Sounds good, right? But how do you do that? Well, it’s easier that you might expect. But you cannot keep doing what you’ve been doing and expect a change. What did Einstein say… Insanity is doing the same thing over and over and expecting a different result. So get ready for a change.
The change is in how you plan and control your buying. Markdowns are the result of buying the wrong quantities. Even if you’re buying great items, too much of a good thing is a bad thing. Your store can only generate a certain amount of sales. Of course, you want those sales to be increasing over time, but there’s only so much you can do to make that happen.
The one thing that retailers feel will grow their sales is more inventory. That’s just plain wrong. While you need the right amount of merchandise to support your anticipated sales, the excess becomes markdowns. Markdowns are the path to retail failure and the sooner you can slash the amount of markdowns you take, the sooner you will find your cash flow on the increase. And isn’t that why you’re doing this in the first place?
OK, you need enough inventory to support your sales, but how do you determine that amount of inventory? The additional factor in the mix is turnover. Sales are great, but turnover is how retailers make money. Simply put, the more you turn, the more you make. In addition, the combination of sales and turnover will determine how much inventory you need each month to support your sales and bring you the turnover you desire.
Turnover is the rate at which you deplete your inventory on an annual basis. If you turn your inventory twice a year, it means that (dividing turn into 12 months) you would need six months of sales in stock at any given time to support your projected sales at a two time turn rate. If your desired turnover is four times a year, it would mean that you would be carrying three months of sales in stock at any given time to support your projected sales at a four time turn rate.
Now, I’m sure that last paragraph had your eyes beginning to cross, and rightly so, but don’t despair. There is a process based on sales and turnover that will yield your monthly buying plan in each merchandise category for the next 12 months. Since your main interest is merchandise, environment, displays, selling, etc. you should resist the urge to spend your time figuring this all out and employ an outside service, or software, or the best option is to be sure you are doing it right with myotbplan.com. After you do a little leg work, you’ll find myotbplan.com is not only a better value, but it’s easier to understand and use, more accurate (important in cutting those markdowns), better supported, more accessible and the only system guaranteed to improve your buying, inventory position and cash flow.
So, if cutting your markdowns is your goal, and it certainly should be, an open to buy system is the way to make that happen. With open to buy planning working to develop your numbers, you will be buying the right items in the right quantities in each merchandise category for each of the next 12 months. Subscribe to myotbplan.com and you can reduce your markdowns by 50% (or a great deal more).