A New Year’s Retail Resolution

RetailerWhy do we go through the charade of making idol promises to ourselves each year that are usually dismissed or forgotten by the time the effects of New Year’s Eve have worn off? Have you ever noticed all the new faces in the health clubs in January, sporting the cross trainers and workout wear acquired over the holidays? Most will have abandoned their physical aspirations come spring.

Making resolutions for the upcoming year is a time honored tradition with roots tracing back to Babylonian times.  In 153 BC, Janus, the mythical King of early Rome was placed at the head of the calendar. Janus was always depicted with two faces, one looking back on past events, the other forward to the future. The early Christians believed the first day of the year should be spent reflecting on past mistakes and resolving to improve oneself in the coming year. Today, many people look at the New Year as a chance to start over, to rid themselves of bad habits and take on a fresh, positive way of life. Hence the modern day New Year’s resolution that generally encompasses everything from self improvement to improved finances.

As you reflect professionally on the past year and look forward to the next, take time to recognize past accomplishments that had a positive impact on your business.  As you consider areas you would like to improve on for the upcoming year, focus on goals, objectives and initiatives that are attainable and realistic. I want to avoid offering up a smorgasbord of suggestions that would most likely be forgotten as quickly as last season’s markdowns. However, here is one resolution that every merchant should make each and every year.

Resolve to: Sell more merchandise more quickly!

That’s it! Resolution making, at least from a business standpoint, is over. Here’s why.  Selling more of your inventory more quickly achieves a multitude of favorable results.  First, you have resolved to have a sales increase. This increase will be driven not by profit-stealing markdowns of old goods, but by fresh new products, which by now we all should recognize is the catalyst to increased revenue.  Second, we have resolved to sell said products more quickly, which translates into faster inventory turnover. Supporting this resolution is accurate open-to-buy planning by store and classification, properly timed deliveries, identification of hot selling items for timely reorders when possible, and dealing with slow selling inventory through stock balancing or in-season markdowns as soon as problems arise.

Added byproducts to increased sales and faster turnover are better margins, stronger cash flow, reduced operating expenses as a percentage of sales, and an elevated Gross margin return on investment (GMROI). Gross margin is enhanced for the simple reason that the newer the products, the greater likelihood of the product selling at full price. Every retailer should be cognizant of the fact that new goods, timed properly have the best chance of selling quickly.  Allow me to explain turnover in the simplest way possible: preferred several small invoices for deliveries on a consistent basis versus a few large ones due all at once. If you can accomplish this, turnover can be improved, providing you are not a chronic over buyer due to poor inventory planning, lack of discipline, or both. Operating expenses are expressed as a percentage of sales. When sales go up, operating expense percentage goes down, and net profit goes up. GMROI increases due to additional gross margin dollars being generated through more profitable sales along with a lower average cost inventory. Simple arithmetic.

Just as the early Romans approached each new calendar cycle by looking both backwards and forwards, if we embrace the benefits gained through retrospect to help guide our future path, we will be better prepared to receive the challenges of the coming retail year.

Here’s wishing you a Happy, Healthy and Prosperous New Year!

Ritchie Sayner is Vice President of Business Development for RMSA Retail Solutions. Ritchie Sayner is Vice President of Business Development for RMSA Retail Solutions. Contact Mr. Sayner at rsayner@rmsa.com or 816-505-7912.Sayner at rsayner@rmsa.com or 816-505-7912.