Count
Those Votes!
By Cathy Wagner, President—Result One
Election
time is coming up soon, isn’t it? You can see
the parties jockeying for position. You know all the
TV ads are soon to follow. The first Tuesday in November
will be here before we know it. But did you know that
there is voting already going on. Right Now. In your
store. Customers come in every day and vote with their
dollars for what they want to see in your store. Your
job is to tally those votes and make sure the winners
are always in stock.
Most
retailers think of those winners in terms of individual
items. Certainly, every store has a short list of “Must
Always Have In Stock Items”. But one mistake retailers
often make is that they don’t look at these votes
in any other way. When we start to work with retailers,
we start by analyzing the needs of the customers. We
look at what the customers are telling us that they
want. And then we group those needs into classifications
of merchandise called classes.
Why
Classifications?
The
benefits of looking at your inventory at a class level
are many. Most importantly, it allows you to grow your
business. Buying items does not grow your business for
the long term. Certainly, there will always be a hot
item. However, looking at your inventory at a class
level will allow you to identify trends. And within
those trends are opportunities for sustained sales growth.
Look at the dress-up/pretend play class right now in
toy stores. Sales in this class are trending dramatically
up over last year. There is no specific hot item within
the class, but our clients have been tracking their
customers’ needs – or votes. Those votes
have indicated an increased need and so we have responded
and increased inventory to match. Sales have gone up.
Profits have gone up. That is the way it is supposed
to work.
This
example illustrates another benefit of utilizing class
structures. You are able to balance your inventory.
At the class level, you are able to look at the sales
by class and the inventory by class and make sure that
the percentages of each class to the total are equal.
Then your inventory is balanced. You are providing the
right amount of inventory to match the sales and needs
of the customers. On the other hand, if you find that
the numbers aren’t matching up, you now know what
classes specifically need to be attacked. And you can
work on either driving up sales in those areas or decreasing
the inventory by taking markdowns or other actions.
(If you need ideas for this, please just ask us!) When
you balance your inventory, you reduce markdowns and
create cash by not over buying. It assures that you
are buying enough merchandise to meet the needs of customers
in each need classification. It prevents you from buying
too much merchandise so that it must be marked down
at the end of the season, which reduces profits. You
need information at the class level to accomplish this.
Sales on track. No excess inventory. Cash flow improved.
That is the way it is supposed to work.
Let’s
say that your business is trending down. Cash flow is
getting tight….tighter…..tighter. You pull
all your open orders, call the vendors and cancel every
order. You resolve to sell through the inventory that
you already own until cash flow gets better. Those kind
of sweeping cuts can destroy a business. You might be
starving the one area of your business that is actually
growing. If you had information on a class level, you
could analyze each class and determine which one actually
needs more inventory to maintain sales and which class
does not.
Creating
a Class Structure
Because
every store has its’ own personality, classification
structures often vary. The key is to create a structure
that represents the strengths and opportunities of your
store. There are three basic considerations. First,
the class should contain similar types of merchandise.
A good example of this would be sport coats in a men’s
store. Second, the class must have a manageable inventory
volume. It’s important that your sales are spread
out among the classes. You do not want the majority
of your sales to be represented by just a few classes.
Third, group together items with similar profit margins.
For example, take hardcover books, paperbacks, early
readers, board books, activity books, music tapes, music
compact discs and videos. Those items all tend to have
the same initial mark up. They could all be pulled together
into one class.
The
quantity of classes is important. A good number is to
have between 12 – 20 classes. Make sure that you
have a functional structure that divides your business
into a series of manageable sections. Too few classes
will not give you the details you need and too many
will be difficult to manage.
Setting up the right classification structure is important.
Professional help is often needed to give you the right
look into the heart of your business. Don’t hesitate
to contact us if you would like more information or
other suggestions about class structure. Now, you should
think of each individual class as if it was a stand-alone
business. You can analyze the information in a meaningful
way. Your customers have spent their dollars and voted.
You can tally up the votes and make sure that you have
the winner!
Cathy Wagner, Result ONE, A Management One affiliate
With over 20 years of experience in retail as both an
owner and a consultant, Cathy Wagner has the unique
position of having worked on both sides of the counter.
She began with one store and grew her retail business
to multi-store operation. As such, she has a working
knowledge of what a store needs to be successful. She
has seen first hand the tremendous benefits that the
strategic planning and inventory management processes
bring to a business. Implementing these processes, uncovering
opportunities and encouraging business growth are her
specialties. According to a current client, "The
results surpassed my expectations. She worked in a hands-on
manner that successfully impacted many of the day-to-day
aspects of my store." Cathy Wagner works closely
with business owners to develop action plans that increase
sales, improve cash flow and create success.
Cathy Wagner did 2 popular and powerful presentations
at the ASTRA convention - The Art and Science Of Buying
and Be Your Own B.O.S.S. – Time Management for
Retailers.
|
