How many retailers do you know where this scenario applies? Perhaps you are even one of them. If so, ask yourself the following questions:

• How did you get into this position?
• Why are you content staying in the situation?
• What steps might you be able to take to change your situation?

I know of retailers that are in this difficult state and aren’t even aware of it.  They have become so comfortable with their complacency that they don’t even realize that there is a more prosperous way to live. How do you know true success if you have never experienced it, especially if you spend the majority of your day to day life dealing with negatives?

Reactive versus Proactive

I recently came across a situation where a retailer had gotten into a negative cash position. The majority of his time and energy was spent appeasing, coaxing, threatening, pleading, and negotiating with vendors to take token payments on past due invoices.  His hope was that his vendors might grant mercy in the form of some nominal credit extension that would allow him to land at least some new merchandise, the lifeblood of all retailers. It is clearly a short term “solution” to a long term problem.

To be fair, I am not suggesting for a moment that there aren’t times for most retailers where cash flow is stronger than other times.  Cash flow is a routine business concern.  In the previous situation, any available cash reserves had been drained through a combination of poor merchandising decisions and even worse financial control. Generated cash paid maxed-out credit cards, and the line of credit that the bank wanted to reduce was being hindered by a costly store build-out, an unrealistic lease, and shrinking margins due to aggressive promoting.  Declining sales, due to lack of fresh product, led to delayed deliveries caused by slow payments to vendors.  The result, was an inventory that was out of balance.  The sales decrease forced the operating expense percentages to rise by default.  Without intervention of some sort, this downward spiral will most likely continue until everything crashes.

The questions become: Who needs the stress?  Is the business really worth all of this? You need someone to talk to, but whom?  Look around at the possibilities. The vendors want you to pay what you already owe so they can ship you more, so they’re out.  Your accountant is constantly reminding you of your dire position, but doesn’t have the answers you need to solve the problem. Your spouse is weary of hearing about the store’s problems and just wants you to do something, anything. You can’t go to the employees with this, so you keep the happy face on trying to stay positive.  Hey what about the banker?  Forget it! He’ll talk to you about money when you don’t need it.  And you certainly can’t approach him with the current financials, because he might get freaked out and call your loan if you don’t produce more collateral, which you obviously don’t have. You’re putting in too many hours, not sleeping well, and becoming short with your friends and relatives.

There are solutions available.

One of the many benefits of belonging to an industry association, franchise, or buying group, is that they have places to refer you should you find yourself dealing with “issues” from time to time.  When seeking out a business consultant, mentor, or industry expert do your homework.  You will be spending some money to get the help you need so make sure you are getting a qualified person to help.  Look for an advisor who has industry experience, thoroughly understands your situation and can provide you with a concrete action plan that is realistic to you. Don’t be afraid to ask for references and follow through on contacting them.

Do you know how to make a large fortune in the retail business? …Start with a small one and don’t be afraid to reach out for a second opinion if you think things could be better.  There just might be a brighter future than you think.

Ritchie Sayner is VP of Business Development at RMSA Retail Solutions. Follow him on Facebook at https://www.facebook.com/RitchieSayner  or email at rsayner@rmsa.com

Bad Business Habits

Stop blaming the economy and the competition. How is it that some retailers are thriving and growing in this down economy? How is it that some retailers thrive and grow in the face of fierce competition? They don’t let the economy or competition dictate how they operate their businesses. In tough economic times, these retailers pay attention to what made them successful in the first place. They leverage their strengths and eliminate their weaknesses, and they take steps to enhance and improve their relationships with their customers. Service is what makes or breaks the independent retailer. The big boys are understaffed, underpaid and underknowledged, and they are constantly losing touch.  Successful retailers understand that the economy and competition are out of their control, but what is in their control is the ability to enhance service and the desire to make their store the best that it can be.

