"Entry Exam" for New Items in Your Stores

Question: "We must keep bringing in new items. But, how do we keep from being over-bought?" 

Answer: "Very carefully!"

Ahh, the appeal of new items. Or, your customer's ever-growing "wish list" items. But, when you are also trying to control inventory, and keep turns up, the challenge is, "Really, which should you buy?" 

• As many retailers are only too aware, if you are not vigilant, you may experience bloated inventories, which can cascade very quickly into cash flow problems.

Here are 6 key questions for you and your buyers to ask yourselves as you consider new items. We think of it as an "entry exam" for merchandise. It's a very quick way to identify which items actually deserve to be in your store.

#1. Can my customers get this item at other stores in my market area? 
If yes, it probably has no pulling power.

#2. Is this a good margin item, or is it subject to a lot of price competition? 
Slow turners with weak margins are double trouble.

#3. Does having this item in stock help me sell other higher-margin merchandise? 
If not, you may not need it.

#4. Can I get faster delivery on this item than I am now getting? 
If yes, you may be able to cut back on your stock.

#5. Do I order larger quantities of this item than I actually need in order to take advantage of price breaks? 
If yes, you may be coming out on the short end when you figure in all your carrying costs.

#6 Do I have an emotional attachment to this item that reflects my personal taste rather than a business-like response to my customer’s desires? 
If yes, get rid of it!

Go here in the Library for Owners at The Retail Owners Institute(R) for more useful and practical insights and tactics about protecting your store from inventory bloat. See how quickly you can achieve greater control of your inventory!

New items? Oh my, yes. 

Too much or too many? Not any more!

With That Inventory...What Could/Should/Would Your Sales Be?

The Retail Owners Institute® has just added another online "gadget" that is kind of fun. Quick and easy to use, of course.

1. You enter your inventory on hand (@ cost);
2. You choose which retail segment you are in;
3. It immediately shows you the annual sales of the "median-performing retailer" in your segment

Here's an example for an owner of a women's boutique.

"Your Mileage May Vary"

Of course, this only means something when you compare the sales volume in your segment to your own sales results. Are your sales usually better than that? Or not?

And, if your sales from that level of inventory are significantly lower, does that mean that you should make changes?

Remember, there is no one "right answer". If there are differences, you get to decide what, if anything, you want to do about it. 

• If you want to concentrate on growing sales, you have a target for the increase.
• Or, if you elect to raise turns to reduce inventory on hand, you have perspective on what is reasonable for your retail segment.
• And, of course, you have 12 month's time to realize the effects of any changes.

Every retailer will have different answers, depending on their particular stores and situation. 

That is the whole point! 

This is another free, time-saving tool from The ROI to enable you to compare your choices, and apply your best judgment.

So have fun with it! Go here to check it out for yourself. 

Inventory Turnover...So What?!

We had an inquiry recently from a three-store owner asking about inventory turnover.

"Is it really important?" he asked.

Our reply, after being struck by the question, started out as less than adequate, to be sure. We explained the formula (Cost of Goods Sold divided by Average Inventory @Cost) and he politely agreed.

Then we explained the difference that turnover rates can make:

• "For example, for every $1 Million in sales at 40% margin, the COGS would be $600,000. If turns were 3, average inventory would be $200,000.
• "But – if turns were 4", we continued, "inventory would be $150,000, helping cash flow by $50,000."

Again, he politely agreed. Then, after a pause, he asked, "But, is it really important?" 

Finally, we got it! And our answer improved.

Key Number Each Month

An Open-to-Buy system that uses turnover rates as the "governor" projects not only the buying budget for each month. It also projects the targeted ending inventory levels for the end of each month.

"Like the white or yellow lines on highways," we offered.

"Wow!" came his reply. "You mean that our buyers should steer their inventory levels to hit those planned ending inventory numbers?"

"Well, that's what the pros do," we responded.

"Hmmm.  Now I see how it's all connected!

"Hitting those ending inventory targets will control my inventory levels. That will help the cash flow. And that will reduce our debt. All of which will help me get some sleep at night!! 

"Guess turnover IS pretty darn important!"

Then we tossed out the classic line from Michael Gould of Bloomingdales, who so famously told his buyers: "No retailer ever filed bankruptcy because their turns were too high."

