Sounds like a silly question doesn’t it? But most retailers with high hopes lease or build spaces that are really larger than they need to support their sales. And of course, they buy merchandise to fill up the space.
For as long as I can remember I have suggested that retailers buy to support sales rather than to fill space. Since all retailers want their stores to look brim full of great merchandise, perhaps you need to make your store smaller. Bringing the rear of the store closer to the front is a good start. A false wall can do wonders in terms of decreasing your space and making your store look full.
Doing more and larger displays is also a way to eat up space. Customers buy with their eyes and the more visual suggestions you offer, the greater the likelihood of making sales. Just seeing endless racks of bits of merchandise is not going to help you make sales.
Think about your own experience when you go shopping for something. Do you really want to be overwhelmed with so much merchandise that it’s almost impossible to make a decision or would you rather be guided to the right decision from a more reasonable selection? If your customers see tons of merchandise, they can pretty much figure that they can check elsewhere and come back to you later since you have such a huge supply. Too much stock decreases any urgency to make a purchase.
You want your customers to feel that if they don’t buy it now, it will probably not be there when they come back. That’s exactly the mentality you want to instill rather than to essentially tell them: “Come back anytime, we’ll always have lots of these!” Trust me, they’ll buy it at the next store.
So, how do you know how much space you really need? If you consider how much you plan to sell and the rate you want to turnover your inventory, the answer will tell you how much inventory you need to carry and then you can figure how much space you actually need. If you go the other way and say you have so much space and try to fill it up so your store looks good, you will overbuy. When you overbuy, you create markdowns. When you have markdowns, you have no contribution to overhead and profits. In order to make up the difference in cash flow, you will have to take more markdowns. And the downward spiral continues.
The answer to this problem is simple, but retailers still resist. Open to buy planning is the only way to properly plan your buying so you can do maximum sales with the smallest possible inventory. Once OTB is in place, you can focus your creative energy on bringing more customers in and serving their needs. But far too many retailers feel they can do this in their heads and that is a gigantic mistake. No matter how well you know your store, your customer, and your product, you need the underlying numbers to guide your buying decisions. Without OTB you are just guessing and your business will suffer in many ways. So, get an OTB system in place. Your world will be a brighter place.