Quit ignoring the obvious. If there are fewer customers coming through your doors today than there were last year, reevaluate your advertising and marketing. If the average sales transaction is decreasing, reevaluate your sales training techniques. What incentive plans have you put into place recently to reward your sales force? If profits are down, reevaluate your merchandise management approach and expense control. Significant change in the marketplace, the economy, the competitive environment, consumer buying habits, or anything else that negatively impacts your business requires a thorough reevaluation of the factors that affect and shape these changes. This reevaluation process is an important part of keeping every business successful.  Retailers go out of business because too often they didn’t adjust their strategy when things first started to change. Be objective, be realistic and tackle problems head on.

Stop thinking of marketing and promotions as an expense. Marketing and promotions are a necessary investment in your business regardless of the economy or other outside influences. Be pro-active. Drive the business. Doing nothing will get you exactly that in return. In store events, fashion shows, trunk shows, giveaways, get your vendors to participate; there is an endless list of activities to keep your store relevant in the future.   YouTube, MySpace, Facebook and even text messaging are clever ways of using technology to reach out to new and existing customers. A simple idea that too many retailers ignore are customer reward programs that encourage customers to come back and shop again. Successful retailers know that marketing, promotions and event planning are a critical and important part of keeping their store in front of their customers.

Stop coming to trade shows unprepared. For most independent retailers going to a trade show is the single most stressful event of the season. Often, just the traveling to the show causes stress. One way to relieve the stress is to come prepared. Remember the difference between buying versus shopping. Buying is the process we use to select products for our customers while shopping is what we do when we buy for ourselves. Knowing the difference is critical for success in retail. You are your customers’ eyes and you should have a clear vision of what is important to your customer as you prepare to shop the show. Walk the entire show before you start placing orders, and stop using the vendor purchase order forms. Use your own purchase order as it has your own terms of doing business and your cancel date and other requirements of doing business with your store; the vendor form is built in their favor, not yours. Lastly, stop accepting too big of a shipping window. An order that comes in between August 1 and October 31 is unacceptable. Make sure that every order clearly states delivery date and a cancel date no more than 30 days after the scheduled delivery date.

Stop overbuying. Stop purchasing more inventory than your traffic can bear. The key for independent retailers to weather these turbulent times is to adhere to basic retail fundamentals. The most basic of which is to buy only what you can sell profitably. In this environment, it’s near impossible to simply sell your way out of over-bought and over-stocked situations. Today, top line revenue stubbornly doesn’t want to turn up. Many stores report that the weakness they’ve experienced has been primarily in traffic counts, and to a lesser extent in units per transaction. The key is to keep inventory levels in line with realistic sales forecasts. Excess inventories in a weak sales environment back up very quickly which creates enormous markdown pressure that is far beyond any markdown pressure you might feel from the competition. Those markdowns destroy gross margins.

Also, many independent retailers feel they have to commit all of their dollars upfront in order to get the merchandise they want. It’s far better to hold dollars back, and flow merchandise out through the season as close as possible to the time of expected sale. That way inventories remain lean, customers are always seeing fresh arrivals, and there’s cash to spend on long-margin opportunity purchases late in the season.

Good Business Habits

Increase cash flow. Your number one priority is to increase cash flow. Strong positive cash flow is truly a competitive advantage. Thinking about inventory in terms of time is the essential starting point in effectively managing inventory and experiencing healthier cash flows. For many retailers, thinking of inventory in terms of weeks supply or months supply is a new concept. They can easily talk about inventory in terms of quantity, units, dollars, cases or case packs and they have heard of terms like inventory turnover GMROI without fully understanding what it means. This perspective on cash flow is ironic because I find that retailers who can’t answer the how many weeks or months supply question are the same retailers that also experience recurring cash flow problems. Remember this important retail metric.  For every week you can improve your annualized inventory sell through, you improve cash flow by approximately one percent of annual sales. We sometimes hold on to the mistaken belief that maximizing sales will lead to maximizing cash flow. Not true. It is optimizing turn rates that ultimately will lead to a healthy cash flow and increased profit in your stores.

Take a critical look at every expense. This is one of those things the best retailers constantly do. When times are good, it’s quite easy for expenses to creep up and get out of hand. Rather than cutting costs across the board, here’s a simple way to look at expenses.

