Using limited inventory and timing to create urgency the right way.

Retailers have always understood one of the most basic principles of human behavior:

People tend to want something a little more when they think they might not be able to get it later.

That is scarcity.

Used properly, scarcity can be an extremely effective marketing tool. It can encourage customers to make decisions, create excitement around new merchandise, increase inventory turns and give shoppers a reason to visit a store today instead of sometime next month.

Used improperly, it becomes manipulation.

There is an important difference between telling a customer, "We only have three pairs left," when you actually have three pairs left, and manufacturing a phony countdown clock that resets tomorrow morning.

One is retailing.

The other is playing games with the customer.

Independent retailers have plenty of opportunities to use genuine scarcity without sacrificing the trust they have spent years building.

Scarcity Already Exists in Retail

You don't necessarily have to create scarcity.

Most retailers already have it.

Suppose you bring in 24 pairs of a terrific new sandal. You send an email to your customers saying:

"We just received this new sandal, and we only have 24 pairs."

There is nothing manipulative about that message if you actually have 24 pairs.

In fact, you have provided the customer with useful information.

A customer who loves the sandal knows that waiting three weeks may mean her size is gone.

Compare that with a message saying:

"BUY NOW! ALMOST SOLD OUT!"

when the stockroom contains another 150 pairs.

The first creates legitimate urgency.

The second creates artificial urgency.

Customers may not catch you the first time. But eventually they begin to recognize manufactured scarcity, and every exaggerated message makes the next legitimate message a little less believable.

Trust is difficult to build and surprisingly easy to put on clearance.

Limited Quantities Can Make Merchandise More Interesting

Independent retailers frequently complain that they cannot compete with the enormous inventories available online.

That disadvantage can occasionally become an advantage.

Instead of apologizing for limited quantities, make them part of the story.

"Only 36 pairs available."

"Exclusive color. We received 18 pairs."

"Once this shipment is gone, we don't expect another delivery until October."

Those messages transform inventory information into marketing information.

The merchandise feels special because it actually is limited.

This can work particularly well with special makeups, unusual colors, seasonal merchandise, limited-production products and items from smaller vendors.

The retailer isn't inventing a marketing gimmick.

The retailer is simply explaining reality.

Timing Creates Another Form of Scarcity

Scarcity doesn't always mean limited inventory.

Sometimes the scarce commodity is time.

A trunk show that occurs Saturday from 10:00 to 4:00 has genuine time scarcity.

A vendor representative visiting the store for one day creates genuine scarcity.

A promotion ending Sunday creates genuine scarcity, assuming it really ends Sunday.

A seasonal product available only during a certain period has genuine scarcity.

This gives retailers another way to create urgency without constantly reducing prices.

Consider the difference between:

"Come see our new fall collection."

and:

"Saturday only: Our fall collection preview, including styles that won't be available again until the next shipment."

The second message gives the customer a reason to act.

Good marketing answers a simple question:

Why now?

Scarcity can provide the answer.

Your Best Customers Should Sometimes Get First Access

Scarcity also creates opportunities to reward loyalty.

Suppose you receive a limited shipment of a product you know will be popular.

Instead of immediately advertising it to everyone, give your best customers a 24- or 48-hour head start.

"You're receiving this because you're one of our loyalty customers. We received 30 pairs, and we're giving our loyalty members first access through Thursday."

Now scarcity is doing two jobs.

It creates urgency, but it also reinforces the value of belonging to your loyalty program.

The important thing is that the benefit has to be real.

If "early access" begins Tuesday but everybody else receives the same offer Tuesday afternoon, the customer isn't getting much of a privilege.

Make first access actually first.

Scarcity Doesn't Have to Mean a Discount

This may be the most important point.

Retailers have trained themselves to create urgency primarily through price.

"20% off through Sunday."

"Buy one, get one."

"Three-day sale."

There is nothing inherently wrong with promotions. But if the only way you can persuade customers to act today is by reducing the price, eventually customers learn to wait for you to reduce the price.

Scarcity can create urgency while protecting margin.

"New arrival. Limited quantities."

"Only 12 pairs in this color."

"Available exclusively at our store in this market."

"First shipment sold through quickly. The second shipment just arrived."

None of those messages requires taking a penny off the price.

That matters.

If a retailer can create excitement at full margin, everybody wins except the markdown budget.

Use Your Inventory Data

Scarcity marketing becomes considerably more powerful when it is connected to actual inventory information.

Suppose a popular style started with 60 pairs and is down to 14.

That's a marketing opportunity.

"More than 75% of our original shipment is already gone."

Or perhaps you have only one pair remaining in several sizes.

Your salespeople can legitimately tell customers:

"This is the last pair we have in your size."

That sentence has probably closed more shoe sales than several billion dollars of digital advertising.

Why?

Because it provides relevant information at exactly the moment the customer is deciding whether to buy.

Retailers have enormous amounts of inventory data sitting inside their POS systems. Too often, we use that information only to determine what to reorder.

It can also tell us what to market.

Don't Cry Wolf

There is one enormous danger with scarcity marketing.

If everything is urgent, nothing is urgent.

If every email says "LAST CHANCE," customers quickly discover there will be another last chance on Thursday.

If every product is "almost sold out," the phrase becomes meaningless.

If a promotion "absolutely ends Sunday" and gets extended until Wednesday, you have taught customers something unfortunate:

Don't believe us.

Scarcity works because people believe the opportunity really might disappear.

That means retailers should use it selectively.

Save "last chance" for the last chance.

Save "limited quantity" for something that is actually limited.

Save "exclusive" for something that is genuinely exclusive.

Language has value. Don't mark that down either.

Create Urgency Without Sacrificing Trust

The objective of scarcity marketing shouldn't be to pressure customers into buying something they don't want.

It should be to help customers understand that postponing a decision has consequences.

There may not be another pair.

The promotion really does end Sunday.

The special event really is Saturday only.

The vendor cannot immediately replace the merchandise.

Her size really could be gone tomorrow.

Those are legitimate reasons to act.

Independent retailers possess something enormously valuable that many giant online competitors spend fortunes trying to manufacture:

A relationship with the customer.

That relationship is built on credibility.

Use scarcity aggressively when scarcity is real. Use limited inventory, special events, seasonal merchandise, early access and timing to give customers compelling reasons to shop now.

Just don't manufacture urgency that doesn't exist.

Because the most valuable thing you can ever have in limited supply isn't merchandise.

It's your customer's trust.

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About the Author

Alan Miklofsky is a semi-retired shoe industry consultant and the former owner of Alan's Shoes in Tucson, Arizona. During nearly 40 years as an independent footwear retailer, he served 29 years on the National Shoe Retailers Association Board of Directors, including as Chairman from 2009 to 2011. Miklofsky now advises independent retailers and footwear companies on merchandising, inventory management, marketing, operations and profitability. He writes and speaks regularly about the challenges and opportunities facing independent retail.