Having the right amount of merchandise in the right department at the right time insures that you will maximize sales, reduce markdowns, improve turnover and increase cash flow and profitability. What more could you ask for?
Even though that’s what every retailer strives for, they mostly try to do it in their head, or on the advice of reps, or by reading tea leaves or tarot cards. In order to properly time your merchandise arrivals to give you the benefits listed above, you need to employ an open to buy system.
If all you were doing was filling in merchandise as it sold, you really wouldn’t need open to buy planning, but in the fashion business when your suppliers are requiring orders be placed three to 12 months into the future, without open to buy planning, you’re just guessing. You function in a creative business, but creativity alone is not enough. Your merchandising creativity must be based on a solid foundation of numbers.
Your store is driven by sales and turnover. So is an open to buy system. With sales and turnover, an open to buy program will forecast ideal beginning numbers. Those ideal inventory numbers compared to your current inventory will show you where your inventory is out of balance. Excess inventory has to be paid for and must carry it’s proportionate share of overhead. If you have too much inventory and it’s just sitting around in your store, it’s costing you money. You wouldn’t want your employees to sit around unproductive, so why your inventory?
Raising your turnover should always be the goal of every retailer because that’s how you make more money. Merchandise timing is critical if you want to make more (or any) money and consequently, working with open to buy planning is also critical. Your open to buy plan will tell you exactly how many dollars you need to receive each month in each department to support your sales and give you the turnover you desire. That’s the kind of timing that will grow your bank account.