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Category: Inventory Management

When Bunnies Multiply

Easter is coming.

If you’re a store full of seasonal merchandise there are bunnies sprouting up everywhere you turn. And just like the real critters, they tend to multiply at a rate faster than expected.

When Bunnies Go Wild
And in 17 days you’ll have a dilemma… what to do with all of the Easter Bunnies that didn’t find their way into someone’s heart and home.

Your first thought is usually, “Well, they’re paid for, might as well keep ’em and sell ’em next year. I’m gonna need bunnies next year anyway.” That was always my first thought. Plus, we have a large enough warehouse that no one was going to care about a small box of Easter leftovers.

Get over that thought. There is a better thought to have…

“Yes, I paid for them. I want my money back!”

When the season ends, the smartest thing you can do with your leftover seasonal merchandise is mark it down and try to turn it into cash.

Four Ways to Better Cash Flow
First, it helps put money into your pockets for buying other (more profitable) merchandise. Throwing it in a box until next season just means you have fewer dollars available for merchandise right now when you really need it.

Second, if you have leftovers, part of the reason is that you bought too much, but even more likely, you bought the wrong stuff. If it didn’t sell this season, it isn’t selling next season. Cut your losses and move on.

Third, even though Easter happens every year, the product mix available for the season and your store’s mix both change frequently. Maybe you’ll find an even cuter bunny, or maybe you’ll decide chicks are the way to go, or maybe you’ll decide that you’ll sit out the next season. If you’re holding merchandise from the previous year, you are less capable of making those choices.

And finally, your financial numbers will improve. If you are measuring your Gross Margin Return on Inventory (if you aren’t, you should!) then you know that part of the equation is keeping your inventory levels lean and tight. Holding merchandise that isn’t selling costs you money.

Hare Today Gone Tomorrow
So for the next couple weeks, sell your Easter goods to the best of your ability. Make your margins and move on. But if April 25 arrives and you still have plenty of bunnies, give those hares their marching orders.

-Phil

Christmas Sales Predictions

It’s time to make your predictions. What do you see in your crystal ball for Christmas sales?

Shopper-Trak is predicting a 2.9% increase.
National Retail Federation says it will go up 2.3%.

But what does that mean?

Not every retailer is going to hit that 2.3 to 2.9% mark. In fact, I predict that very few retailers will be up 2-3%.

Double-Digit Growth
Some retailers are going to have double-digit growth this holiday. Others are going to see double-digit declines. And a whole bunch of retailers are going to be within 1% either way of last year’s sales.

Those numbers NRF and Shopper-Trak are predicting are national totals. They take into account overall population growth, spending habits, surveys of customer moods, etc. – on a national basis!

None of that has any relevance in your local market. Your population might be growing faster than the national average. It might be declining. Your competition might be doing more in your market (or less). You might be doing more (or less) to grow your own business.

The Only Number That Counts
The best thing to do about those numbers is to forget them. Ignore them. Don’t give them the time of day. Focus only on your own number, the growth you want to make happen in your business. Pick a number that works for you. Then set about doing what you have to do to hit that number.

For me, I am predicting 15% growth in November. I have acted accordingly. I have planned my marketing and my inventory to meet this goal. I have indoctrinated my staff that this is what we are going to accomplish. I have trained them, scheduled them, and inspired them to make this happen.

Planning and Action Make it Happen
It isn’t a wish. It is a plan. We looked at what we did last year. We looked at what we are capable of doing historically. We looked at what was realistic based on this year’s trends. We looked at what the market would bear. We chose a goal that we knew we could make. Then we set up actions to put us in the right position to meet this goal.

It doesn’t matter what NRF or Shopper-Trak believes. It only matters what you believe. Do you believe you can reach double-digit growth this holiday? If you believe it, you can achieve it. You only have to act upon those beliefs.

If you’re just sitting back waiting for your 2.3% increase, I promise you, you won’t get it. Be proactive and go get the sales you want for your business.

-Phil

Would You Attend This Workshop?

The Jackson Retail Success Academy is now signing up retailers for our 2011 class that starts in January. This 8-week program has been a huge help for new retailers to get the foundation they need to be successful.

Some have asked if we could run this academy in their community so I put together a 2-Day Workshop format.

Would you sign up for this workshop if it was offered in your town?

