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Category: Inventory Management

You Don’t Need to Buy it All at Once

Christmas season is the time for most retailers to offer the widest selection possible. We broaden our selection. We increase the choices. We try extra stuff that we think we can sell that time of year.

The problem, however, is when we get into the off-season and start re-stocking the store. We have a tendency to want to restock every single thing that sold in December. And therefore, we tend to overbuy in February and March only to find ourselves cash-poor in May and June.

One simple tip to stop you from overbuying, to increase your cash flow, without losing sales in the slower seasons is this…

Limit your customer’s choices to only two or three per category.

Cut back on your offerings by simply giving them a good, better, best (or even just good/best) option for now. They will appreciate the simplicity of the choice. You will appreciate the simplicity of the buying. Your bank account will appreciate the simplicity of fullness.

-Phil Wrzesinski
www.PhilsForum.com

PS To learn more about ways to manage your inventory and cash flow, download my free eBook Inventory Management. In it you will learn two formulas that can help you manage your cash better than ever before.

Should You Still be Ordering?

My dad always said…

“There are 24 days in December before Christmas EVERY year. Make the most of those days because they are the days that count the most.”

With that said, you only have a couple days left to check your inventory to make sure you have what you need to make the most of those days.

To borrow another cliche, strike while the iron is hot.

As much as you might be needed on the sales floor this weekend, take some time to check your inventory for fast movers and hot products. Make a list of the top ten items you are seeing fly off the shelf. Prioritize that list and start emailing/calling your reps right away. Get those hot movers on order and back on your shelves as soon as possible.

Don’t worry about making great terms, worry about getting the products that will make your customers smile. That is your goal this time of year.

Should you still be ordering? Yes! Get the hot stuff in now. Don’t worry about the rest.

-Phil Wrzesinski
www.PhilsForum.com

PS The goal all year long should be to make your customers smile, but this time of year, with the increase in customers, it becomes twice as critical. Make your customers smile now and you will smile in January.

A History Lesson About Change

I give talks to mother’s groups and other organizations about how to shop smart for toys. The talk is always well-received and praised for the smart and practical information. Most of the participants are surprised at how much thought should actually go into each toy purchase, and how easy it is, once you know what to observe, to get the right kinds of toys for your kids.

The lessons in that presentation are the same lessons my grandfather was teaching sixty years ago.

The lessons have not changed, but the toys have.
The principles have not changed, but the products have.
The core values have not changed, but the way we present them has.

The point worth making here is that while you need to hold onto the the same principles, the same core values, the same ideals about the products that got you to this moment, you need to update the packaging.

Make sure your product mix continually includes new items, fresh displays, and updated categories. Rotate your merchandising around to give your store a new look. Add a fresh coat of paint to give the feeling of new in your appearance. Dust every single week! Try new products and new categories that make sense for your store. Try one that doesn’t make sense. It adds a little excitement and surprise. Sure, keep the basics and staples, but give your customers reasons to come back to see what’s new.

You’ll never hear a customer ask, “So what’s old and dusty?”

The principles do not change, but the way we implement them always needs a fresh face. Make sure you are constantly updating and improving your product selection and displays. Keep the “history”, but ditch the “old and dusty”.

-Phil Wrzesinski
www.PhilsForum.com

PS Sometimes it is hard to read the label from inside the bottle. Have a spouse or friend give your store a critical look, preferably someone who hasn’t been in your store in a while. Ask her to label things as either “old” or “fresh”. If she calls it “old”, get rid of it, move it, or update it.

Right, Right, Right

Just read an interesting article on a discussion board (sorry, don’t have the source link) about the new wave in retailing.

Interesting because it talks about how big-box stores are downsizing to meet the needs of the new shoppers.

Interesting because it talks about how today’s shoppers (now being called Generation C for their connected, communicative, computer-savvy, community-minded outlook) shops differently than any previous generation.

