It is human nature that when we are feeling flush, we will spend more. It doesn’t really matter if we need something, if we have money, we like to buy. Obviously, the problem with allowing those urges to drive the buying for your store will result in over buying for your store.
Unfortunately, when sales are strong, retailers tend to think that things will only get better and so they must buy more to accommodate those ever increasing sales. But even if sales do continue on a positive trend, you still need to avoid the temptation to over buy.
So the answer is YES, you need OTB to develop your buying plan even when sales are strong. It is always important to remember that too much of a good thing is a bad thing, and when you bring in more merchandise than you will sell, the result will be excess invoices and markdowns – not profits.
Good sales cover up a lot of mistakes, but mistakes are ever growing and will subvert your bottom line. When sales are strong, there is fear of not having enough rather than the reasoned thinking about having the right quantities. And while strong sales are euphoric, will you be prepared or over bought when sales begin to slow down?
Not only does OTB enable you to forecast your buying based on projected sales and turnover, it also enables you to spot trends (up or down) as they are beginning, not after they have caught you unaware. This early warning system puts you in the driver’s seat and allows you to constantly make course corrections to insure your inventory is always correct to support your anticipated sales at your desired turn rates.
When sales are strong, it is time to improve your turnover and profitability. Just as Christmas sales turn up the wick on moving merchandise, strong sales at any time should allow you to increase turnover if you are working with OTB. Since half of the driving force of OTB is turnover, you must move the dial higher on turnover and keep your stock leaner when your customers are anxious to buy.
While that may sound a little contradictory, it is this “buying frenzy” by your customers that enables you to satisfy them with less merchandise, not more. Now, I’m not advocating empty shelves, but if you work your strong sales with the same low turn rates from before, you will lose all of your profits and much of your contribution to overhead when you step back and see how much excess merchandise you have accumulated during YOUR buying spree.