Don’t spend money on anything that doesn’t do at least one of these four things:

1. Get more customers through your door.

2. Better serve your customers

3. Support your associates

4. Directly help grow and improve your business.

Every other expense should be carefully scrutinized.

Start negotiating. More so than ever before, both landlords and manufacturers are willing to work with their independent retail customers who they have a history with and good credit in the marketplace. Prior to this, being a partner often meant: give me what I want and I’ll be your partner. Recently, the term “partner” has acquired a more authentic meaning. Due to current conditions, retailers are holding back from opening additional stores at this time, and even closing stores. Vacancy rates are up. Traffic is down. Landlords have fewer candidates for the vacant space they have in their centers. As a consequence, independent retailers who do want to open stores have less competition for leased space and are able to get more affordable rents, better locations or both. Today, independents are successfully negotiating advantageous new leases, lease renewals, rent reductions and spec reductions.

With the manufacturers, try to get as much as you can when you are preparing to buy. Remember, the vendor is never more accommodating than when you are standing there with your pen in hand. A few things to negotiate for:

1. 60+ day payment terms

Plus 30 day terms from the day you receive the merchandise, not the shipping date

2. Pre-paid shipping

3. No pre-approval for damage / defective returns and full refund (not credit note)

4. Co-op advertising

5. Guaranteed repeats

6. Free goods for display

7. Guaranteed sales: 90 days

Start training your sales force and providing them with incentives. The problem with many independent retailers is that they simply don’t have expectations for sales production. They say, “Here’s what you have to sell this week or this month to keep your job.” Essentially these retailers put people on the floor, pay them an hourly wage and hope they sell. Then there are the retailers that have some concept that people want to make more money. So they put in an incentive program and start paying commission.

The problem with that strategy on its own is that it does not give salespeople skills to succeed or the tools to measure their progress. How people behave on the sales floor is related to how they are trained and managed, not how they’re paid. Stop settling for mediocrity. Get everyone on your staff professionally trained. Turn your staff’s “helpfulness” into high performance selling. Set accurate and objective sales goals. Make sure your employees are making enough add on sales. Understand the new sales metrics and how they impact sales. These are behaviors and they require that you have weekly coaching meetings with your sales staff. Establishing Esprit de Corps results in better customer service and higher sales. Good managers and salespeople that provide a high level of customer service and close more sales at your stores can change the culture of your business into a high performance machine.

Keep challenging yourself and your associates. Even in difficult economic times, the best retailers take bold steps to distance themselves from the competition. They continue to identify and take advantage of the opportunities that are always there even in a competitive environment and a tough economy. Retail may be the toughest profession out there but, there’s always room for those who get it right.

Ritchie Sayner is VP of Business Development at RMSA Retail Solutions …follow him on Facebook at https://www.facebook.com/RitchieSayner  or email at rsayner@rmsa.com

To learn more retail business best practices, check out our Management category.

Outstanding efforts by buy local supporters, such as Alison Grappone, ensure independents’ success in increasing wedding gift sales. After planning her wedding four years ago, Grappone became aware of the lack of independent retail gift registries. As The Telegraph reports, “Grappone and her husband wanted local gifts from independent book shops and the community playhouse, or a share in a community supported agriculture program.” As a result, Grappone saw the opportunity to create a gift registry dedicated to independent retailers and nonprofits.

But there are other methods to provide gift registry services to those looking to support their local economies without the assistance of online directories. Independent retailers, especially those retailing kitchenware, can build their bridal business now by following a few simple steps. With an average number of 151 gifts on a couple’s registry, according to The Knot, retailers are encouraged to build their registry business through a focus on outstanding customer service, in-store incentives and a convenient, enjoyable process. Below are a few tips in reaching these goals:

1) Help the couple pick out products that fit their lifestyle. As any store owner should do, get to know your customer. The greater the effort you put in, the more likely you will gain a repeat customer. Couples looking to register don’t want to waste their wish list on items they won’t use. For instance, kitchenware retailers have the best opportunity to launch a successful registry as bakeware (91 percent) and kitchen appliances (90 percent) are the most popular gift selections. So, ask couples about their culinary lifestyle and use their answers to help determine what they need. A few questions to ask include: How frequently will you prepare meals at home?; Who will be doing the cooking?; Do you enjoy entertaining?; Are you inclined to assemble meals, rather than actually cook foods?