Interesting because it quotes heavily an inventory management software company that uses a lot of 50-cent words like…

Deploying network inventory strategies that optimize stocking policies and maximize the availability merchandise, reducing stock-outs and eliminating excess inventory, in a forward-looking time-phased methodology combined with guided exceptions, and early warning signals to support root cause analysis.

The bottom line of the article is that today’s customer is using her phone, her computer and the Internet to do more research than ever before making purchases. She knows the products, the features, and the general price range.

She will only buy from you if you have the Right product in the Right price range and give her the Right kind of service.

Yeah, not really a new concept to retail. The only difference is that it is easier for customers to know what are the right products and right price range for them. So you have to be as savvy as them.

You have to be following trends in your area closer than before to make sure you have the right products. You have to be paying attention to price far more than you used to (although the Internet makes that easier for you, just as it is easier for her.) You have to be giving far better service than what is found in a typical retailer (and you cannot have an off day.)

The big box stores are in trouble because even with all their computers they cannot accomplish the first thing on that list because they cannot react fast enough when things change. And they never had a chance at Right kind of service. Yet all their focus has been on getting the Right price. They are downsizing because their sales are downsizing. Look at their same-store sales. Down for Wal-Mart, Target, K-Mart, Sears, and Toys R Us.

For the specialty stores, our biggest issue is having the right products, followed by having the right prices. We have to be careful we do not drive ourselves out of the market by dropping a line as soon as it gets discounted somewhere and thereby not having the right goods. Then we have to look at pricing and what we can afford. We don’t have to match but we have to be in the range. The one thing we do have Right is the customer service (most of the time:-).

The reason the Internet is having such a huge influence on retail sales lately is because it is accomplishing the first two Rights (product and price) and getting better on the third (service).

Retail hasn’t really changed. Customers haven’t really changed. If you have the right products to meet their needs at a fair price and you take really good care of them, you’ll have plenty of customers coming through your doors. Same as it has always been.

-Phil Wrzesinski

www.PhilsForum.com

PS Sure, you have to work hard to do all those things. But retail has always been that way. Ancient Chinese Proverb says, “To open a shop is easy, to keep it open an art.” Roy H. Williams said, “If making a profit were easy, everyone would be doing it.”

PPS Before you spend a penny on a software program full of 50-cent words, check out what I have to say for FREE.

How Much Retail Shrinkage Do You Have?

According to the National Retail Federation, in 2010 Retail Shrinkage rose to 1.58% of all retail sales.

(Note: Retail Shrinkage is the difference between your physical inventory and your “booked” inventory, divided by your total sales)

What is more interesting is to what NRF attributes all that shrinkage.

  • 44% is due to employee theft

  • 33% is due to shoplifting

  • 23% is due to other errors (billing, receiving, cash register, etc.)

Think about that…

Two-thirds of your shrinkage is caused by your staff either intentionally or unintentionally.

Here are some ways to shrink your shrinkage.

Shoplifting

Make sure you greet each customer coming through the doors. Shoplifters love anonymity. Saying hello can sometimes be the best deterrent. Wal-Mart has an amazingly low 0.75% shrinkage and I’m sure those greeters at the front door play a part in that.

The next best thing is to be available. If your staff is always walking the store working with customers then would-be shoplifters have no place to hide. In fact, make sure you design your store so that there are no hidden places. And if you cannot avoid them, visit them often. Just as a policeman on patrol deters crime, an employee on patrol deters shoplifting.

Video cameras are helpful, too, but they come with a couple downsides. As a deterrent, they have to be visible. Would-be shoplifters have to know they are being taped. But that can cause some of your better customers to feel uneasy and not want to shop in your store. Plus there is the added expense of the system. But if you are in a high-crime area or sell a lot of high-ticket items that can be easily pocketed, cameras can be your best investment.

Employee Theft

The three biggest reasons employees might steal…

  1. They are thieves to begin with – you should have done a background check!

  2. They do not feel any ownership of the store.

  3. They are pissed at you and want to get back at you.

Take care of your staff. Empower them to make decisions for the store and they will feel ownership. Reward them for great behavior. Treat them with respect as human beings. Be aware of their time, their needs, their families. When you talk about the staff as “we” instead of “they” your staff will feel like part of the family and most of them will not steal the merchandise.

