Things Retailers do that Really Bug Me

Anyone who has been around the retail game for any length of time probably has subconsciously compiled a list of minor annoyances that drive them bonkers. These would consist of the little,common sense things that you notice in stores and ask yourself, “Why would someone do that?” Here is my list of things that some retailers do that, well,simply bug me. Maybe they bug you too?

Where ever I go, I notice store windows.Have you ever visited a town and noticed a store that feels they need to cram a sample of everything they carry in the front window in order to get their message out? This drives me out of my mind. The confusion and clutter created by doing this actually have the opposite effect on shoppers. They don’t get any message at all. When it comes to store windows and in-store displays, keeping things simple is always a better way to go.

Call Attention to THAT?
Sometimes the natural tendency for retailers attempting to move merchandisethat no one wants to buy is to actuallygive it more attention. They do thisby putting the slow-moving goods inthe window, creating a display in the store or—worse yet—spending advertising money to promote a “dog.” This is a failed strategy void of all common sense. Sure, we need to rid our stocks of problem merchandise as quickly as possible, but we don’t need to show the world our problems by highlighting trouble merchandise. You can’t grow volume by constantly focusing on what no one wants to buy. Volume is built when stores feature what customers want now!

What would happen if you built a house without an architect first drawing up a blueprint? Unless you were very lucky, the result would likely be disastrous.Yet this is exactly the gamble that retailers take when they buy without a well-constructed merchandise plan. Unless the retail guardian angel intervenes, more often than not, stocks will be out of balance, leading to stifled sales and missed buying opportunities. Overbuying is also likely to occur. As a result, poor cash flow, high markdowns and slower turnover will prevail.

Have you ever known of a store owner(or buyer) that buys a little bit from every vendor that calls on him or her? These are people who have a hard time saying “NO.” They don’t want to hurt anyone’s feelings, especially since the rep came all the way to the store “just to show me the line.” Well, that’s his job. Yours is to buy a well-balanced assortment that has meaning to your customers. When you buy a little from everyone, you end up with a whole lot of nothing. This practice leads to overbuying, duplication, and confusion to the customer. In addition, the lines are not meaningful to the store and conversely, the store is not important to the manufacturer.

Don't Hover, Do Be Knowledgeable
I hate going into a store prepared to buy, only to be ignored. It actually makes me mad. I don’t need to be hovered over, but I do expect to be greeted cheerfully when I walk in and have a knowledgeablsalesperson available to answer any questions I may have. While I know we are all busy, I believe that’s not too much to ask.

I like to be sold. I understand the sales process and I appreciate other sales professionals that do too. It matters not to me if I am buying a pair of socks or a new car. I want to be sold! Don’t just read the label to me when I am asking a product related question, tell me something Idon’t know. Providing extra information adds value to my shopping experience and makes me feel better about my purchase.

It drives me nuts to go into a store and see a four-way display fixture jammed with three times more merchandise than it was ever intended to hold. Typically, the same display will also be holding multiple lines, styles and even colors that don’t go together. This merchandising technique usually is associated with an “overbuyer,” or at the very least an individual who does not understand how vital a component visual merchandisig is to increased sales.

How’s Your Presentation?
When I see empty racks, shelves or other fixtures lacking inventory, I could just scream. With expenses and competition being what they are today,it is so important that retailers scrutinize their merchandise presentation at all times in order to maximize sales.

Cluttered and hard-to-read print ads are simply a waste of advertising dollars. They too drive me crazy.

I equate a dirty store with a lazy owner. Floors should be mopped or vacuumed daily. Racks should be dusted—and don’t forget the tops ofthe glass cubes. They are huge dust gatherers.

Hand-printed display signs are the absolute worst. I don’t care if your printing is exceptional. A professionally printed sign says a lot about your image. When I go into a store with ridiculous pricing, the veins in my neck bulge. This is the store where the owner didn’t set the retail price and told the marking room to take a certain percentage markup. In this store, you will find prices like $42.37 next to something marked $36.84. What’s that all about? You will find a similar approach to pricing at this store when the sale price is literally 1/3 off the original price. I am talking 33.333% off. $36.84 now becomes, you got it…$24.68. Simply ridiculous!These are just some items that have been bothering me for a while. I feel much better sharing them with you. If I missed anything that bugs you, shoot me a quick email so that I can update my list.