2) Help gift-givers envision the gift they are giving. Most wedding registries are online, providing customers with little chance to see the product before shipping. Independents, however, have the opportunity to make the shopping experience unique. For gift-givers looking to fulfill their purchases in-store, retailers could provide a bridal registry display center. These displays would feature a representative sample of the items on a couple’s registry. As Marg Junkan, owner of Cook’s Emporium, tells The Gourmet Retailer, “The response has been great. If you just hand someone a registry sheet they’re sort of lost. The displays really help because customers don’t have to walk all over the store looking for the registry items. It’s really encouraged them

Decisions made during periods of difficult cash flow might include not taking discounts, paying vendors late, paying COD for inventory, not taking entrepreneurial risks that might be good for business, cutting back on essential services that keep a healthy business thriving, bank loans taken out when needed cash is sitting in boxes on the shelves, and running sales events out of panic in order to create cash. However, cash flow can be improved, and here is how:

1) Reduce expenses. Make sure operating expenses are in line with industry norms. Set an operating expense budget based on current volume and stick with it. Two of the largest and most common areas that get out of line are occupancy and payroll costs. However, if you are continually borrowing money to finance a heavy inventory, you are probably paying unnecessary interest expenses.

2) Increase sales revenue. More sales at the register mean more cash in the bank, assuming sales are being generated at normal margins. Excessive markdowns taken as a result of overbuying or other merchandising infractions are not considered a profitable way of generating sales. Effective use of off-price merchandise can be a vital component to driving volume.

3) Improve inventory turnover. Reducing the average inventory and not buying more than you can profitably sell is essential to positive cash flow. Understanding gross margin return on investment (GMROI), which blends average inventory and gross margin, would be very useful here.

4) Raise maintained markup. Increasing maintained markup can be accomplished by either raising initial markup or by reducing markdowns. Since this is an average not all stores need this high of a markup, while others may need more. Good retailers maximize IMU wherever possible. This is the reward for diligent buying and good negotiating. In today’s retail environment, all retailers need to strategically avail themselves to opportunistic pricing (buying off-price), whenever possible, in order to maximize maintained markup.

5) Properly timed deliveries. The timing of merchandise deliveries is critical to the optimization of cash flow. This point is closely linked with all points previously covered. What sells fastest in your store, new merchandise that arrived just ahead of the new season or last season’s leftovers that you couldn’t even get rid of on sale? If vendor terms aren’t prearranged, some stores end up paying for goods months before they have had an opportunity to sell them in some cases. I have also seen examples of stock levels in seasonal categories (i.e. sandals or winter footwear) that are actually higher in the months following the season than they were during the season, due to accepting late deliveries.

Since inventory is most often a retailer’s single largest asset, more time and resources should be devoted to monitoring this area. Accurate sales and inventory forecasting is essential to maintain and strengthen cash flow. Inventory related costs can take over half of a retailer’s annual budget, and operating expenses eat up another 40 percent, on average. In other words, $0.96 of every dollar is committed to merchandise and expenses when things are running normally. When the items above are the least bit out of sync, cash flow begins to erode. Most prudent people wouldn’t think of not having insurance on their home or car, for peace of mind and protection. Think of a comprehensive merchandise plan coupled with a cash flow plan as an insurance policy for your largest asset, your inventory.

Ritchie Sayner is VP of Business Development for RMSA Retail Solutions. Contact Mr. Sayner at rsayner@rmsa.com.

If you answered “F” congratulations, you are probably a savvy retailer. Cash is King in the retail business. Strong, positive cash flow is a must for any thriving retail establishment. The benefits of positive cash flow are numerous: pay vendors on time, take discounts, expand or remodel, add brands, pay yourself more, and so on. Poor cash flow, however, forces retailers to make survival decisions they may otherwise not make. This is what I commonly refer to as Management by Crisis.