Errors

Check, double check and triple check.

Check that the order confirmation from the company matches the order you requested and entered into your computer. (You do request order confirmations, don’t you?)

Double check that the packing list matches what is in the boxes.

Triple check that the invoice matches what you actually received.

Our shrinkage has averaged about 0.3% for our sixty-two year history. With an inventory as deep as ours, a store as large as ours, and the number of employees we have, we’re pretty happy about those numbers. What is your shrinkage?

-Phil Wrzesinski

www.PhilsForum.com

PS For more on keeping your inventory under control, check out my free eBook Inventory Management. Thirty seven businesses downloaded it last week to help improve their cashflow. What do they know that you don’t? (Hint: download the book and find out)

Don’t Marry Your Inventory

Marry your spouse. Develop a long-lasting relationship built on love, trust, fun, and shared interests.

But don’t ever marry your inventory.

Your inventory shouldn’t be around for long. It is simply an affair designed to bring you some short-term enjoyment (profit). If it overstays its welcome, you both suffer.

Oh, sure, when you first get your inventory it is exciting and new. There is an infatuation. And people tell you how great your inventory looks with you.

But if it stays around, it starts to look old and tired, and so do you. Be heartless. Kick it to the curb and get something newer and younger and fresher.

(Note: this is the only situation for which I’ll give you this advice, so use it for what it’s worth:-)

-Phil Wrzesinski
www.PhilsForum.com

PS Yeah, a lot on Inventory Management this week. That’s what happens when I’m divorcing my inventory in our Summer Fun Sale.

Discounts or Dating, Which is Better?

The first question out of every retailer’s mouth at the trade show is, “What’s the Show Special?”

The vendor responds with some incentive such as Free Freight, a percentage discount, or extended credit (net 60 instead of net 30 days for instance) if the order is large enough.

If given the choice, which should you choose?

Your Choice
Most retailers jump on the Free Freight. And they would be smart. With shipping costs the way they are, freight bills run from 12% to 20% the cost of the goods. That’s a major savings.

Most retailers, though, ignore the extended dating. It is hard to quantify what an extra 30 days to pay actually saves.

Unless, like me, you’ve done the math.

Doing the Math
Extending your payment terms from Net 30 to Net 60, in terms of cash flow, is the equivalent of a 15% discount. In other words, it’s just as good for your cash flow as Free Freight, and far better for your cash flow than a 3% or 5% discount.

The key lies in the phrase for your cash flow.

If you are under a cash flow crunch, you should look at trying to extend your payment terms in lieu of any discounts under 12%. It will help you out far more than the 2-3% or 5% or even 10% discounts offered.

But if your cash flow is already strong, take the discounts. The one shortfall of extended dating is that it does nothing for the bottom line. Freight is an expense so Free Freight decreases your expenses. Discounts lower your Cost of Goods Sold. Extended dating merely helps cash flow.

Discounts or Dating?

  • If you need cash flow, choose the extended dating.

  • If you need profit, choose the discounts.

  • If you can get Free Freight (which helps both) take it

But never, ever, ever buy something you don’t want just to qualify for the incentive. Never. Okay?

-Phil Wrzesinski
www.PhilsForum.com

PS Need more help with your inventory management? Download my free eBook Inventory Management

Get Rid of Your Dogs

What if you bought this shiny new crib for your store. It measures 62″ wide and 35″ deep. It takes up 15 square feet of your store.

What if six months after you bought it, you still hadn’t sold it?

One calculation some stores use to see how healthy their sales are is Sales per Square Foot. Take your total annual sales and divide it by square footage of selling space to find out your Sales per Square Foot.

Now you know how much business you should be doing for those 15 square feet.

But if you haven’t sold a single crib, where are you? You’re in the hole. You’re out whatever it cost to bring that crib in. You are in negative numbers.

