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Strategic Merchandising And Open To Buy, Part Two |  May 22, 2019 (0 comments)


Carlsbad, CA—Last week we discussed the challenges in merchandising your store and how to potentially increase your sales by 50% with just a little analysis. Today we will discuss steps two through four to round out this topic and truly help strategically build your business.

Related: Strategic Merchandising And Open to Buy, Part One

The second step, after identifying what your clientele is coming to you for, is to look at your existing inventory. Focus on the categories in your store that have the highest sales and gross profit dollars. These are areas where you cannot afford to be missing merchandise. Clearly, they will have the highest impact on the profitability of your store. As you are analyzing the inventory in each category, answer the following questions:

Next, look for areas that are under-performing. The fact that it is not moving is a call for help. Don’t ignore it—address it. Is the product out of style, not a good design, over priced, shopworn, or displayed poorly? By dealing with this problem merchandise you free up open to buy dollars to replace with new, better selling product.

Next, make a list of items by price pointsyou need to fill in. If you are short on cash, you may need to redesign some of the old merchandise or put it on sale to generate cash with which to make new purchases.

Before buying at a trade show or even in your own store you should always know what area of your business is driving your sales and your profit. This is where you should focus your investment.

The third step. Now that you know what you need by department, the third step is to see what you can afford. We discussed the importance of an open-to-buy in a previous article. Retailers should never make purchases without a confident open-to-buy budget. This is the single biggest way to find yourself overbought and with a stressed cash flow. By strategically planning your purchases you reduce the upcoming problem of holding dated inventory, which slows down turn and cash flow. As mentioned in the previous article, the key is to buy carefully with a plan and not over spend that plan. 

A good guide for your open to buy is to look at your cost of goods sold for the period you are buying for from last year.  Most jewelers should spend less than this number because they already have too much inventory. To estimate what you should spend, take for example your total cost of goods for August, September and October last year. Let’s say that number was $210,000; then you should only spend $210,000 for that same period this year. It is imperative that you also hold out dollars for your memo and special orders, so you have the cash to pay for these as you go.

The fourth step in merchandising with a plan is to start at the top of your prioritized merchandise needs list and apply estimated dollar spending budgets.You may find you do not have enough money to purchase everything you would like. However, committing to spend only the amount you have allocated will increase your company’s financial stability.

The key to merchandising is to buy what will sell. Carefully analyzing what you have sold and sales that you have missed will help to focus your plan. Comparing this to your current inventory mix will identify the merchandise, that you need to purchase. Finally, by specifically allocating your spending budget to the price points and styles you have identified as missing from your assortment you will soon realize an increased turn rate. It is equally important to replenish those items that sell quickly so your merchandise assortment stays in balance.

This may sound overwhelming but breaking it down into pieces makes this a very manageable task. The results are astounding, and what you find in your case may shock you as well. Don’t think that if you have had a piece for five years that one day someone will actually buy it. Move it out whether by selling it at cost or melting if necessary. Old merchandise takes up valuable real-estate in your cases and freeing up those dollars to purchase fresh styles will impact your bottom line.

If you merchandise with a plan instead of by what looks good that day, your assortment will be rounded out, by covering both style and price point you will find that more often than not, you have exactly what your customer is looking for.

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. or 760-633-2959.

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