The Retail Management
Advisors
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Newsletter Sign Up and Newsletter Article ArchiveSign up to receive The Retail Management Advisor (free) Please feel free to view our archive of past newsletter and web articles. Adobe Acrobat Reader is required. If you do not have Adobe Acrobat, click here to obtain a free copy from their web site. Often you receive your financial statements and file them away for safekeeping until you are asked for them by your bank or another creditor requests them. But, within those financial statements are the indicators of success of the past year. This article and another to follow next month will explore these indicators and give you the ability to transform the numbers on your financial statements into meaningful indicators of where you and your business have been and keep you better informed as to where it is going. What Will You Do WHEN Disaster Strikes Your Store? Pessimism, not
optimism This is one area where it pays to be pessimistic. Do not think IF it could happen, but rather WHEN it will happen. It is only by thinking that way can you get yourself and business adequately prepared. And, preparation is the key to successfully getting through a major disaster and getting your business open again. We are all very aware of the disaster that has affected New Orleans and all it’s citizens. What you may not be aware of is that up to a half or more of the businesses in that city may be unable to open their doors again. They may have had property insurance but as the months go by their cash reserves will be depleted and they will not have the cash needed to start over. Being Best Is Better Than Being Big Independently-owned businesses have been taking an unfair rap for the last few years. It seems that they are all failing or about to fail. According to ‘common knowledge’ we are told they can’t compete with the BIGS who are owned and operated by publicly traded corporations. In today's economy it is more difficult to turn a profit especially for the small retailer. Yet, it can be done. As promised in our last newsletter, following is more information concerning the "Star Performer" retail store. To be a successful retailer, it has always been important to pay attention to all aspects of your business. In today's retail climate it is essential for your survival. For example, what good does it do to increase sales volume by the use of constant promotions if the markdowns kill Gross Profit? What good is a 44% Gross Profit if Operating Expenses are 46% of sales? Can a well thought out and followed Open-To-Buy help business if the sales effort is lacking? What is Stock Turn Rate and Why is it Important? (June 2004) The inventory of the typical store represents the largest single element of its total assets. The sale of goods from this inventory is the merchant's chief source of operating profit. Thus, the way in which this merchandise investment is put to work is of utmost importance in achieving a profitable operation. The Death Cycle In Retailing (April 2003) The death cycle in retailing is a series of events which, if not caught and corrected in time, will cause the financial demise of the company as surely as the sun rises in the East. Cash Flow Problems? (April 2003) If you are having problems with cash flow it is usually due to one, or a combination of several, of the following factors: buying is not controlled, sales are too low, or expenses are too high. This situation can be turned around. This article tells how. Merchandise Management (January 2003) The best way to manage inventory levels and keep inventory where it should be is to use an Open-To-Buy to plan inventory and control buying. Preparing an Open-To-Buy is not too difficult, but does take some time and thought. The needed ingredients for preparing an Open-To-Buy are: planned sales by month, planned or anticipated markdowns and planned monthly beginning-of-month inventory levels. With these figures an Open-To-Buy can be prepared. If you are not now using an Open-To-Buy for planning and controlling inventory and buying, make a commitment now to begin. Do not spend another season ‘guessing’ how much to buy. Are You Getting The Most From Your Computer System? (November 2002) For any retail store, the computer system is a significant investment in time, effort and money. As with any investment, it is critical that you get the most value from it. When visiting retailers for the first time, it is all too common to find that they are not fully utilizing their system's capabilities, not printing and reviewing important reports on a regular basis, and that the record keeping is not up-to-date. Suggestions for Increasing Sales (May 2002) A continually increasing sales volume is critical to the success of the independent retail specialty stores. Operating costs continue to climb every year and you have no control over many of these costs (i.e. utilities, taxes, insurance, etc). While many operating expenses can be reduced or eliminated there is no way they can be reduced enough to make up for poor sales. Sales are the lifeblood of retail, and continuing increases are necessary. Benefits of the 4-5-4 Calendar (December 2001) The 4-5-4 Retail Accounting Calendar was devised with the peculiar needs of the apparel and sporting goods retailer in mind. Our business cycles are those periods of time between the start and end of a selling season. In general, these business cycles end in July and January. Protecting Against Disasters (November 2001) In light of the September 2001 terrorist attacks we all should be much more aware of how quickly a disaster can strike. We do not mean just terrorist attacks but fire, floods, hurricanes, tornadoes, earthquakes, etc. Below is a checklist that we hope you all will use to see how prepared you will be if a catastrophe strikes. In a Cash Flow Crunch? (October 2001) The cost of being behind in vendor payments is hard to define in actual dollars