Decisions made during periods of difficult cash flow might include not taking discounts, paying vendors late, paying COD for inventory, not taking entrepreneurial risks that might be good for the business, cutting back on essential services that keep a healthy business thriving, bank loans taken out when needed cash is sitting in boxes on the shelves, and running sales events out of panic in order to create cash.

Improving Cash Flow Has Multiple Steps

But cash flow can be improved, and here is how:

1) Reduce expenses: Make sure that operating expenses are in line with industry norms.  Set an operating expense budget based on current volume and stick with it. Two of the largest and most common areas that get out of line are occupancy and payroll costs. However, if you are continually borrowing money to finance a heavy inventory, you are probably paying unnecessary interest expenses.

2) Increase sales revenue: More sales at the register mean more cash in the bank, assuming that the sales are being generated at normal margins. Excessive markdowns taken as a result of overbuying or other merchandising infractions are not considered a profitable way of generating sales. Effective use of off-price merchandise can be a vital component to driving volume.

3) Improve inventory turnover: Reducing the average inventory and not buying more than you can profitably sell is essential to keeping cash flow positive.  Understanding gross margin return on investment (GMROI), which blends average inventory and gross margin, would be very useful here.

4) Raise maintained markup: Increasing maintained markup can be accomplished by either raising initial markup or by reducing markdowns. Since this is an average, not all stores need this high of a markup while others may need more. Good retailers maximize IMU wherever possible. This is the reward for diligent buying and good negotiating. In today’s retail environment, all retailers need to strategically avail themselves to opportunistic pricing (buying off-price) whenever possible in order to maximize maintained markup.

5) Properly timed deliveries: The timing of merchandise deliveries is critical to the optimization of cash flow. This point is closely linked with all of the points previously covered. What sells fastest in your store, the new merchandise that arrived just ahead of the new season or last season’s leftovers that you couldn’t even get rid of on sale? If vendor terms aren’t prearranged, some stores end up paying for goods months before they have had an opportunity to sell them in some cases. I have also seen examples of stock levels in seasonal categories (i.e. sandals or winter footwear) that are actually higher in the months following the season than they were during the season due to accepting late deliveries.

Since inventory is most-often a retailer’s single largest asset, more time and resources should be devoted to monitoring this area.  Accurate sales and inventory forecasting is essential in order to maintain and strengthen cash flow. Inventory related costs can take over half of a retailer’s annual budget and operating expenses eat up another 40 percent on average. In other words, $0.96 of every dollar is committed to merchandise and expenses when things are running normally. When the items above are the least bit out of sync, cash flow begins to erode. Most prudent people wouldn’t think of not having insurance on their home or car for peace of mind and protection. Think of a comprehensive merchandise plan coupled with a cash flow plan as an insurance policy for your largest asset, your inventory.

To learn more on merchandising, inventory and cash flow check out our Management Section.

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

Body Language Matters to the Customer

It may be obvious that smiling when greeting a customer is a good technique to start with, as customers know when you are genuinely smiling and concerned about their wants and needs. However, you and your staff may be giving off negative body language that you are completely unaware of. Below are body language mistakes to avoid:

1) Clasping and rubbing hands together. Customers may think you are nervous or uncomfortable, or worse, that you are arrogant and believe you have already closed the sale. Solution: Let your hands naturally rest at your sides or on your lap, depending on if you are sitting or standing.

2) Clock watching. Customers may think you have something more important to do than their needs. Solution: Forget the time and focus on the customer.

3) Arm crossing. Customers may think you are closed off or uninterested in what they are saying. Solution. Open your arms to appear more receptive.

4) No eye contact. Customers may think you can’t be trusted or are holding something back. Solution: Be engaged and interested and always look the customer in the eye.

