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Strategic Merchandising And Open to Buy, Part One | May 15, 2019 (0 comments)
Carlsbad, CA— One of the most important aspects of owning a retail business is merchandising your store. Effective merchandising is having the items your clients want to buy when they are ready to purchase. But merchandising your store to maximize profits doesn’t just happen. All too often retailers believe, “If I buy it, they will come.”
Not true. Merchandising approached in a strategic and systematic way will yield a much higher turn rate, and therefore, higher profits.
It is easy to attend a trade show and just buy what we like. Unfortunately, sometimes upon returning to the store you find you already had three similar items, or 10 at the same price point. Worse yet is not even realizing this mistake and then just putting your new merchandise into the case, hoping it sells.
Effective merchandising is achievable. Many retailers feel as though no matter what is in the case, the customer is going to want something different. If you are feeling that way, there are two issues: one, you didn’t stock your case in a strategic way, or two, your sales associates are not selling, they’re clerking. Strong merchandise assortment, higher turn rates, and more profits are achievable. (We will discuss the steps to Strategic Merchandising over the next few articles, so be sure to watch for them.)
First, identify what customers are coming to your store for. Examine your past sales looking at what percentage is attributed to what categories. This will tell you your reputation in the market, areas of opportunity, and potentially expose product that should be abandoned. To determine this, you should analyze what your customers have bought over a period of time (one year is a good place to start). To see this more clearly, break merchandise into categories. Categories are simply groupings of similar merchandise such as diamond rings, diamond earrings, bridal, colored stone rings, etc. A category could also be a specific brand, or something as detailed as diamond hoop earrings. Your analysis should answer the following questions:
- Which category has the most sales dollars?
- Which category has the greatest number of unit sales?
- How much gross profit did each category generate and which one is the highest?
- What is the average retail sale of each category?
Now you can begin to get a picture of what your customers have been buying from you, which will help you determine what they will be seeking in the future.
However, this is a more important question that most stores cannot answer, and that is, “What did my clients want that we didn’t have?”
In other words, customers walked out without buying because they didn’t find what they were looking for. The best way to keep track of this is to have a wish book in which sales associates write down why people left without making a purchase. Were they looking for a particular brand and couldn’t be convinced to purchase an alternative item? Were they looking for a basic such as diamond stud earrings, but stock hasn’t been replenished so you have no two-carat total weight pairs? Also, look at your special orders. Is there a trend of items you are consistently bringing in because you don’t have it available in your cases?
More often than not, if you don’t have the item your customer is looking for, they will simply walk. Sadly, we find eight out of 10 customers leave a store without buying because they didn’t find the right item. This may sound shocking, but we challenge you to count the number of customers and number of purchases on a given day to determine your close ratio (repairs do not count). You may be surprised. If you can stock a few more items specific to what your clients are looking for and you then sell just one more of the eight that are leaving without buying, you could increase your sales by 50% or more.
Next week: We continue Strategic Merchandising steps two through four.
Dan and Lori Askew of Vantage Group provide decades of expertise to both retailers and manufacturers in the jewelry industry. They strategically examine each area of business and address concerns in the order that will make the greatest impact in the most time efficient way, specifically with cash flow, merchandise planning, inventory control, advertising, and store management. www.VantageGroupinfo.com or 760-633-2959.