Many retailers spend more time planning their vacations than they do planning their inventory

What is off-price merchandise?

Quite simply, it is merchandise made available from a vendor at a discount taken from the original line price, hence the term “off-price.”

Benefits to the Retailer

When a store is able to procure off-price merchandise from a supplier, it can serve to generate several benefits.  If used effectively and the product is in-season, better margins, faster turnover, and increased volume all result.  If the special buy is used as a traffic builder and the “savings” passed on to the customer, a good will element also is generated.

Common Misconceptions

From time to time, I have heard retailers say that they don’t buy off-price because they have either tried it once and it didn’t work well or they felt that they were buying someone else’s problem. Both arguments are faulty.

First of all just because something was tried once doesn’t mean that it won’t work the next time.  Several questions must be asked in order to determine if the buy was good or not. For example, how much was purchased? What was the price? Was it a good item from a vendor you usually by from?  Was the merchandise timed right?  How was it marketed once it was received? Regarding the second point, often-times retailers get an opportunity to buy into the very goods that they purchased originally. Other times a popular style becomes available for any number of reasons. By its very nature, off-price buying has a certain element of risk, but so does retail in general.

When It Works

The benefits of off-price merchandise can best be realized when a retailer plans for the buy in advance. It is not always easy to predict what exactly is going to be available. This goes for vendors, quantities, price, sizes, colors, and delivery timing.  hat being said, when a retailer is in a healthy financial position and keeps open-to-buy dollars available for such buys, more often than not deals can be found. Sometimes an off-price purchase can be negotiated in advance when an initial order is being considered.

When It Doesn’t

If a store is overbought to begin with, buying more merchandise is generally not advisable no matter what the price is. You already have your own markdowns to worry about, let alone someone else’s.  This would be like pouring gasoline on an already blazing fire. If you buy more off-price merchandise than your company can absorb, you will be defeating the purpose and will not be able to benefit fully from the buy. Additionally, if you buy product simply because the price is attractive yet it won’t stand up to the rest of your criteria, you are doing your company a disservice. Remember, the objective is to resell this merchandise quickly and make money. If you buy based on price alone you run the risk of getting burned.

Buying Strategy

If you are one of those folks who visit the gym once every quarter, you probably don’t see much value. The same applies to buying off-price merchandise. Make it part of your regular merchandising strategy.  A basic open-to-buy strategy that you might consider would be to spend 60 percent of your money on initial or advance orders, 20 percent for fill-ins and reorders and keep 20 percent available for opportunistically-priced merchandise. An open-to-buy plan that is prepared by month, store and classification would greatly simplify this process. By allocating a portion of your open-to-buy dollars specifically for promotional merchandise, you will become more disciplined about seeking it out instead of waiting until it is offered to you. Be persistent in asking vendors what merchandise is available. Ask them to contact you immediately when they break price. You may not always be able to buy, but you should always take the time to look. Once you find merchandise that would be good for your store, and you have confirmed that open-to-buy dollars are available, don’t be afraid to pull the trigger. Buy the Best, and Pass the Rest!

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.

Read more of Ritchie Sayner’s articles on inventory and open-to-buy planning.

According to the 2011 Mobile Payments Global Survey by KPMG, the majority of companies think that mobile payments will become mainstream in the next five years. These new technologies include mobile wallets, mobile banking and contactless card systems. The study, which surveyed nearly 1,000 companies across the world, noted that while convenience will foster growth, security will impede adoption. In fact, 71 percent of respondents said that security is the main challenge companies face as they develop mobile payment strategies. Retailers will need to proactively prepare to meet these challenges, especially when it comes to loss prevention.

Technology Faces Security Challenges

New technologies will come and go, opening new windows of opportunity for theft, fraud and loss. Yet the precise ways in which shrink will manifest itself is often revealed only with time and experience. This presents a challenge to loss prevention (LP) professionals who are already grappling with the best way to shut off dozens of other sources of shrink. No matter the technology being adopted, the best practices are simple. LPs have to be given the opportunity to evaluate a new technology, anticipate challenges, and mitigate risks. This includes, giving the LP a seat at the decision and planning table. It is critical that LP professionals have a seat at the table any time a new store technology is planned for implementation. LPs can see the technology in the lab and beta environments, collecting valuable insight into the possible losses that may be triggered. It also gives them a chance to understand the processes that will need to be created to mitigate risks and losses, as well as metrics that will need to be monitored to determine if losses are stemming from the new technology. Self checkout is an example of a technology that many retailers have deployed to enhance customer experience and efficiency, but also introduces risks associated with loss.  LP should be involved early during the proof of concept phase.

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To read more about the steps retailers can take to ensure LPs can do their job in helping with a smoother and safer transition into new technologies, check back in March. Read more articles on loss prevention.

