Is your store providing you with a living or are you continuing to support it by borrowing or depleting your savings to ensure that you can pay the bills? The downside of retailing can be the drain on your financial resources in order to keep the doors open. And most retailers fall into this category.
It doesn’t have to be that way!
Your buying is your bottom line. Most retailers think that buying the right items ensures success. That’s certainly important, but not as important is buying the right quantities. Too much of a good thing is a bad thing. While we all hope to have increasing sales, they tend to move one way or another in a relatively predictable fashion. So, planning is a very important aspect of your buying.
It’s very easy to overbuy. Buying is power! We are all ego driven and want the reps to feel we are the top retailer around. One way we do that is by writing big orders. Well, the reps certainly appreciate those orders, but after the glow of “strutting our stuff” fades away, we are usually left with too much merchandise and too many markdowns.
Another problem surfaces when we see reps that have become our “friends” because of writing these big orders. They grow to expect them and after they buy us a big lunch, we certainly can’t disappoint them, can we? A rep’s job is to sell us merchandise. That’s how they make their money, but that should not concern the retailer. First, you have to keep your own house in good financial order.
Within your business, you have three financial segments: merchandise, overhead, and profit. Profit is hoped for, but it is a product of merchandise. Overhead must be paid and the merchandise provides the income to make those payments. So, everything is contingent on the merchandise and how much you buy. Buy too little and miss sales and hurt income. Buy too much and create markdowns. And when you take markdowns you eliminate the contribution to overhead and profit.
The path to retail success is mapped out by an open to buy plan. Based on your anticipated sales and your desired turn rates, it will guide you to buy the right amount of merchandise in the right categories for delivery at the right times.
With an open to buy plan, your buying will be on target, your sell through will be high, you’ll make the necessary contributions to overhead and take home consistent profits. Open to buy will take you from survival to success.