Retail - How to increase your margin by 43% for this AW2023!

If you can put your hand on your heart and say that you’re totally happy with the profit your retail business is making, then congratulations, you must be one in a million!

We regularly run Retail workshops at GFM and we have delivered one every season for many years at Who’s Next in Paris. The question at the heart of every conversation is always the same:

How can I make more money from my shop?

You’re reading this because it’s what you want to know too.

Before we go any further, think about this: Are you ready to change the way you work in order to turn things around?

Right now you’re probably reviewing your sales performance over the first half of the year and planning how to improve the second half.

Let’s focus on the buying.
Successful buying is a mix of art and science. The art is the buyer’s instinct for what’s hot in the coming season; the science part is knowing how much to buy and when to bring it in.

We've been looking at the results for one of our clients.We’ve been working together for less than a year. Here are his results for 2 consecutive Autumn Winter seasons and let's make sure you do the same for Autumn Winter 2023.
Deal?

• Number of items sold LY: 856   -  TY: 857 ... Yes just one more piece was sold!
• Sales  TY compared to LY: +25% 
• Margin (gross profit ie sales - cost of goods sold) TY compared to LY: +43% 
  LY= last year / TY= this year

RESULTS: If you store does £300 000 in total sales and your gross profit LY in percentage was 45% this means you made £135 000 in gross profit.
An increase of 43% means you made an extra £58 050 to pay for expenses, rent, salary and the hard work you put in the business.
How does that sound?

As you can imagine, he’s delighted and his comment was "Now I understand why we talk about the Science of Buying".

Before we look at the details of how he achieved this, I need to draw your attention to a number of key points:

• Never underestimate the relevance and importance of sales & stock data. I mean the basic but specific information about exactly what you sell. Not Big Data, just the sales and stock numbers by product categories (in £), discount, incoming stock. These numbers will tell you the truth about what is happening in your shop. Not a week goes by without a retailer telling us one thing about what is hot / happening in his store while the sales data tells another story.
Every time you look at data, action should follow.
So if your sales are less than £400,000 - £500,000 per year, look at it once a month and see the progress around the 15th of the month.
Today, who will look at your data each month and question it?

• Another key to turning things around is your state of mind. I’m not suggesting tinkly music and chanting here, lovely as it may be, but rather the need to view things in a different way and to accept and embrace change. Change needs to become part of the way you work, so that you are able to adopt a different approach when something does not produce the results you want. Every month and season there are new things to deal with, whether it’s brands, looks, approach to business, opportunities or challenges.
You need to be open to working differently.
What have you changed in your business over the last 3 months?

• Getting a new perspective is invaluable in a business. Often only somebody who is outside the business can give you this. For example, recently we were talking to one of our clients about the need to take customers’ birth dates. He was very resistant to this idea because he thought it was too intrusive and might be straying into data protection territory. When we pointed out that we were not suggesting he took the year of their birth, just their birthday, he suddenly realised how it could be used to connect with clients in a positive way (like sending them a voucher for their birthday to use in his shop - or a free gift). He’s now using this as part of his marketing activity and tells me that it has helped to boost traffic. We all have obstacles which prevent us from moving forward.
What you might see as an opportunity, I might see as a problem and vice versa.
A sounding board can be incredibly valuable.
You need somebody to challenge what you are doing in your business in order to move it forward. Who brings critical thinking each month in your business?

• Don’t forget that time is a limited resource. Get the priorities right for your business and strive to remain focused. Don’t waste time doing things which are not going to move your business forward. Where possible, try to delegate the more mundane tasks while you focus on what is most important for your business right now, whether it’s marketing, sourcing new brands, updating your shop or studying your sales data. Who will look at the business each month to decide what is important/urgent and what is not?

I promised to tell you about my client who improved his profit by 43%. Here’s how he achieved it:

• Apart from being provided with the right numbers each month in each product class (e.g. dresses, tops, jeans..), he was diligently applying some key best practice retail rules . The ‘right numbers’ came from our merchandise plan (OTB plan - a retail tool for controlling stock and forecasting sales).

• Unlike many independent stores, he now tracks sales and stock by product category and then by Brands (not the other way around) and he sees the power of doing that. After all, customers tend to buy by product category first and brand second. As you will never buy a brand forever, it doesn’t make sense to only track data per brand. Don’t forget that no brand is equally strong in every product category.

• Unlike many other stores, he does not put 100% of his budget in forward ordering. He ensures that whatever he buys on forward order is delivered monthly throughout the season. This way, his stock remains fresh, keeping both his customers and staff interested in what’s on the shop floor. You might need to learn how to challenge the brands as they are not all ready to work that way!

• Unlike other stores, he buys fresh goods in the second half of the season and was still buying AW goods in December, Janauary and February (at a discount for some of them and therefore maintaining his margin even when he was heavily discounting the goods)

• We also spent a considerable time looking at how and when to study his sales data, how to prioritise tasks in the business and finding a sounding board (in this case it was us).

This is why he got a 43% increase in gross profit! Do you want the same thing?

You know you want to change. Focus on tasks that you control and avoid wasting energy on things you do not control.

Try to buy closer to the season as much as you can, after all, you are often understocked in the second half of the season and therefore losing sales which means you LOSE the customer – possibly even forever!

You are great. Let's take action today and we are here to help and support you or just answer a question for free.
As GFM Founder says: Never assume we will say no, always assume we will say yes.

Onwards, upwards towards a very enjoyable end of year holiday season and more profitable AW season like increasing gross profit by 43%!.

Resources - Live Event at Moda UK / Autumn Fair (september 2022) / Pure London (Febraury 2023)

Global Fashion Management's Founder, Thierry Bayle, has delivered a retail seminar at Moda and Pure London.
If you want to receive the handout and more free business resources or templates, please connect with us.
[email protected]

NB
Another benefit of using an accurate open to buy plan is to reduce the average stock level by up to 30% without affecting sales. This is possible as you just need to turn the goods into cash more quickly.