When you write an order, are you thinking more about your accounting than your merchandising? The only reason to use the cost figures on an order is for the manufacturer and your accountant. You should be doing your buying at retail!
How does that work? Think about your store. What’s your purpose? You want to sell merchandise, but to whom? Your customers, of course. And when they come into your store and look at the merchandise tags, what do they see? They see your retail selling prices. So, when you are doing your buying, you’re building a retail dollar inventory to support your retail dollar sales – so buy at retail.
When you look at merchandise from a rep or at a trade show, everything is priced at wholesale (your cost). The easy thing to do is to look at the cost and apply your markup and determine if you will be able to convince your customers to pay that price. If guess wrong, you’ve bought a markdown.
The right way to approach your buying is to find items you think would be great in your store. Then look at each item and based on it’s intrinsic value and the price you think your customer will pay for the item, set a selling price. Only then should you ask the cost. If the cost supports the margin you are looking for at the established selling price, chances are it’s a good buy. If the selling price must be higher than you’ve just established in order to achieve your margins, you’ve probably just bought a markdown.
This will take a little extra discipline on your part in the beginning, but it’s well worth it. The little bit of extra time this process takes will be more than offset when the merchandise arrives since your selling price is already on the order. Your open to buy plan is constructed at retail, so your buying should be at retail as well. Do it this way and you’ll have a store full of happy customers and a bank account full of money.