Ritchie Sayner is vice president of business development at RMSA Retail Solutions, which works with retailers to improve performance. For a complimentary review of your store’s inventory balance,contact him at rsayner@rmsa.com.

Initial Markup

One question I am repeatedly asked by shoe retailers is how to increase maintained margin. Several answers readily come to mind, the most obvious being to avoid overbuying and therefore reduce the margin-eroding markdowns that accompany such a practice. Another way of increasing maintained markup is to find ways to increase initial markup.

Let’s make sure we are all speaking the same language. When I say initial markup, I am referring to the markup percentage placed on the goods when they are received from the manufacturer. Maintained markup is what is left after taking into account the cost of the markdowns. Stated differently, maintained markup is the difference between net sales and the gross cost of the merchandise sold. Gross margin is the difference between net sales and the net cost of the merchandise sold. Total merchandise costs include the cost of the goods, freight inward, any workroom costs, and any adjustments for earned discounts. It is clearly a different number than maintained markup.

According to the 2006-07 Business Performance Report, initial markups for independent shoe retailers reached an all-time high in 2005 coming in at 56.8%. This represents a 4.8 point increase since 2001. My hunch is that the almost 5 point gain in five years is due to stores seeking out and taking advantage of off-price opportunities to combat the effects of discounters and increased operating expenses. Whatever the reason, we can all agree that initial markups are on the rise… and it’s a good bet that they aren’t going to go down any time soon.

Having the correct initial markup is the cornerstone to achieving the desired maintained markup. Have you ever wondered what the determining factors for initial markup are? Why do we double the cost? What does the term “keystone markup” mean and where did it originate? My quest into the origin of “keystone markup” did not yield any definitive answers. One source at the National Retail Federation (NRF) seemed to think that there was an actual “markup key” in the early days of cash registers. This practice predated individually ticketed items and pricing was oftentimes handled at the point of sale. One expert thought the term began in the jewelry business. Another thought more closely follows the dictionary definition of the word which is a stone at the top of an arch that locks the other pieces in place. I suppose this makes sense since 50% of akeystoned item is cost and the remaining half is markup. Regardless of origin, keystone pricing refers to a percentage markup applied to a products cost, although it is becoming an outdated term due to rising markups.

In my work as a retail consultant, I continually ask retailers to define their initial markup. The answers are quite interesting, and run the gambit from doubling the cost and adding $1 or $2 dollars to a multiplier of 2.2 or 2.3 as an example. These answers over time have led me to the conclusion that most retailers truly can’t explain what initial markup was intended to cover. There are three areas that IMU must satisfy: 1) desired net profit, 2) operating expenses, and 3) markdowns. Outlined below is a formula for determining initial markup given the objectives above.

IMU = (desired net profit % + operating expense % + markdown %)

100+ the markdown %

Example: Let’s say that our net profit goal is 7%, operating expenses are 40% and markdowns are 18% of sales. Given the formula above, the IMU% would have to be 55% to cover the markdowns, pay the overhead and still contribute 7% to the bottom line. If the store average is say 52% on average, net profit would decrease to 3.4% right from the start given the example above. If you do the math, that is nearly a 50% reduction in profit. To restate the message, initial markup is directly related to net profit. You must begin with enough markup in the beginning in order to have to something left at the end.

It is a good practice for all stores to review pricing practices on a regular basis. Competitive pressures, changes in operating expenses and availability of promotional goods all come into play when deciding on a markup goal. Are you making markup decisions based on what a product will sell for OR what you paid for it? One way to avoid falling into the trap of cost-based pricing can be done when buyers are at market. The best time to determine what the actual selling price will be is at the time the order is written. In my previous retail career, I would often have our buyers decide what they thought they could sell a certain item for prior to knowing the cost. Once we knew the cost, we would make a decision to buy or pass the item. Basing the retail price around the intrinsic value of the merchandise instead of it’s cost, helped us to increase our initial markup. Perhaps this strategy would work for your store as well.