Retail Success Academy 2-Day Format

Day 1:
8:00am Meet & Greet – goal setting, expectations
8:30am Understanding Your Brand – definition of branding, character diamond workshop

9:30am (break)

10:00am Character Diamonds Revealed
10:45am Traditional Advertising – Creating an ad budget, How Ads Work, Advertising ROI, Ads with Impact

12:00pm (lunch)

1:00pm Marketing on a Shoestring Budget – Word of Mouth, Social Media, Cause Marketing, Networking, Public Relations

2:30pm (break)

3:00pm Understanding Your Financials – Balance Sheets, Income Statements, Ratios & other important numbers
4:00pm Cash Flow Sheet

5:00pm (break for evening)

6:00pm Dinner/Drinks someplace fun in your town

Day 2:
8:00am Resources Breakfast – meet the local Chamber, DDA, Buy Local groups
8:45am Inventory Management – GMROI, Pricing for Profit, Turn Ratios, Open-to-Buy, Cash Flow

10:45am (break)

11:00am Customer Service – The Basics, The Best Practices, The Wow! Service

12:00pm (lunch)

1:00pm Hiring & Training – Identifying the Perfect Employee, interview questions that work, developing a training program

2:15pm (break)

2:30pm Staff Meetings/Training Sessions – hands-on workshop to learn how to plan and run successful meetings & training sessions
4:15pm Final Q&A
4:45pm Evaluations

5:00pm Go be successful!!

Tell me whether you think it would be worth two days to you to attend a business-altering event like this and how much you would expect to pay. (You’ll be surprised when I reveal what it would actually cost.)

-Phil

PS All those links take you to free eBooks I’ve already written on those topics. The eBooks are extremely helpful but not nearly as much fun and motivating as the live presentation.

Which Topic Next?

I recently published three Free eBooks on my website – Inventory Management, How Ads Work Part 1, and How Ads Work Part 2.

I have two more eBooks I’m working on, but not sure if I have the time to get both done. Which would you prefer first?

One title is Marketing a Retail Store on a Shoestring Budget. It is similar to the non-profit eBook of a similar name, but with a couple distinctly retail-oriented changes. But I’ve done a lot of writing on advertising lately and not sure the motivation is there (unless you tell me that is what you want).

The second title is Merchandising Made Memorable. The goal of this eBook is to give you some tried and true rules on merchandising including plenty of examples of do’s and don’ts. Plus, there will be a couple ways to break all the rules all the way to the bank. Just like Pricing for Profit, I look at merchandising from a customer’s standpoint. And you should, too.

So those are the options… Let me know in the comments which one you want to see first.

-Phil

Make Your Dogs Bark!

If you’re in retail, you’ve done what I’ve done – bought stuff that didn’t sell. Oh, it looked good in the catalog or at the trade show. The sales rep gave you tons of info on it. You put it in a great location, even trained your staff on all its finest features.

But at the end of the day, the customers weren’t buying.

So what do you do with those dogs? Make ’em bark and move ’em out!

This Thursday we’ll have over five times the usual customers at our Summer Fun Sale. It’s our once-a-year clearance sale (or as my friend calls it, the make-it-go-away sale).

For the past two months we have been searching the store for the dogs, the merchandise that just won’t hunt, and red-tagging it at half-off the regular price. We’ve been storing these goods in a corner of the warehouse waiting for the third Thursday in July.

On Wednesday we’ll close a couple hours early and set up tables & shelves right in the center of the store. And on Thursday the fun begins. Our first customers will arrive about an hour before we open. They’ll sit by the front door in lawn chairs and peer through the window with binoculars to search out the deals they want to scoop up first. About fifteen minutes before the doors open our parking lot will be full.

And three hours later, I’ll be making my first trip to the bank!

Some people ask me why I do it this way. They ask questions like…

Why do you always mark it half-off and not 25% or some lesser margin?

I mark it half-off to create both excitement and urgency. Anything less and customers might not bite. Remember, these are items no one wanted. Your customers already voted a thumbs down on them. You need to go big if you want to get their attention.

Why wait until one certain day? Why not just mark it down and have a clearance area?

I don’t want to train my customers to expect a markdown. A clearance area that is always full of new merchandise just tells customers to wait until the item they like ends up there. The thinking goes… something is always on sale, so why pay full price? Plus, the excitement factor goes way down. Think about it this way… Would you rather have your parking lot full and people lined up at the door fifteen minutes before you open, or the same few regular customers wandering through the clearance section on occasion?

Why mark it down at all? You’ve already paid for it and now you’re just losing profit.

If you read my earlier post on Gross Margin Return on Investment, you’ll remember that GMROI is calculated by dividing your Gross Profit by your Average Inventory at Cost. Selling a whole bunch of inventory at half-off does not increase my gross profit, but it does wonders for lowering my average inventory. Plus, the cash I get gives me the opportunity to go buy something else that will make me a profit.

Here’s another way to look at it. If I buy a crib for $350 and put it on my floor, but don’t sell a single piece for a whole year, that space on my floor has cost me $350. But if I sell that crib for $250 after 6 months, I now am only down $100 for that space and have 6 more months to put something else there that might make me money.

