The prices weren't right at Aoki Boutique.
Shoppers came into the Philadelphia store and would smell a soy wax candle, admire a mug with rubber wings or maybe try on a handmade Mongolian scarf by an up-and-coming designer. But, often they left the shop empty-handed.
"People responded well to the items, but they weren't selling," says Alina Alter, who opened the store in April. By August, Alter's 650 square-foot store was bulging with excess inventory. She needed to sell more of her summer items to make room for fall ones. "My higher-priced pieces were just sitting there," she says.
Alter was dealing with an issue that many small business owners face: Finding the right price to get people to buy and still make money. If a company doesn't figure out a balance it can spell disaster.
Aoki Boutique is Alter's first business. Before jumping into entrepreneurship, she worked in the event-planning department of a hotel and hosted at restaurants. She knew nothing about the retail business so she read how-to books and spoke with a retail consultant to get up to speed.
"It was a total crash course," she says.
Following the advice she read and heard, she marked up most items by 2.5 times the wholesale price. She priced everything that way. "I was so new to it that I thought I had to be really by the book," says Alter.
Faced with too much inventory, Alter had to take action. She decided to start slashing prices.
Her new strategy was to look at each item individually, and give it a price based on her gut instinct. "I had to put myself in the shoes of customers," says Alter.
Faux leather purses that she previously priced at $65 were reduced to $20. She's still able to make a profit from them. Alter buys the bags from a New York vendor for $10 each. "I'd rather sell three or five bags at $20 than wait for someone to buy one for $65," says Alter.
She also advertised to her followers on social media site Facebook and blogging site Tumblr a promise to cap her prices at $250 for any item. That way customers know what to expect before they come in the store, she says.
The advice she got works better for bigger retail markets such as New York and Los Angeles, she says.
"Philadelphia is more budget conscious," says Alter. "There's so much more disposable income in New York." She also found that Philadelphians are less willing to pay a lot of money for the up-and-coming designers she features in the store. "They can't justify paying $100 or $200 for a brand their friends aren't going to recognize," Alter says.
Sales are up 15 percent since Alter started the new pricing strategy in the middle of August. September was the best month for sales so far, she says.
"I learned to trust my gut and intuition," says Alter. "And not just blindly follow best practices."