Ritchie Sayner

Understanding GMROI

Wouldn’t it be great if there were a wayto improve your profitability withouthaving to increase sales or margins? Iknow the idea sounds like one of thosecommercials that promise you will loseweight without diet or exercise, but ithappens to be true.What’s the magic answer, you ask? It is:“Understanding the concept of GMROI.”GMROI is short for Gross Margin Return on(Inventory) Investment. It is calculated bytaking the gross margin of a store, depart-ment, classification or vendor and divid-ing it by the average cost inventory for thesame period. For every dollar invested ininventory at cost, how many gross margindollars are you getting back? Should $1 Yield 87Cents?Would you be willingto invest $1 knowingyou were only going toget back 87 cents on agiven style, a particularvendor, or in a classifica-tion of merchandise? Icertainly hope not, yetsome stores that do not understand theimpact of GMROI allow this to happenseason after season and year after yearwithout taking corrective action.Consider the chart below. The sales,COGS (Cost of Goods Sold) and grossmargin number are the same for all threeexamples. The only component that hasbeen changed is the turnover. The firstcolumn illustrates the discussion aboveof investing $1 and getting $0.87 inreturn. Column 2 is representative of theaverage NSRA store according to the2006-2007 Business Performance Report.Column 3 shows the effect an improve-ment in turnover can have on cash flowand GMROI.The $0.35improve-mentinG M R O Iamounts to1 9 . 2 % .Where elsecan you ach-ieve such asignificantincrease inprofitability?This is, inmost cases, abest of bothworlds scenario: Improve cash and profitabil-ity while at the same time spending less.Turns Hasten ImprovementAssuming that the gross margin is notuncharacteristically low, improvingturnover is the simplest and quickest wayto improve GMROI. Margins have beenrelatively stable since reaching a recordhigh in 2003, so it seems evident thatthere is not much opportunity for upsidegrowth. The opportunity that is availableto the independent shoe merchant isone of increased turnover.What never ceases to amaze me in dis-cussions with independent shoe mer-chants is how some can agonize over howto control expenses. Let’s use freight costs,which might run about 1.5% of sales, as anexample. The freight costs have retailerswincing—yet the same retailers are rela-tively complacent about a storewideinventory that turns twice annually.As the chart illustrates, an improve-ment of just four weeks of supply onaverage inventory would generate abouta 4% improvement in cash flow. Thisslight improvement would cover thefreight costs for nearly three years. So—which area really deserves the mostattention?Richie SaynerUnderstanding GMROIRitchie Saynercontinued on page 20Increased Turns=Increased Cash FlowAn improvement of only 1 week in annualsell-through increases cash flow byapproximately 1% of annual salesEffect of turnover on average inventory investmentAnnual sales volume$1,000,000Cost of Goods sold %53.5%Gross Margin$465,000> Turnover1.2.12.5> Weeks’supply5224.720.8> Average Investment at Retail$1M$476K$400K> Average Investment Cost$535k$255k$214k> Cash improvement$280k$ 41k> GMROI$0.87$1.82$2.17Page 220SEPT-OCT 07continued from page 13continued from page 9continued from page 14continued from page 15owner went a step further—which he didn’t have to do. Theresult of that extra step is simple: We are now his customers forlife, and we advertise his business at every opportunity.Think about it. The story can and should apply to your busi-ness, although the details will differ. If you start to identify howyou can apply the same thought process to your business andcustomers, and educate your sales associates on your philoso-phy, you’ll be doing something that more and more retailerssay has become impossible: building customer loyalty for life.It’s not impossible, though. Sure, customers want bargains,and look for good value for their money. But they also increas-ingly want the recognition that comes in person-to-personcontact. They can have purely commercial transactions any-where, even without leaving their houses to go to a store.What they can’t get “anywhere”is your genuine regard.What are the ways you show it?sGreg Gorman, principal of St. Louis, MO-based GMG Design, Inc.(www.gmgdesigninc.com)., is an internationally recognized multi-disci-plinary designer, author and speaker specializing in retail business, plan-ning and merchandising development. He can be reached atgreg@gmgdesigninc.com.Hopefully, there is someone in your area who is either flu-ent or well-spoken in one other language and can help youformulate an effective job aid.And remember: Smiles are universal. Use your early andoften, no matter who you’re talking to!sNancy Friedman is president of The Telephone Doctor, a customer serv-ice training company in St. Louis, MO. She can be reached at www.tele-phonedoctor.com. This article is excerpted from The Telephone Doctor’sHow to Handle a Foreign Accent.If you desire an increase in GMROI, then it is vital that you findways in which to improve turnover. I will be happy to share mythoughts on improving turnover with anyone who wishes toemail me about this.sRitchie Sayner is vice president of business development at RMSA RetailSolutions, which works with retailers to improve performance. He can bereached at rsayner@rmsa.com.product in terms of ‘style or comfort.’ Now we’re learning thatwe have to deal with style and comfort.”Both Weilheimer and the audience challenged the execu-tives regarding vendors pushing their own products, often incompetition with retailers. According to the executives, eachcompany plans to invest more in concept shops, partneringwith retailers to build brands and business. Each also sees theinternet as an opportunity, but not an exclusive one.Weilheimer noted that media today includes print, broadcast,online, viral, grassroots, events, public relations and other“message’opportunities which vendors—and retailers—needto explore, understand and use.When Weilheimer asked them to forecast the main con-sumer concerns that will affect business over the next severalmonths, Prince didn’t hesitation: “Discretionary spendingchoices,”he said. “People can find things 24/7 – we need to bewhere they’re looking.”Paterno was equally sure of his answer: “We expect spendingto be relatively flat. So it’s concepts—what we can ‘sell’ that’sunique and tells a story. We’re optimistic that consumers willrespond favorably.”Nelson voiced “cautious optimism. Women’s is our first, sec-ond and third priority. It’s been an up-and-down spring sea-son, but we’re optimistic.

