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The Art and Science of Buying

What is the issue faced by many retailers from large chain stores to independent retailers: Buying!

As you are placing orders for the SS or AW season, you must be having the following 2 questions in mind:

How can I make this buying process easier?
How can I maximise my profits on the stock I am buying – which is my number 1 asset?

Let’s focus on 2 key elements which will help you put more £ / € or $ in your pocket. Guaranteed!
You have the art of buying and you know what to buy, you now need to have the science part of buying which is “how much to buy” and “when to bring it in”.
Answering those questions as accurately as possible will put you ahead of your competitors and increase revenue while reducing stock.
So, what do you need to do to achieve better results when managing your stock?

1. Break down your stock by product types
Many retailers analyse their stock solely by brand or supplier. The first analysis must be done by product
type and then only by brand. By working by product type, I see 3 immediate benefits: it is easier to spot
trends, easier to identify a balance in the stock & easier to take meaningful stock data
1. With the recession, many retailers now understand that you cannot forecast sales or demand on last year’s numbers. You must work on what is happening now therefore working on the last 2 to 3 months. This is the way to grow the business. Each class will be considered as a profit center that you will help them to improve and grow.

2. The right balance in the stock means that if dresses represent 20% of sales they must also
represent 20% of stock. If dresses represent 25% of stock, you will be missing valuable pounds to invest in other classes which require money for fresh goods and growth.

3. If you can’t measure it, you can’t fix it! By taking data about sales, discounts, initial mark up, maintained mark up, gross margin return on investment, stock per class and per month … You will start understanding what is driving your business forward. You will understand on which class to put more efforts. You will be able to do selective discounting. You will start challenging yourself and making positive changes.
Measurements will give you the 100% certainty of what’s hot or what not working in the shop.
Making an assessment on what is hot, despite being on the shop floor 8 hours a day or more, is often distorted by what has happened today or this week and therefore it is hard to see the big picture.

Without looking at your watch, could you tell me exactly how it looks and could you give me all the small prints written on it (front and back)? Many cannot and yet we see it more than 8 hours a day!

2. Analyse your discounts
Discounts are the biggest thieves in your shop. They can represent 5/10 to 30% of net sales and yet many retailers, even those having an epos system, do not always track them.
Guess what pays the invoices, your salary and all the hard work you do in the boutique : your sales after deducting discounts. You want to know where the profitable sales are in your shop. During the sale period, I have heard many retailers telling me that there cashier was full of cash but they could not pay their invoices. Make sure you keep space for full price merchandise during sale time ( to generate profits and not just cash ).
Every month, check if you are overstocked and act on it immediately. If you wait till the end of the season, you will discount the goods up to 70% ( may be more ) and the profits will be lost.
Working the stock analysis by suppliers prevents you from taking long term data. Some suppliers will not stay with you forever and furthermore not every brand is strong in every product class.

The difference between growing the business and struggling to survive is based on your ability to read the demand that exists and translate it into cash available to buy stock.
There are always some classifications that are driving your business, some that are in cruise control and some that are falling away. Your priority is to have the information to identify the opportunities and exploit them to the full.

As a reminder, you know the closures of many stores around the world, from Bed Bath and Beyond, Forever 21 ... in the USA to the UK High Street with BHS and House of Fraser. Let's make sure we take care of your number 1 asset (apart from your people): your stock.

At BHS Limited from 2010 to 2014, sales went down 15% and stock went up by 50%. Is that normal?

Happy retailing and have a great buying season.

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