Monthly Sales Results Are Interesting. Here's How to Make Them Significant!

The "international greeting" among retailers is "How are sales?"

The response almost invariably includes a reference to Last Year. Sales are up versus LY, or flat, or down. This is the common metric among retailers.

• The U.S. Census Bureau collects data on retail sales each month. Once again, The Retail Owners Institute® has analyzed the monthly retail sales by retail sector, compared those results to the same month Last Year, charted the results for the trailing 6 months, and posted them on The ROI site.
• Go here to see how your results compare to other retailers in your sector. Now, thanks to The ROI, it's easy for retailers to get perspective. (For instance, maybe you find that everybody else in your sector also was down. Misery loves company!)

Interesting. But NOT Significant!

Comparing your own results to Last Year, or even to others in your retail sector, is interesting. How to make it significant? Just one way: compare your results to Plan!

Once you know whether sales are ahead of plan or behind, you can use the "lead time" to make adjustments!


And the most important adjustment for retailers is, of course, inventory!

For instance, take another look at your Open-to-Buy plan. 

The key number to be watching with an eagle eye: your targeted Ending Inventory for each month. 

• Sales ahead of plan? You may need to adjust your buying to bring in more merchandise to meet your targets
• Sales lagging from plan? Good thing you found out now! You still have time to make adjustments, and avoid excess inventory.

The ROI makes it easy for you to do all this. Just take advantage of our online BUYING PLAN Forecaster.  Available 24/7. Free!

• Entries are easy and fast. Planned sales and margins for each month, plus Beginning Inventory at the start, and turnover rate. That's it!
• Immediately see a monthly Open-to-Buy, including targeted Ending Inventory for each month.
• Powerful. Fast.  Free, 24/7. Only at The ROI. Go here to use it for yourself.

Now THAT is significant!

Every Retailer's Dread: "Too Much Inventory!"

"So, retailers, how much inventory should you have on December 31?" Now, thanks to The Retail Owners Institute's online BUYING PLAN Forecaster, any retailer can find out. Anytime, from anywhere. For free!

That's right. Retailers now can develop their own inventory buying plan whenever they need it. From their laptop, their tablet, even their smartphone! In just minutes. All online, in the cloud. And now, FREE unlimited online access!

"Why is it free?" 

That's a fair question! Two main reasons:

1. Unfortunately, there are lots of in-house spreadsheets used by retailers that are well-intended, but not necessarily accurate. So, we want to make it easy to get correct Open-to-Buy calculations.
2. The ROI's goal in everything it does is to bring the power of better inventory control and improved cash flow (and more peace of mind!) to more retailers. This basic BUYING PLAN Forecaster can help.

The ROI's view: "Retailers, be our guest, 24/7 from anywhere!"

---

About The ROI's BUYING PLAN Forecaster. 

• With just 3 easy inputs of numbers you know, you can find out in minutes how much inventory to bring in, and when, to meet your goals for sales, margins and turns. 
• Immediately get monthly buying budgets, targeted Ending Inventory (that's the key number!) amounts for each month, even the projected GMROI for as many plans as you want.

And it's dynamic! Want to see "what would happen if I...?" No problem! Change turns. Or change sales in some of the months. Or adjust margins. See immediately what difference that makes. All on your own!

The Institute's BUYING PLAN Forecaster is one-of-a-kind.

• Online, in the cloud. Nothing to download or install.
• The formulas are all built in.
• Sophisticated, accurate, and fast.
• Easy for retailers to use!

And now, even better, it is available for any retailer, anywhere, to use anytime. For FREE!  

Retailers, don't let your inventory "get out of whack!" 
Why wait? Try it yourself. Just go here on The ROI site.

Deciding Where & How to Cut Inventory?

"But, I Can't Sell from an Empty Wagon."

Obviously, there's truth in the basic retailing maxim that "you can't sell from an empty wagon." If you don't have an appealing assortment of goods your customers need, they have no reason to visit your store. 

However, today, you may have to redefine "full wagon". 

Here are some questions to ask about each item added to your store:

Q. Can my customers get this item at other stores in my market area?
Yes?  It probably has no pulling power.

Q. Is this a good margin item, or is it subject to a lot of price competition?
The latter? Slow turners with weak margins are double trouble.

