MoneyShop money
The free extras that quietly eat your margin
The free bag, the extra scoop, the tape, a drop on the way: nobody decided them, so nothing counts them. Count five for one week, then keep or price in each.
A discount and a free bag are not the same kind of cost
The free bag, the extra scoop, the tape, the drop on the way home: none of them was ever decided, so none of them shows in your day's total. Count five of them for one week, multiply by your open days, and you have a monthly figure. Then keep the ones customers would miss and fix the rest.
Why a free bag never shows up anywhere
A discount is a number. You said it out loud, the customer heard it, and some part of you felt it leave. Rs 50 off a Rs 1,000 bill is a decision, even a bad one.
A free bag is a hand movement. Nobody said a number, nobody decided anything, and the bag went into the customer's hand the way it went yesterday. The drawer at closing time has no line for bags.
A discount can be argued with. A free thing is never counted, so it is never questioned, and it grows a little every year for as long as the shop stands.
Nadeem runs a grocery shop, and at eleven in the morning he is weighing a kilo of lentils for a regular. The needle settles, and his hand tips one more small scoop in, because that is what a hand does. Into a bag, with a rubber band because the bag is thin. The customer's boy takes a toffee from the jar by the till. The bag is heavy, so a second bag goes around the first.
Five free things in under a minute, and Nadeem would tell you honestly that he gives nothing away. There was nothing to remember.
Most shops give more: the paper round the meat, the tape on the parcel, the sample biscuit for the doubtful buyer, the small item thrown in to close a sale, the free drop to the next street, the tea for a customer who walked in angry.
None of it is wrong. All of it is unknown, and you cannot decide about a cost you have never seen.
Count it once, honestly
You do not need a study. You need one week of noticing, on a page torn from a notebook and taped beside the till.
Pick five. Not fifty, five. The ones you suspect are biggest: bags, the scoop, packing material, free delivery, and your own shop's habit. A cloth shop might pick the free stitching, a mobile shop the screen guard.
Rule the page into four columns, one row per thing.
The four columns, for one honest week
- 1The thingBags, the scoop, packing, free drops, and your own shop's habit. Five rows, no more.
- 2How many times todayA tally mark every time it happens, all day. Change nothing while you count.
- 3What one costs youThe bag at bundle price, the scoop at buy rate, the drop at the boy's time plus petrol.
- 4Multiply, then multiply againColumn two times column three at closing. Add the week, divide by its days, then times your open days a month.
Column one is the thing. Column two is a tally mark every time it happens, all day. Column three is what one costs you: the bag at bundle price, the drop at the boy's time plus petrol, the scoop at the item's buy rate. Column four, at closing, is two times three.
Do this every open day for one week, and change nothing while you count. Give fewer bags because you are counting, and the number is a lie.
At the end, add each row, divide by the days you counted, and multiply by the days you open in a month. That is the number. It is the first time in the shop's life it has been written down, and it is usually far more than you would have guessed from a chair.
A month of free things, in rupees
Say a small grocery shop opens 26 days a month, and the owner counts for one week. Here is what the four columns come to.
Say a small grocery shop opens 26 days a month
Bags, about 50 a day at Rs 2 each. The scoop, about 30 loose items a day, each with an extra pinch worth Rs 5 at buy rate. Tape, rubber bands, newspaper and string, Rs 40 a day. Two free home drops a day, at the boy's time plus petrol. And the rounded-down last rupees on about 40 sales, a subject of its own, so it stays one line here.
That is Rs 450 a day and Rs 11,700 a month.
Now set it beside the profit. Say the shop clears Rs 60,000 in a normal month after stock, rent, electricity and the helper. Rs 11,700 is nearly one rupee in every five. The owner works one day a week for the bags and the scoops. He never decided to. He never knew.
Most of them should not stop
Many of those free things are the cheapest marketing your shop will ever have, and the man who ends them to save the number often makes himself poorer.
Take the bag. Say Nadeem stops giving bags and saves Rs 900 a month. Two households notice, feel small, and move to the shop at the corner. Each spent Rs 8,000 a month with him, and on grocery margins he kept about Rs 640 of it. That is Rs 1,280 of profit gone to save Rs 900. He is Rs 380 a month worse off, and the two families are gone for good.
So the number is a list to sort, not to cut, and two questions do the sorting.
Does the customer notice it? Not in theory. Does he see it happen, feel it, remember it?
If it went tomorrow, would he change shops, or buy less?
Anything he does not notice is pure loss: the bag he did not need, the tape on a parcel going straight into his own car. Nobody is being kept by it. It is money in the bin.
Anything he would miss is advertising. It belongs in your price, not in your bin.
Shabnam has bought from Farooq's shop for six years. At seven in the evening she comes in for Rs 1,400 of groceries, and Farooq drops two toffees in the bag for her daughter without a word, as he has since the girl was two. That is not a leak. That is why Shabnam does not cross the road to the bigger shop, and Farooq would be a fool to touch it. Keeping a regular customer is worth more than a jar of toffees a month.
