#Retail - Treat your stock with Respect!


As we look back on 25 years' experience in stock or inventory management / open to buy both in the USA, Europe with over 400 clients, we realise that many Brands or Retailers fail to properly recognise the importance of the stock in improving sales, profits and customer traffic. 

As a multilabel store, your Cost Of Good Sold (COGS) could represent 40 to 55% of your net sales.
As a mono Brand store, your COGS could represent 15 to 35% of net sales.
And yet, many Retail events will not discuss how you can do a better buying.

Let us tell you a little story:

We were visiting a store in Central London where the break even point had to be around £1.5M (excluding VAT) and we sat down with the owner.
What is your number 1 product category? Dresses
How much?  34%
What categories do you track every month in terms of sales and stock?   Dresses
What kind of dresses do you sell?  
Short dresses?  Yes
Long dresses?  Yes
So what do you track every month?  He answered again dresses.
.... I was puzzled...
Can you tell me if you need to buy 30% short and 70% long dresses or the reverse.

Guess what was the answer?  "I don't know".

The consequence is simple. The boutique was 
In addition, we are sending the customers to the competition. 

People fail to identify the right KPIs to understand what is happening in the business.
Do you understand and track IMU ( initial mark up ), MMU ( maintained mark up ), GMROI ( gross margin on investment ) ...?

Some retailers still believe that there is only Art behind buying. 

There is the Art of Buying as you know WHAT to buy ( or design , manufacture and put in your store ) however there is the Science of buying as you need to know HOW MUCH to buy and WHEN to bring the goods in.

Each product class will trend differently across the year so you must figure out and become better at forecasting sales per month by class.

Then you need to understand in each class and each month what should be the stock to sales ratio.

With my partners, we have analysed several hundred thousand classifications and have built up a statistical and mathematical model to forecast very accurately what you will be selling in your store. You must also look into it internally or outsource the open to buy plan.

OTB is used by many in the USA and possibly only by the larger retail organisations in Europe. However, today, it is accessible to the one-store operation for £300/500 per month. The ROI can be from 3 to 10 times what the Retailer has invested.

As a multi label store, one must also ensure to analyse the stock by product class and only then by brand. Otherwise you will be losing track of the trends in the store. If you only focus on brand analysis, you will most probably be buying the same things several times.

January is the right month to review our operations and set up the necessary changes to either set up measurable goals for the year or check if we are on tack and if not, apply new rules which will produce new improved results.
The same work should happen every quarter especially during a crisis situation.

Let's not forget that each product class in the business is a profit centre therefore it needs to be looked independently.

Accordingly, you must challenge your store manager to not only reach a global sales target per month BUT a sales target per class.

Connect to exchange more business retail insight or implementation skills, tools.
We will tell you what the others refuse to tell you. 
We will tell what you need to know to grow sales, profits and improve cash flow.

Happy retailing.

retail buying top tips

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