If you’re wondering what’s the difference, you need to rethink about how you merchandise your store. Of course you want to have great items and you probably do because you go to the shows and keep an eye on trends to make sure you are current with what’s new.
But how much you buy makes all the difference. If loading merchandise into your store would grow your sales proportionately, you would just buy MORE. But, as you have probably experienced, all that does is to grow your INVOICES!
The merchandise in your store should not be there to encourage sales, but to support them. While it kind of sounds like the same thing, it’s far different. If you go into the marketplace and buy everything you see that you feel is terrific and that would get your customers’ hearts racing, you’re headed for a negative cash flow. Your store will only make a certain amount of sales because of your size, your competition, the demographics of your market area, etc. Even though you continue to strive to grow your sales — and they will — but only so much. If you could double your sales by doubling your inventory, life would be a dream, but that’s never going to happen.
So, you have to start with your sales in order to determine how much merchandise you need to support those sales. If you do that, you will buy the correct quantities, be able to pay your vendors, contribute to overhead and take a profit while avoiding dreaded markdowns.
You can do just that using an open to buy plan. Based on your anticipated sales and desired turn rates (turnover is the key to making money in retail), an open to buy plan will forecast your merchandise needs for each month 12 months into the future. Buying according to your open to buy plan will insure that you have the correct amount of merchandise each month to support your sales at the turn rates you have planned.
So, don’t put the cart before the horse. Plan your sales and buy merchandise to support them. Your customers will be happy and so will your bottom line.