Sort every free thing into one of four boxes
- Keep: he notices it, he would miss it, and it costs less than the household is worth to you.
- Price it in: he would miss it, but it costs real money. Raise the item a little and keep the extra free.
- Make it conditional: he likes it but does not need it every time. Free above an amount, or with a full basket.
- Stop: he never noticed it, or he was never coming back. That is money in the bin.
Three ways to fix the ones that must change
For a free thing the customer would miss, but which costs too much, there are three moves. Take them in order; the first does the least damage.
Price it in. Raise the item a little and keep the extra free. Packing at Rs 140 a day across 200 sales is under a rupee a sale. Put Rs 5 on the items that usually leave in a bag, and the bag is paid for many times over while still being a gift. The customer feels nothing, because he never sees the two numbers side by side. It is the same thinking as pricing an item so you still earn: the cost of selling it is part of its cost.
Make it conditional. Free delivery above Rs 2,000, a bag with a full basket, the extra piece with a whole kilo. The customer still gets it, and now it pulls the sale up instead of leaking out of it. He feels it as a small game he can win. Keep the rule one breath long and the same for everyone, or it becomes an argument.
Charge for it openly. Rs 5 for a bag, Rs 50 for a drop, Rs 20 for gift wrap. The customer feels this one every time, and some will grumble. It works only for things he does not see as the shop's kindness: delivery, wrapping, a second bag for a heavy load. It does not work for the toffee.
A discount is not on this list. A customer asking for money off is a different problem, and that article has its answer. Here we are only talking about what you give without being asked.
Two that need their own rule
The generous scoop. Treat it with respect. Tipping a little extra is an honest habit of the trade, and it often earns more than it costs: the customer who sees the needle go past the mark trusts your scale for life. But it should be a decision, not a slope. The hand that tips a pinch on Monday tips a spoon by the end of the month, because nothing ever pushed back.
Give the hand a rule. The needle rests on the mark, then one small pinch, and the scoop goes back in the sack. The pinch is for trust, not for the kilo. If a customer asks for more, that is a discount, and you answer it as one.
The stranger. This is the one give-away always worth ending: free things to people who were never going to buy again. The traveller who wanted a sample. The man who priced your rice against the wholesaler's and left. A sample to a doubtful regular is an investment. A sample to a passer-by is a gift to the road. No need to be rude. You just do not reach for the jar.
Write it down so the number stays
A number counted once drifts back. Six weeks later the hand has forgotten, and the bags are going out two at a time again. Three habits keep it known.
Keep the page, and count again after three months in the same four columns. A row that has grown shows up before it costs a season.
Treat packing and delivery as real shop expenses, not as air. When you buy the bundle of bags, the roll of tape, the petrol for the boy's bike, write each one down as an expense the way you write rent. In Wasoolo they go in as shop expenses, so the month's profit is the one after the free things, not the one before. Most shopkeepers who work out their real profit for the first time find a packing line they had never seen.
Write the rule where the helper can read it. "One bag per sale. Free drop above Rs 2,000. One pinch." A helper cannot follow a rule that lives in your head, and most give-aways happen at the counter you are not standing at. A glance at the packing line in Wasoolo's expense list each month tells you whether the rule is holding.
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The free things are not your enemy. The unknown ones are. Count them once, keep the ones that keep customers, price in the rest, and stop giving gifts to the road.
Common questions
Is a free bag really worth counting? It is two rupees.
One bag is two rupees. Fifty a day for 26 days is Rs 2,600 a month, a helper's week of wages. The point is not to stop the bag but to know what it costs, so you can decide whether it earns its place. For most regulars it does.
Will customers feel cheated if I charge for something that was free?
Some will, which is why charging openly is the last of the three fixes. Price it into the item first, or make it free above an amount. Charge openly only for things customers do not see as the shop's kindness, like delivery to a far street.
How do I count the scoop? I cannot weigh every extra pinch.
Weigh ten of them once: a bag on the scale, your normal generous tip, read the extra grams. Multiply by the buy rate per kilo, then tally how many loose items you weighed in the day. You want the size, not the last rupee.
My helper gives away more than I do. What do I do?
Write the rule on a card by the till, short enough to say in one breath: one bag per sale, one pinch, free drop above a set amount. A helper gives freely because he has no rule and it is not his money. Then check the packing expense each month.
A customer asks for the extra piece himself. Is that the same thing?
No. Once he asks, it is a discount, and you answer it as one: politely, with a reason, and the same for everyone. This article is about what you give without being asked, which nobody counts, so it grows for years.
I counted, and the number is small. Was the week wasted?
No. Your give-aways are cheap advertising, not a leak. Keep them, put the number in your expense list so it stays known, and count again in three months. A small number that stays small is a good shop.
Send us a message with your five free things and their week's count, and we will help you sort them.