Want fries with that?

Most of us probably would have toadmit that at one time or another wehave succumbed to the fast-food drive-in experience. In case that doesn’t sound familiar, I will try to jog your memory:You pull up at a nationally known burger joint and stare at menu board,trying to figure out just exactly what willdo the least amount of damage to yourarteries while some barely audible kid’svoice blares at you from a tin speaker.Inevitably, whatever I order, whether it isa hamburger at lunch or a cup of coffeein the morning on my way to anappointment, the follow-upquery seems to be, “Do youwant fries with that?” Mostrecently, this query has beenrefined to inquire as to the sizeof fries I might want, addingthat I can be super-sized for asmall upcharge. The amazingthing to me is that it alwaysseems to be fries that are beingpushed, even if fries don’t exact-ly match up with my order.I’m the type of person whowould order fries if I wantedfries, so I am not a good candidate in thisenvironment. I have to assume, however,that this strategy works for most cus-tomers, or the burger joints wouldn’tcontinually use it. If you know the natureof retail sales people, you know that sug-gestive selling is a technique that mustconstantly be reinforced. I would assumethat to not suggest fries is met withsome mild admonishment at the veryleast—and with a much harsher repri-mand or some equally punitive reminderat worst.The bottom line is that the mar-gin on fries must be outstanding.IncreasedSalesVolume—andMarginThe point is, suggestive selling not onlyworks, but can add significant percent-age to store sales volume and margin. Inmost shoe stores, shoe care products,insoles, and even socks for that matterwouldn’t achieve the volume levels theyhit today if not for suggestion by a sales-person. According to the National ShoeRetailers Association’s 2008-09 BusinessPerformance Report, sales of non-footwear items increased from 7.6% ofsales to over 12% of sales between 2003and 2007. There is even some specula-tion that this increase may contributefavorably to the improvement in storeturnover that has been reported. I seethis as a distinct possibility.My contention is that suggestive sell-ing,whendoneproperly,isnotonlyaddi-tional sales and profits to the store, butalso service and therefore value to thecustomer. Inexperienced or poorlytrained sales associates are happy when acustomer simply makes a buying deci-sion for a primary item. The only otherdecision that therefore needs to be madein their mind is method of payment. Theseasoned sales person, on the otherhand, sees the selling process as justbeginning when the customer agrees tothe shoe, sandal or boot. Socks are a no-brainer for shoes and boots. There willalso be no better time to suggest shoecare products and insoles. Handbags andbelts in some stores can also improve thevalue of the transaction.MakeItFunGetting sales associates to rememberto offer additional items to acustomer requires constantattention. Making a gameout of suggestive selling canmake for a lively morningmeeting with the sales staff.Give the same item to sever-al different sales people atthe same time, and allowthem each thirty seconds topick up as many additionalitems as they can think of.Thirty seconds is about thetime you have to take a cus-tomers purchase to the cashcheck out area. Have each associateexplain what items they found, and whythey felt they would be a good compli-menting purchase, and then add up thetotal value of this imaginary sale. Thengive the associate who has come upwith the most profitable list of add-onsales some small recognition—say, fiveor ten dollars.This is all about more sales and youwant to instill the fact that the more yousell, the more everyone makes.This exer-cise brings a lot of fun and laughter asyou discuss the items and add up their“DoYouWantFrieswithThat?”Ritchie SaynerPage 221value. Watch