You’d think that making money would be every retailers’ number one motivation, but it’s really not. They expect that it will happen if they make their store attractive, hire attentive sales personnel, do alluring displays and provide great merchandise. If they do all that, how can they lose?
Sadly, even when excelling at the tasks just mentioned, retailers continue to operate with a negative cash flow until they eventually cannot support their store anymore. What’s the problem? Overbuying. It’s really hard for retailers to say no to reps when pressed to buy more. How do they know that more will be a problem? The truth is that too much of a good thing is a bad thing. All that great merchandise must be paid for and so to must you pay your overhead. Sales will only generate so much cash. When buying outpaces selling, cash flow problems ensue.
The way out of this dilemma is to use open to buy planning. This mathematical process will determine a buying plan in each department each month for the next 12 months based on YOUR anticipated sales and YOUR desired turn rates. Using open to buy will insure that you face your reps with a solid buying plan that will insure a positive cash flow. Once you’re underway, you’ll never look back. Now is the time to get started with open to buy even if you’ve already been to the shows and committed future orders, they’re not set in stone. Set up your plan and compare your orders with your buying plan and you’ll immediately see where those orders are out of balance with your planned sales. Pair the orders down and you’ll cut your markdowns and increase your cash flow.
Now you’re ready to make some money!