The bottom line is this…

Don’t be married to your merchandise. If you have dogs that have gotten fat and lazy, you need to make ’em bark and move ’em out. Turn them into cash and move on. That includes seasonal merchandise that didn’t sell during the season, too. For us that means the Summer Fun Sale – a necessary part of my inventory management plan.

-Phil

Help Me Choose A Workshop

At many conferences we have breakout sessions – three or four different topics and speakers from which you can choose.

I struggle with these because I usually want to attend more than one, and cloning has not reached the level to allow me that luxury. And trying to decide between one session and another is tough.

I need your feedback here…

I’m going to give you four options for sessions you could attend. For the sake of argument, let’s assume all the speakers are well-qualified to talk on their respective subjects and you can only attend one of those sessions.

Which session will you attend and why?

Session #1 – Marketing & Advertising on a Shoestring Budget
Learn the smartest ways to get the most out of your limited advertising resources. This class will show you how to use Social Media the right way, teach you new ways to market your business without spending a dime, how to get a guaranteed return on the money you do spend on advertising, and why you’re not getting the word-of-mouth you think you deserve (and how to change that). Every attendee will leave with at least four inexpensive ways to increase traffic and sales that they can implement right away.

Session #2 – Everyone has Customer Service, You Need Customer Delight
This session will show you how to train your staff to consistently give your customers far more than they expect. Topics covered include how to meet and greet your customers the right way, understanding the different customer temperaments, how to solve their problems, and how to finish each sale leaving the customer happier than when they came in. Each attendee will get a blueprint for training their staff including role-play examples and key phrases to avoid.

Session #3 – Knowing the Numbers, It’s Your Money After All
You can just hand over your financials to your accountant and hope for the best, or you can learn the numbers yourself and make them work for you. This class is for the financials novices who wish to learn simple ways to understand the financials behind their business. You will learn how to calculate important numbers like Cost of Goods Sold, Gross & Net Profit, and the many different ratios that banks use to determine if your business is growing or dying. When you finish this class, you’ll know exactly where your money is, what it is (or isn’t) doing for you and how to make it better.

Session #4 – Cash Flow Basics – How Smart Buyers Make More Money
When is a deal from your vendor too good to pass up? When is a discount not worth the loss of cash flow? How do you know when you have too much inventory? Too little? These and other questions will be answered in this buyer’s workshop including tools you can use to increase your cash flow and make you more money. You don’t need a point-of-sale system to be a better buyer. You just need to know these simple principles of buying that dramatically change your financial picture.

Which will you choose and why?

-Phil

New eBook on Inventory Management

Cash is King.

And in retail, your cash is primarily tied up in your inventory.

But what would happen if you earned an extra 20 cents for every dollar you have in inventory? Multiply your average inventory times 0.2. What do you get? Extra money to play with. Extra money to pay yourself, to invest in your business, to spend attracting new customers.

Is that number worth 30 minutes of your time?

That’s how long it will take for you to read my new free eBook – Inventory Management: Cash is King.

And in those 1800 seconds you’ll learn simple easy ways to unlock the money tied up in your inventory.

What are you waiting for?

-Phil

Inventory Controls That Work

Open-to-Buy is great for businesses with vendors who ship quickly and can pinpoint delivery with consistent terms. It works great for businesses whose monthly/weekly/daily sales are predictable. It is a super system for companies who can give the system full-time attention.

In other words, for the Independent Retailer, Open-to-Buy sucks!

I’ve looked at a half-dozen OTB methods, none that I could ever get to apply to my business. Too many vendors with different terms, different minimums, different seasonal needs, different availabilities. If I tried to run LEGO on an OTB, we’d be OOB (out of business). I sell it all in December, but if I don’t order it to arrive in August, LEGO will be sold out and I’ll get nothing.

Instead of an OTB, we followed these three simple principles this past year that gave us the results we wanted.

Don’t be out-of-stock of the Must-Haves. We define Must-Haves as any product that we sell more than 36 pieces a year. You probably already know intuitively what products you sell on a regular basis that you always have to have in stock. Make sure you have enough of those items at all times. (Note: You can define your must-haves by whatever criteria you want. Just make sure you always have them.) This way, although the rest of your stock might be low, the customer always thinks your stock position is strong. The fewer times you have to say, “No, I’m sorry, we’re out-of-stock,” the better.

Don’t out-buy your Dating Terms. If the vendor gives you 30 days to pay the invoice, don’t buy more than a 60-day supply (assuming keystone or higher mark-up). Sure, sometimes this doesn’t work (see the LEGO example above). Sometimes the minimum order is more than a 60-day supply. Fill your shelves with that first order, but don’t re-order until you can order within the terms. And whenever possible try to get longer terms from your vendor.