Organizing Email Marketing Campaigns

Email marketing campaigns can be organized so each group of recipients receives a relevant, even personalized, marketing message. And in 2012, the concept of learning something about customer preferences, demographics, desires, and devices, and then building relevant and authentic customer conversations via email around that data, will continue to grow in importance. As with any kind of marketing, targeting the right people at the right time is essential, and email makes it easier to strategize and customize. “While segmenting an email list by purchasing behaviors, funnel stage, and user declared preferences has proved successful, marketers need to continue to listen and look for shifts in consumer lifestyles,” wrote W. Jeffrey Rice, Senior Research Analyst for MarketingSherpa, in his company’s 2012 Email Marketing Benchmark Report.

Forty-nine percent of marketers responding to the survey said they could not segment their email lists based on viewer device habits. This is significant, considering that in May 2011, Nielsen reported that 38 percent of mobile users own a smartphone, and 55 percent of all new phones purchased were smartphones. As Practical eCommerce writes, “Given that one in ten email recipients are reading emails on a mobile device, marketers need to find a way to segment email lists so they can accurately identify those subscribers.” In preparation, however, those marketers designing for the B2C channel have created emails for mobile readership (41 percent), even without accurate readings on the exact number of consumers using their mobile devices to read email.

This article was adapted from a piece by Practical eCommerce.

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Preparing for the New Season: Best Selling Merchandise and a Better Understanding of Delivery Dates

But before jumping ahead, running a vendor profitability report is the first step to preparing for any new season. You will want this report to rank the vendors in each classification (category in which inventory data is organized and analyzed), according to sales volume, maintained margin and turnover or sell through. If your POS system does not have a report similar to this, request it. It is perhaps the most important report you can run. This exercise will be very eye opening and may provide the ammunition needed for future vendor negotiations. You should als be able to run a similar report for sizes, colors and price points. Divide your open-to-buy (OTB, a financial budget for retail merchandising) dollars by allocating them to top vendors you think you will be using in each classification, being sure to leave uncommitted OTB dollars for reorders, fill-ins, new vendors and promotional merchandise. Once this exercise is complete you are ready to tackle the timing issue.

Building orders and planning delivery dates is an essential component to a sound merchandise plan. Let’s consider women’s sandals as an example. A typical selling season is February through June. March, April and May represent the heart of the cycle, with sales usually peaking in April depending on weather and location. February and June are referred to as “shoulder” months. In February, stores normally start building sandal inventory levels for the spring season. This year, due to an unseasonably mild winter, some stores have moved sandal deliveries up earlier to attract the fashion conscious consumer who buys early in the season when new offerings are first presented. Just because the calendar says it’s January, doesn’t mean people aren’t thinking about spring. Fresh new merchandise that has recently arrived, provides a welcome relief to the frequent shopper who has been inundated with aggressive promotional markdown on last season’s boots for the past several weeks. June is typically a clearance month for sandals even though “in-season” markdowns probably will be implemented much earlier on poor performing styles. Final markdowns are typically made in late summer, although this past year several stores experienced good sandal sales much longer due to warm fall temperatures in a large part of the country.

Remember that your customers like to see new merchandise just as much as your sales people enjoy selling it, which means you need a fresh flow of merchandise arriving throughout the season. Many retailers have a habit of front loading, or landing most of the merchandise early in the season. The store may look great early on, but it can look equally as bad as the season matures with less desirable sizes on key styles dominating the assortment mix. Stores that front load often commit so much of the OTB to early shipments that cash is not readily available for size fill-ins and off-price opportunities that may exist at the season’s end. This practice slows inventory turnover, interrupts cash flow, and potentially restricts volume growth.

Many vendors offer price advantages or extra dating if you permit them to land merchandise early. This approach often backfires because the merchandise is picked over before the season begins. Moreover, the sales associates are tired of the merchandise before the season arrives. Another point to be made against getting the majority of the inventory at the beginning of the season is that if business does not pan out as planned you already have an entire season’s worth of stock. Had you written back up orders on key styles, you would have had much more flexibility in modifying or even canceling as a last resort.

Just as landing merchandise too early can be dangerous, so is landing it too late. Landing merchandise too late could be inviting markdowns because there is too little time remaining in the season to sell the goods at full price. This is the major reason why an in-store completion or cancellation date should be used on every order.

The final key to scheduling ideal delivery dates lives in he open-to-buy. Your OTB should reflect planned receipts by month, over the course of the season. Once you receive your monthly OTB, you can then create a percentage of planned receipts per month, instead of a lump sum amount. Your monthly OTB will reflect current trends and consumer buying patters as they unfold over the course of the season. An additional benefit is that your accounts payable will be easier to deal with, and our cash flow will better mirror your expenditures. Think in terms of several small invoices as opposed to fewer large ones. By following thse simple steps you will have a clear picture of how receipts should flow. The closer you adhere to planned delivery dates, the better your business will perform.

Check out Ritchie Sayner’s other contributed articles on inventory forecasting.

To discuss your store’s inventory timing contact Ritchie Sayner. 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.