With all the discount madness going on to drive customers to your store or your site, you want to make sure that at the end of the season you wind up with a profit – and a large one at that. It’s not going to happen if you are marking down regular priced merchandise to encourage shoppers to buy.
It’s already too late to change your strategy for this season, but now is the time to put a plan in place to ensure that next time around you are prepared to give your customers bargains and your bank account large returns.
The solution is open to buy planning. Open to buy will set up a buying (and inventory) plan based on what you expect to sell and the rate you want to turn over your dollars (turnover is the key to retail profitability). Your open to buy plan will tell you how much to buy and then you can figure how much of your sales will be reduced price merchandise. Once you have that figure, you can shop your current vendors and others long in advance of your sales so you can buy “off-price” merchandise.
When the merchandise that the vendor has discounted to you arrives in your store, you can take extreme markups so the merchandise will fit in with your regular priced merchandise. When the sale times roll around, you can cut these ultra high prices (that appear to be regular prices) to show your customers great bargains while still maintaining your desired markups.
If you simply reduce your regular priced merchandise down to your cost, you are giving away your contribution to overhead and your profits. Even if doing that produces strong sales, the result is that you’ve lost money. Only using open to buy planning can you be prepared to put a smile on your customers’ faces and profits in the bank!