Two ways to extend your terms:

  • Ask your vendor – especially if you are ordering new stuff. If you have a strong credit rating or excellent payment history ask for an extra 30 days. Remind them that it will help you to buy/try more. Then be absolutely sure to pay that bill on time.
  • Pay with a Credit Card the day the invoice is due. This give you an extra 20-30 days depending on your credit card agreement. (Make sure you pay that bill on time, too – fees and interest will kill any deals/savings you get.)

Minimum orders are Okay – Don’t buy what you Don’t Want. You don’t always have to increase your order just to get whatever special is available. Discounts, Free Freight and Extended Dating are nice, but not always necessary. Sometimes you find yourself buying stuff you don’t want or need just to qualify for the discount. After paying interest on the money you borrowed to pay the invoice, plus taking a markdown on the products you didn’t want and couldn’t sell, you’ll find that the special wasn’t so special after all.

The best specials your vendors can offer you are:

  • Extended Dating – Net 60 or Net 90 do more for your cash flow than anything else. Always select this option first if given the choice.
  • Free Freight – Depending on where they ship from, this can be as much as a 15% discount – great for the bottom line profit.
  • Deep Discounting – 5% is no incentive. 10% isn’t much either. To be considered Deep you need a 15% or better discount. Don’t ever over-buy your dating terms for less than 15% off (the equivalent of Free Freight). Even then, only buy what you know you will sell.

Dating does the most for your Cash Flow. Discounts & Free Freight really only help the Profit/Loss. Go after the special that meets your needs.

There will always be times when you have to over-buy. But choose them carefully. Do it for your Must-Haves. Do it when the dating terms are favorable. But if you ever find yourself thinking, “I’m not sure I really want to buy that,” then don’t!

We decreased our average inventory by over 10% this past year (while only losing 4% in top line sales). This caused us to have a higher Gross Margin Return on Investment (we made more money on the money we spent) and better Cash Flow. Follow those three principles and you’ll see an improvement in your business, too!

-Phil

Settling the Dust

Christmas is over. Retailers across the country are adding up the numbers to see how they did.

The media is having a field day reporting about whether Sales were up or down and using that to determine who “won” or “lost”. The problem is that the media are not looking at the whole picture.

Sales are only one number among many that tell the true story of a business. You also have to look at critical numbers like:

  • Expenses
  • Inventory Levels
  • Profit Margins
  • Cash Flow
  • Net Profits
  • Happy Customers (had to throw that one in, too:-)

To make all your decision based only on Sales is to decide what an elephant is by only looking at the leg.

My father taught me years ago that it is virtually impossible to get all those numbers to look good at the same time. But if you can get 4 or 5 of the 6 numbers going in the right direction each year, you’re doing well.

So how did you do?

At Toy House and Baby Too I was able to…

  • Cut Expenses
  • Lower Inventory Levels
  • Raise Profit Margins
  • Increase Cash Flow
  • Raise Net Profit
  • Keep Our Customers Smiling

In a year where our Sales were down, we still found ways to make money and show a profit. And it wasn’t as hard as many make it out to be.

Over the next couple weeks, I’m going to explore how we improved 5 of our 6 critical numbers so that you can learn from our example and apply it to your business. Some of the steps to take are so incredibly easy, you’ll kick yourself for not having done them already (I kicked myself at least three times this year.)

Stay tuned…

-Phil

The Christmas Tree Lesson

My son gave me the coolest gift for my birthday – a Charlie Brown Christmas Tree.

Now some of you might wonder why I think that is so cool. I mean, it’s a lonely, bare tree that represents the ultimate failure of a blockhead child. Charlie was laughed out of the auditorium when he presented it to the Peanuts Gang.
Yet, there are lessons in that tree that all independent retailers can learn.
Think about what happened next to Charlie’s tree. (I know you’ve all seen the Charlie Brown Christmas Special at least a dozen times – this should be a simple exercise.)
Linus wrapped his blanket around it to give it support.
What have you wrapped around the foundation of your business to give it support?
Have you secured your financing? Have you bolstered your training program to make sure your staff is fully trained and ready to deliver excellent customer service? Have you checked to make sure your inventory includes an ample supply of the “must have” items – the stuff you can never be out-of-stock?
These are the foundations that give your business support, no matter how simple or bare your business might be.
Back to the tree… After Charlie Brown left, the other kids gathered around and decorated the tree with stuff from Snoopy’s dog house. The finished product looked as good as any tree ever did. But it wasn’t the decorations that made the tree special, it was the love they poured into it.
You don’t need the budget of Nordstrom’s to dress up your store to look its best.
You only need to add in some Love. Pour some love into your business. Show your customers how much you love what you do, and you’ll look more special than any overspent, over designed, cold, heartless big box store. Show passion in your design, passion in your policies that serve, and passion in your interactions with the customers and you’ll be the best tree on the block.
Even a simple tree like Charlie Brown’s can become something special. So, too, can your business.
Merry Christmas (and Happy Birthday to me:-)
-Phil