how this simple little exer-cise translates into more added salesduring the days that follow. Better yet,use it as a kick-off to a week-long conteston suggestive selling. Give prizes for first,second and third place. Make it compet-itive—you can also post each day’sresults in the back room to make it funfor everyone.It’sNot“Pushy”I have heard store owners complainthat some sales people feel that theymight be pushing something on thecustomer that they don’t want. Myanswer to that is always the same: If thecustomer doesn’t want it, she will let youknow. If you don’t ask, you will neverknow—and your customer may havemissed out on something that she sim-ply hadn’t thought of, something thatcould make her day (or her outfit). One ofthe main responsibilities of the salesassociate is to give the customer theopportunity to make the purchase. Afterall, isn’t that is what sales associates arebeing paid to do? And who better tomake an add-on suggestion than a salesassociate, who has product knowledge,a sense of what goes together, and infor-mation on what’s trendy, fresh and/orunique?Retailers continually struggle to rein-vent themselves, refine assortments andclosely manage expenses and inventory.I encourage all retailers to pay moreattention to suggestive selling practicesthis coming year as well. Teach yourselfto listen to the techniques retailers out-side the footwear industry use in sugges-tive selling. It doesn’t matter whetherthey’re selling tires, food, jewelry, booksor something else. How they do it couldbe adaptable to your store, for whateverkinds of additional items you carry. Andthe next time someone asks you if “youwant fries with that?” you’ll be able torecognize suggestive selling for what itreally is: more sales and better profits.IRitchie Sayner is vice president of busi-ness development at RMSA RetailSolutions, which works with retailers toimprove performance.

Top 10 for 2010

Way back in the 1980s, RMSA puttogether a document entitled “10 Secrets for Success in Retail Management.” I recently rediscoveredthis publication and thought the mes-sage warranted repeating as we enter anew decade. I have taken the liberty ofupdating the original list a bit for thesake of freshness. What I find most inter-esting, however, is that the basic princi-ples that make up a successful retailbusiness are pretty much the same in2010 as they were then and always havebeen.The main reason why most retail busi-nesses encounter difficulties is that theylack appropriate management tech-niques. More often than not, money andcash flow issues are the result of a prob-lem, not the cause of it. Industry analystshave found that there are ten particularmanagement techniques vital to successin retailing. It may be that not all of theseareas apply to your operation. Slightimprovements in one or two areas alonecan sometimes translate into greatlyincreased profits.With gratitude to RMSAfor content and acknowledgment to acertain late-night television host for for-mat, allow me to present the Top 10 Secrets for Success in 2010.

#10: Expense Management. Anannual review of operating expensesonce the profit and loss statement isgenerated at year-end is not sufficient intoday’s demanding and ever-changingretail climate. Operating expenses needto be planned and budgeted, not left tochance. If we consider that every twopercentage points trimmed from currentoperating expenses could add as muchas 60% to net profit, it stands to reasonthat actual expenses should be com-pared to planned expenses at least on aquarterly basis.

#9: Markdown Management.It isn’tjust what sold that counts, but also whathasn’t sold. Every slow seller is a drain onearning potential. Excessive markdownsare a result of little or no planning, over-buying or just poor inventory manage-ment. Timing of markdowns is key. Thelonger you wait once you know of aproblem, the costlier it will be to remedy.

