There are basically three types of retailers. Let’s think about each one for a minute.
To begin with, there’s the prospective retailer that is planning to open a store. There’s so much to consider: location, size, promotion, types of merchandise, personnel, when to open, floor plan. It’s kind of mind boggling, but there’s one thing that can bring everything into focus – open to buy planning. By following the setup regimen of a good open to buy system, before you even sign your lease, you will know how much inventory to open your store with based on the sales you anticipate and the turn rates you desire. This information will help you know how large your store should be, how to layout your floor plan to accommodate your inventory and get you underway without excess invoices and markdowns.
Then, there are those who have recently opened, and bought a store full of merchandise with the hopes of selling it. These retailers are learning they hard way that you cannot do your buying by guessing. But the sooner they realize the error of their ways and set up an open to buy system, the sooner they will be on the way to running a profitable retail store. It doesn’t matter how smart you are, you will always be seduced by the reps into buying too much. There are too many variables and you cannot do it in your head. Once on board with open to buy planning, you will be able to bring your inventory into line, increase your turnover, reduce your markdowns and improve your financial position.
Finally, there are established retailers who have been in business for many years and survived the ups and downs of the retail cycles even though they have been flying by the “seat of their pants”. Even though they may think they have made money, in all likelihood, their profits are tied up in depreciating inventory rather than being in the bank. The sad truth is that the longer they operate this way, the harder it becomes to change their methods and that’s a shame because if they start using open to buy planning, their life will get easier and dramatically more profitable.
So, if you’re a retailer and you’re ordering future delivery merchandise, YOU need open to buy planning. And the sooner you get set up, the sooner you’ll start making money.