but the toll it takes on you and your business is too great for you to let this condition commence or to let it continue if you are already in this situation. Leading a Winning Retail Organization (August 2001) Is your retail organization less than it could be? Are sales below expectations? Productivity down? Do you want to make improvements but are not sure where to start? Actually the answer is quite easy....it's the action that's more difficult. Markdown information is a very important management tool. Volumes have been written about markdowns, why they occur and what can be done about them. Markdowns should be planned to increase sales, help keep inventory at the proper level and clean up end-of-season merchandise. The Magic of Open-to-Buy (May 2001) Almost all retailers we have talked to that are now using an Open-To-Buy understand how it can help them do a better job of buying (which helps increase sales, reduce markdowns, increase Gross Profit and increase Stock Turn Rate). However, many retailers have never been educated as to how to effectively use an Open-To-Buy and the benefits of its use. Merchandising for Higher Profits (April 2001) To be a successful retailer, it is not enough just to sell merchandise. If you want to be successful you must sell merchandise profitably. It doesn’t matter that you had a 20% sales increase if that increase was due to selling merchandise at a loss. Yet, there are many software systems on the market today that do not give the retailer the information needed to manage their inventory properly so the store can achieve higher profits. Your computer system needs to give you the information you need to make good decisions about your merchandise and so you can take corrective measures before it is too late. A New Look At An Old Friend (January 2001) Are you communicating with your customer regularly? With all the options customers have these days it is imperative that you do this; thank you notes, follow up on alterations, birthdays, new merchandise arrivals, etc. Besides the phone and direct mail remember to include e-mail as an option. How Profitable Do You Plan To Be This Year? (January 2001) If your operating year ends December, January or February you should be working on, or have finished, your plans for the new year. Numerous studies have shown that you will be more likely to succeed if you make realistic, achievable and concrete goals. It is not enough to say that you want to increase sales this year. You must plan to increase sales by 10%. Instead of saying that you want to be more profitable this year, plan to increase Net Profit by 2 percentage points. Then, once you have defined what you want to accomplish you can determine how to accomplish your goal. Only then will you be ready to take the needed steps to achieve that goal. Changing the Perspective of Your System Provider (December 2000) I recently conducted a sales training seminar for a software provider in your industry. It was my purpose to work with their sales representatives to teach them YOUR perspective of a system and develop salespeople that could help you arrive at the correct decision. Is It a Markdown or a Discount? (November-December 2000) One of the more important concepts that we want in a retail system relates to the ability to differentiate how a price reduction is reported to the merchandising system - as a markdown or discount. Due to the looks of confusion we saw on a couple of vendors' faces, we thought it was worthwhile to review these topics again. Markdowns and Discounts are not the same. Getting Over The Hurdles (August-October 2000) As we work with clients across the country, we find general acceptance of the need for good merchandising planning. Yet we all know that planning alone does not translate into success. Execution of the plan (which involves the disclipline to follow, review and react to the plan) is another part of the formula for success. Credit Card Fraud (May-July 2000) We recently heard a horror story from a client involving transactions over the Internet. They had developed a web page and were selling some merchandise, although it represented a very small percentage of total business. As expected, some stolen credit cards were used to make some purchases overseas, but the fraudulent purchases were not discovered until after the goods had left the country. The client had received authorization for the purchases, but later were presented with a chargeback. Open-to-Buy (March-April 2000) While preparing and following an Open-To-Buy is no guarantee of success and lack of a plan is no guarantee of failure, we feel Open-To-Buy planning is essential to ensure the optimum level of inventory to support monthly sales plans and to maximize the return on capital invested in merchandise inventory. Plans for Next Year (January-February 2000) What are your plans for next year? To show more profit? Increase the company's cash reserves? Increase sales? Decrease inventory levels? Increase the customer base? Reduce debt? These are all excellent goals; however, the likelihood of achieving them is slim unless you have made definite plans on how to accomplish them. Business Protection (October-December 1999) Insurance coverage considerations usually get the most attention after there is a loss. This is when retailers who thought they were covered find out they aren't or that the coverage they have is inadequate. "Must Have" insurance coverages for retailers are briefly described below. These insurance coverages should help keep you from "going-out-of-business" should disaster strike. If you are missing any of these vital coverages, call your insurance agent immediately. E-Tailing (Web article May 2000) While there is still a tremendous market for selling products and services over the internet, the public is more skeptical. While business on the web will continue to increase, there is still a place for the brick-&-mortar retailer.
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