#8: Visual Merchandise Manage-ment. The saying that you seldom get asecond chance to make a first impres-sion rings true for this managementtechnique. Visual merchandising is thesilent salesperson in any retail operation.Goods well displayed are half sold. Weare in a very visual business. It is the pres-entation of properly displayed merchan-dise, well planned advertising and goodhousekeeping that portrays a store’simage. First impressions are very impor-tant. They influence the customer’s con-scious and sub-conscious decision mak-ing processes. The effective use of color,design, and quality projects the store’sattitude and image. I refer to this as astore having “pop” or “wow factor.” Ifaccomplished properly, visual merchan-dising can create customer need andwant of an item. If your store lacks thetalent to create “pop,” hire a visual mer-chandiser on a contract basis. With thedownsizing and reorganizing of retailersdue to the economy, a plethora or talentin this area abounds in nearly everyregion of the country.

#7: Customer Service Management.Customers are the most important peo-ple to any retail establishment. They arenot dependent on us; we are dependenton them. It is critical for management todevelop training programs for employ-ees. Training should be an ongoing pro-gram encompassing specific objectivesthat reinforce employee developmentand company policy. (And rememberthat even long-term employees needtraining—regarding new products, newproduct technology, fashion trends,communicating effectively with cus-tomers, and so on. Nobody is ever soskilled that there is nothing left to learn.)

#6:CustomerAnalysisManagement.Retailers often refer to their“regular”cus-tomers without realizing that up to 18%of these customers are probably lost onan annual basis. Customers move, shopother stores, and eventually die. Theseattrition factors are referred to as thethree “Ds”—death, desertion, and dissat-isfaction. It is important to review yourcustomer base periodically to see how ithas changed. Perhaps you need tochange some things to attract new cus-tomers. Be open to this. People shop dif-ferently today than they did in the pastand they will probably shop differntly inthe future.

#5: Debt Management. The objectivehere is to keep debt at a minimum andcash flow at a maximum, especially in2010. Outstanding debt obligations thatimpede credit may starve an operationof fresh salable inventory which couldultimately affect sales and cash flow.

#4:SoundProfitManagement.“Whatgets measured, gets managed,” accord-ing to management guru Peter Drucker.With all of the management tools avail-able today thanks to technology, there isabsolutely no excuse not to have currentdata relative to your business immediate-ly accessible. This list of information needed for sound profit management includes, but is not limited to a cash flowstatement, balance sheet, income state-ment, vendor profitability report, fast andslow seller report, and sales and invento-ry forecast (open-to-buy plan).

#3: Self-Control Management. Thistechnique may be the most significant ofall and too often the least applied. Goal-setting is the starting point. Reasonableand attainable goals must be set for allareas of the operation. Successful imple-mentation of all of the techniques dis-cussed here are essential if one’s goalsare to be achieved. Prioritize your time.All too often, store owners micro-man-age the most insignificant portions oftheir businesses. Tackle the most impor-tant tasks first, those being the ones thatcould have the greatest financial impacton the business.

#2: Inventory Management. Thistopic is best described in three terms:turnover, cash flow, and gross marginreturn on investment (GMROI). Of these,turnover is by far the most essential.Seldom have I encountered a retailerexperiencing cash flow issues that had agood turnover rate. It should be remem-bered that for every week of improve-ment in annual sell-though, cash flowincreases by approximately one percentof sales. Nobody comes in your storelooking for merchandise that wasreceived last year. Increases in profitablebusiness come from a constant flow ofproperly timed new merchandise. Formaximum sales, focus more on what isselling, rather than on what isn’t.

#1: Dollar Planning Management.Retailers do not fail from overbuying.They fail when they can’t pay for theiroverbuying.The development of a soundmerchandise planning and open-to-buyprogram is crucial to the survival of anyretail operation. Forecasting and plan-ning must be based on the sound evalu-ation of current and projected sales andinventory figures. Classification merchan-dising or the development of trends bytype and end-use of merchandise isessential. Buying merchandise in theright amounts, timing deliveries properly,and having the proper selection of styleswith adequate assortment planning arethe keys to increased profits.IRitchie Sayner is vice president of busi-ness development at RMSA RetailSolutions, which works with retailers toimprove performance. He can be reached at RSayner@RMSA.com.