Not only have you not made any money, you’ve lost money on that space.

And chances are, since no one wanted that crib in the last six months, just taking 10% off the price isn’t going to move it any faster.

The best move is to mark it at cost and sell it quickly. Get it out of there. Get back to zero for your 15 square feet. Then you have six more months to try something else in that space that will make you money.

Hey, we all make bad buying decisions, dogs that just won’t hunt. That’s part of the retail game. But a worse decision is not getting rid of the dogs soon enough.

Make sense?

-Phil Wrzesinski
www.PhilsForum.com

PS If you want to know more about managing your inventory including the two formulas every retailer should know and track, download my FREE eBook on Inventory Management.

PPS Follow this link for my post on the best way to make your dogs bark.

PPPS Check with your industry to see if there are standards for what your Sales per Square Foot should be. But understand that every store is different. The bigger your store, the more of your space might be used for extra cash registers or wide aisles for shopping carts, thus lowering your numbers.

Stats Lie, Trust Your Own Numbers

The only numbers that really count are yours, the ones you make, the ones you manage.

The weather service says Jackson County has only received 3″ of rain (as of May 27) yet my dad had a bucket of 8″ of water from just the previous week (including evaporation).

The various reports have retail sales up, down, or flat, so many different ways that you could get dizzy trying to follow.

Even Winston Churchill says, “The only statistics you can trust are those you falsified yourself.”

And as Seth Godin pointed out in his last post, none of these reports on the economy really matter.

The only economy that counts is your local economy. The only statistics that count are the numbers you create and measure.

Are you tracking Customer Counts? This is a good sign of the health of your marketing campaign.

Are you tracking Average Ticket? This is a good sign of the ability of your sales staff?

Are you tracking Gross Margin Return on Inventory? This is a good sign of the ability of your buyers.

Are you tracking Cash Flow? This is a measure of the ability of your company to react to changes in the local economy.

Those are the numbers that count.

Phil
www.PhilsForum.com

PS Need help in understanding those numbers? Help is available in the Freebie section of my website. Need more help? Send me an email. You can be successful in any economy when you track the right numbers.

Are You Working ON Your Business or IN Your Business?

Morgan Freeman’s character “Red” said it in The Shawshank Redemption, “You either get busy living or get busy dying.” Never have more truer words been said about retail.

So what are you busy at right now?

Are you busy coming up with new ways to market your business?

Are you busy evaluating your inventory mix to make sure you have the right items, the right amount of items, the right prices?

Are you busy measuring your financials to make sure you have enough cash flow, are keeping expenses in line, and building profits for the future?

Are you busy training your staff, teaching them how to please your customers and make their experience both memorable and worthy of talking about?

If you want to get ahead, you have to spend just as much time working ON your business as you spend working IN your business. Maybe even more.

Here are some simple things you can do to find more time to work ON instead of IN.

  • Don’t waste your time stapling, folding, cutting or hole-punching. If you don’t have a staff person in need of a simple project, give it to your kids or grand kids. (And if that isn’t an option take it home with you and do it while you catch up on your favorite show).

  • Don’t micromanage. Train your staff how to do it. Then empower them to do it. Even encourage them to come up with their own ways to do it better.

  • Don’t ever say or think “it would be quicker for me to do it myself.” The first time, you’re right. But if you teach someone else how to do it, the first time will be your last time.

  • Hire somebody. Let them do all that day-to-day stuff that bogs you down. Not only does it free up your time, but it forces you to work ON your business just to find the money to pay them.

And if you aren’t sure where to begin working ON your business, think about it as a three-legged stool.

  • The seat of the stool is the products. Without the seat there is no need to prop it up.

  • The first leg, then, is the marketing. What are you doing to get people in to see your products?

  • The second leg is selling. How well trained is your staff? Do they know the benefits of the products?

  • The third leg is the financials. How is your cash flow? Profit? Inventory levels? Expenses?

Pick the wobbliest leg and get to work. (Let me know if I can help).

-Phil