This time of year the only thing you’re thinking about is sales. Sell like crazy, but don’t forget that the early trade shows are just around the corner. As a retailer, your most important resolution should be to get a productive open to buy system working for you before you head out to the shows. That’s the one New Year’s Resolution that will insure your success in 2018.
Let’s face it, retailing (on the surface) is pretty easy. You buy and you sell. Of course there’s a whole bunch of other tasks vying for your attention – personnel, advertising, the landlord, etc. – but your most important job is to insure that your buying supports your selling but doesn’t out pace your sales. If your inventory levels constantly creep up, you’re going to have trouble paying your bills.
Based on history and your promotional plans, you can closely figure what your sales will be for the coming months. Of course, there will be changes because of the weather, tourism, and business trends. But these can be accounted for as you see trends develop each month. Because the most important factor in making money is turnover, you will need to factor turnover into your buying plan. Sales in each month are different from the others – some will go up and some will go down – so that needs to be build that into your buying plan as well. It’s important to have enough merchandise for the strong selling months and yet pull your inventory down for your weak selling months to avoid being over inventoried, having excess invoices and taking markdowns.
So, the simple is actually a bit more complicated. The only way to properly plan and control your buying, inventory, turnover, markdowns and cash flow is with open to buy planning. Trying to buy without open to buy is just guessing and that leaves you at the mercy of the reps. As soon as you start marking merchandise down and putting it on sale, you have effectively eliminated your contribution to overhead (all of those expenses necessary to keep the doors open) and your profit.
Make your new year’s resolution to set up an open to buy plan. But don’t wait until next year. Do it now and be ready for a great New Year!