The Power of New

Which sells the best: fresh new mer-chandise received just in time for theupcoming season, or inventory left overfrom last year that you didn’t clear outbecause you had a complete run of sizesthat you thought you could sell duringthe next season? With even a remedial understanding of the concepts ofturnover and gross margin return oninvestment (GMROI), it should be easy tod e te rmine that new goods always trump old merchandise when it comesdown to what will sell the fastest. Thelonger an item remains on the floorunsold, the more it costs you -- not onlyin real dollars, but in opportunity costs. Itmight be more accurate to say “i nmissed opportunity costs.” In the past,we have discussed both turnover andGMROI in this column so I thought wecould use a fresh approach to discuss“The Power of New!”Early in my career as a merchandisem a n a g e r, I was assigned the task ofimproving the sales in the shoe depart-ment of the department store where Iworked. Our shoe buyer was an olderman who had been in the shoe businesslonger than I had been on the planetand we both knew it. In the process ofreviewing our falling sales and heavyinventory position with him, I convincedhim that a tour of the stock room wouldbe eye-opening for both of us.

The Stock Room Tour And was it ever! I was looking for left-over sizes, bad colors, poor fitting models, discontinued vendors and otherslow sellers that we could immediatelyslash, so we could generate cash ando p e n - to-buy dollars to re o rder fre s hmerchandise that was beginning to sell.

He was proudly pointing out complete size runs of shoes that we had owned for longer than I am willing to admit inp rint. When I said we really neededeverything on sale that had been in ourstore longer than six months with theexception of models that he could justi-fy selling into the next season, he lookedat me like I had two heads. After thepurging was complete, our inventoryhad been reduced by about one third inboth dollars and pairs, sales volume inthe department was growing at a rate ofroughly 20% per month, and marginswere improving because we were sell-ing newer goods at full price instead ofo u t-of-season pro d u ct that we we relucky to sell for “cost.”Even today, some shoe retailers arevery skeptical when they hear me saythat sales volume and margins canincrease with a decrease in their inven-tory position. Did I mention that cashflow improves because new customersfind their way to your store and existingc u s tomers buy more? I am curre n t l ywo rking with several retailers in thisexact situation. One merchant in partic-ular comes to mind. The store is turningits women’s shoes 3.2 times, all the whileenjoying a 49.5% margin and a 15%sales increase over last year. Over 98%of this merchant’s inventory is lessthan three months old. My discus-sions with this store are different fromothers that I often have.There is no com-plaining about the poor economy, how$4.00 per gallon gasoline is keeping cus-tomers from the stores, what the com-petition is doing or which vendors didn’tship this or that. Instead, we constantly review current fast-selling models forpossible reorder and slow sellers thatcan be reduced in season with a smallm a rkd own. Remaining open-to- b u ydollars are used for off-price goods toadd freshness to the assortment andbolster the margin. The Power of New haschanged this retailer’s total approach tohis business. Merchandising the New Versus the Old Grocery retailers generally have agreater understanding of The Power ofNew goods than shoe retailers do. Thatshouldn’t be surprising; they have to,otherwise they must throw their inven-tory away—literally. Next time you are inyour neighborhood grocery store, lookat how the bananas are merchandised.Typically, the newer fruit has a bit ofgreen on the tip. These are the bananasthat will be perfect to eat for the nextfew days. On the other hand, the oldbananas have already begun to showtheir age by virtue of the dark spots onthe skin. These will soon be bagged anddiscounted as their value to the store isdiminished and their only re m a i n i n gpurpose is to become banana bread.The point is that no-one comes in toyour sto re purposely looking for oldmerchandise, unless they are solely bar-gain hunte r s. Shoppers, especiallywomen, frequently shop stores lookingfor what is new. Prove The Power of Newto yourself. Change a display in yourstore, rearrange a fixture or redo thewindow and see what happens. Itemsyou may have had for a while will beginto sell because they appear “new.”

By: Ritchie Sayner