This is an article finder to our 10-part Retail Buyer Training series produced by SNEWS®.
Looking to quickly calculate gross margin percent, mark-up percent, GMROI, retail selling price, turns and more? As part of our popular SNEWS® Retail Merchandising Training 101 clinic series, we've created a package of on-line calculators to make the job just a bit easier. Just plug in the numbers where our calculators ask for them and presto...your answer awaits. Talk about being a smart buyer!
At a retail training seminar we attended at Outdoor Retailer Winter Market 2007, we were stunned when the question was asked of the retailers in the audience how many folks knew what basic terms, such as turn, gross profit and margin, were and how to determine them. We'd estimate less than 15 percent of the audience raised their hands, with the rest staying silent or shaking heads in resignation. Ouch!!!!
Last week, we debuted our new 10-part Retail Merchandising Training 101 series by covering the most basic of concepts -- knowing how to determine your gross profit or margin on the sale of an item. Of course, we know that there might be some who imagine that if they can now calculate what money they made on the sale of an item, a brand or a category, or how to predict what money they might make on a sale in the future, school is out. Not so fast!
There are a number of these factorings of margin and turn that retailers use, but one of the most common is GMROI, or "Gross Margin Return on Inventory," often confused with the "Jim Roy," a non-alcoholic cocktail or that little known ancestor of Robert the Bruce, Jim the Roy. As we said, this indicator is dynamic, and tends to be "The Great Equalizer," allowing comparisons between inherently different category types. How do we compare the relative merits of a group of styles that, for example, maintains a 39-percent Gross Margin (GM) but turns at four times a year, against another group maintaining a 45-percent GM and turning twice a year? Which is better? Which one should I put my energy into?
So now we're all comfortable with calculating and predicting gross margins, stock turnover, sell-through percentages and other velocity-based ratios, and we have a good sense for when these values appear favorably or not.In the previous article on GMROI, we mentioned markdowns. Markdowns are your friend...Now if that statement makes you consider canceling your subscription, we can talk about Barry Bonds, a less controversial topic by anyone's estimation. If not, read on!
Your merchandise plan will bring together everything we've taught so far -- initial product margin, maintained gross margin, turn goals and the various sales velocity metrics of sell-off percentage, sell-through, etc. -- into a master plan for every category of goods you sell for your company and, in the case of multi-door operations, every store. Doing this manually at the granular level necessary to manage and analyze your inventory purchases and sales requires software and the ability to create an information structure within it. It will also require point-of-sale capture of daily sales feeding into that software.
For a spring selling season (January through June), as you likely know, vendors usually need your order commitments by the prior September at the latest, and often your best access to product is even earlier. The bigger brands are out with their lines, looking for your reactions or even solid commitments, as early as June. As a preseason tool, your merchandise plan, particularly the receipts at cost line, is in fact your initial open-to-buy budget. You can rely on these dollar values to pre-book goods for delivery into the future season.
We want to offer you a few tools and strategies for managing your preseason buying. For the sake of these examples, we'll assume you have trade shows to attend. We'll also assume you will do more than a little of this preseason preparation in your store...
By now you have most of the essential building blocks of planning and managing your sales and inventory under your belts. While we know you'd rather be heading out for a paddle, trail run or to the climbing gym, you still have work to do -- ¦so sit back down. What follows is the part we'd all like to skip, but we suggest it may be the real key to your being able to avoid mishaps and repeat successes in the future: History and its analysis.
Many of us in specialty retail like to think of our clientele as friends, or at least patrons whose repeat business we rely upon. We train our staff to take as much time as each unique shopper needs to make a decision and that's a large part of being a specialist. We carry better products. Our market has to do with aspirational versus commodity shopping. In this discussion of traffic and conversion rates, we aren't suggesting you abandon your concept of customers as friends and people and start seeing them simply as numbers. But these metrics can be key pieces of data by which you can...
We've now covered all the basic merchandising calculations, planning and open-to-buy. Last time, we covered the ways our merchandise selections, location and promotions relate to the flow of customers in stores and how and when shoppers convert to buyers. In so doing, we see that the real investment and the biggest contributor to our overall profitability is our inventory: We're merchants after all, and selling things is what we do. Selling things pays for everything -- even that upcoming expedition you're hoping to take to Mount Plentiful Dreams. The following discussion on staff hours and retail floor space efficiency may seem to veer slightly afield of pure merchandising. But once again, it's the product that is our biggest investment (and in many cases, our only real asset) and we want it to work harder than everyone.