Q. Does having this item in stock help me sell other higher-margin merchandise?
No? You may not need it.

Q. Can I get faster delivery on this item than I am now getting?
Yes? Sweet! You may be able to cut back on your stock.

Q. Do I order larger quantities of this item than I actually need in order to take advantage of price breaks?
Yes? Be careful! You may be coming out on the short end when you figure in all your carrying costs.

Q. Do I have an emotional attachment to this item that reflects my personal taste rather than a business-like response to my customer's desires?
Yes? Get rid of it!

Tired of the Mystery and Voodoo Around Open-to-Buy? So Are We!

Most retailers have heard of the inventory managing tool "Open-to-Buy". (BTW, "Open-to-Buy" is slang for a budget for how much inventory to bring in, and when.) But all too often, Open-to-Buy has been shrouded in mystery. Too complex and/or too expensive.

Those days are over! The Retail Owners Institute is on a crusade to spread the word: Managing and controlling inventory IS within the reach of all retailers.

Here's the deal: Open-to-Buy is just a 4-part formula!  And any retailer, anywhere, can put that formula to work, on their own!

What can an Open-to-Buy do for a retail operation?
    •    improve margins
    •    improve cash flow
    •    reduce the time spent on inventory management
    •    help have the right merchandise in your store at the right time
    •    avoid excess inventory
    •    invaluable when delegating to buyers
    •    help you sleep at night!

How Does The ROI Take Away the Open-to-Buy Mystery? Here Are Four Answers!
The ROI is the foremost resource for retail financial training and know-how. The Institute is dedicated to taking away the mystery of retail finance. Retailers CAN control the cause-effect connections between sales, margins, expenses, profits, inventory turns, and cash flow.

Here are 4 different ways (free or very low cost) that you (or your staff) can learn more about controlling inventory with an Open-to-Buy plan.

#1. Free TOPICAL TUESDAY webinar
November 15. 10 am Pacific Time/ 1 pm Eastern Time
"Back by Popular Demand: CONTROLLING INVENTORY LEVELS"
Free registration • Go here
About 80% of retailers are over-inventoried some or all of the time.  As we approach this particular Holiday Season, having excess inventory may be especially treacherous.

Right now, controlling inventory is the #1 job of the CEO or owner. This live TOPICAL TUESDAY webinar with Pat Johnson & Dick Outcalt, Co-Founders of The Retail Owners Institute, will review the basics of inventory management, and show how The ROI's online multi-department Open-to-Buy Calculator automates the number-crunching for you. 

There will be plenty of time for Q&A, so bring your questions (and your buyers!!)  Go here to register for free

#2. On-demand info on The ROI site: CONTROLLING PROFITS, INVENTORY & CASH FLOW
This is an entire section at The ROI, dedicated to this major responsibility of retailing. Available online, 24/7, on-demand. Explanatory how-to articles that reduce the mystery. Short videos that teach, explain, and illustrate. Online calculators that automate the process (nothing to download or install; they just work!)

#3. The OPEN-TO-BUY CENTER
This is one of the new "special purpose portals" of The ROI: an entire website dedicated to Open-to-Buy! The remarkable multi-department Open-to-Buy Calculator is hosted here. Any retailer, anywhere, can do their own Open-to-Buy plans in just minutes. (Try it yourself! 1st month is just $4.95!) 

And, if you need some refresher, the Open-to-Buy Center includes articles and videos. Just look under the RESOURCES tab.

#4. BASICS of OPEN-TO-BUY eLearning Kit & Calculator
Want more structured training? Need to train your staff in Open-to-Buy? Here's the perfect answer!
The BASICS of Open-to-Buy is a self-paced, online eLearning "KIT": a step-by-step how-to training course, and an online "calculator" that automates the cause-effect number crunching.

Talk about doing away with the mystery! And it's needed more now than ever before! Go to The ROI's eLearning portal for details about this new management training tool for retailers and buyers. (Be sure to watch the short video about the BUYING PLAN Forecaster!)   "Learn it. Do it. Profit from it!"

There you have it. Four different ways that you and your staff can make Open-to-Buy planning your new best friend! Just depends on how you like to take in information. But the key: no more mystery about how much to buy, and when. (And, no more intimidation by "the experts".)