This has been adapted from a management piece on American Express OPEN Forum

Planning Delivery Dates for Better Profitability

First, start by running a vendor profitability report. 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, as it is perhaps the most important report you can run. This exercise will be very eye opening and may provide the ammunition necessary for future vendor negotiations. You should also 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, making 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. 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 season’s end. This practice slows inventory turnover, interrupts cash flow, and potentially restricts volume growth.

Many vendors offer price advantages or extra dating (extra days from the invoice date in which to pay the bill) 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. If business does not pan out as planned you already have an entire season’s worth of stock. Had you written backup 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 the 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 patterns as they unfold over the course of the season. An additional benefit is that your accounts payable will be easier to deal with, and cash flow will better mirror your expenditures. Think in terms of several small invoices as opposed to fewer large ones. By following these 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.

Ritchie Sayner is VP of Business Development for RMSA Retail Solutions.

The truth is cost cutting, especially when it impacts the payroll, can often have negative side effects on employee morale. As American Express’ OPEN Forum blogger, Darren Dahl, writes, “While you might succeed in adding a few dollars to the bottom line, you might actually suffer a net loss in the productivity of your employees.” Below are a couple methods to help both your business and its staff with the ultimate goal, making money and keeping morale high:

1) Ask for ideas. Don’t overlook your most valuable assets, your employees. They not only have first hand knowledge of the processes to help point out areas of waste, but can also provide you with innovative insight about your customers as they interact with them, learning about their needs and what might be missing in fulfilling those needs. As Marla Gottschalk, Ph.D., a practice manager with organizational development firm Rand Gottschalk & Associates, admits, “It can take some planning to create a channel of communication where employee ideas on cutting costs can be brought up, but when it’s done well, great rewards follow.”

2) Lay people on, not off. Laying off employees will only have the rest of your staff fearful of losing their job, or they may leave before being asked, leaving you understaffed and even less capable of making sales. Instead, ask employees if they would volunteer some extra time to help the store out, especially if you are considering increasing store hours to compete with late night and all weekend, big box retailers. While you may not be able to offer them their typical hourly rate, or anything at all, once the extra work shows some turnaround in the bottom line, perhaps there could be a bonus down the road. Once again, it is all about communication.

One thing is for certain; hardworking loyal employees cannot be taken for granted, even if your cash register is a little drier than in previous years. As the store owner and their employer, you should make the effort to recognize the efforts of those employees who continue to keep the storefront going. As Roy Saunderson, president of the Recognition Management Institute, says, “What employees won’t forget is how managers treated them during the tough times. That means you should be increasing the amount of time spent one on one with employees, writing appreciation notes, listening to concerns and thanking them,” and most importantly, cutting costs elsewhere.

As city centers look for paid parking profits, retailers are quickly losing their convenience and curbside appeal, making the effort to reinvigorate downtown impossible. Taking a comprehensive approach to downtown retail parking is important because of the significant differences in a downtown environment compared to the competition (suburban malls or big box retailers). The suburban malls and big box stores have several obvious parking advantages over downtown areas, and these include:

• Plentiful land on which to provide cheap or free surface parking.

• Simple, easily understood access, characterized by direct lines of sight from the parking lot to the store(s).

• Generally high levels of service through short walking distances, generous parking stall widths, etc.

• Single ownership and control of dedicated parking resources.

• Increased ability to control employee parking behaviors through direct management.

For this reason, downtown businesses, including the independent retailers lining Main Streets nationwide, have begun to voice their opinions to their local governments. Lynchburg, VA, for instance, recently plagued by the threat of paid parking, caused business owners to band together in a battle for survival. News station ABC13 reported on the recent showdown between downtown business owners and the city parking authority, saying, “Downtown businesses say paid parking can drive people away from downtown. The owner of Celebration, a downtown shop, says the meters are not user-friendly and scare away business.” And while these business owners are worried about parking inconveniences, including meters and limited spots, a clean slate is not a logical possibility in downtown environments when it comes to parking. But there are some basic principles relative to effective retail parking strategies that can be employed to give retail a fighting chance downtown and place control back in retailers’ hands. Possible parking resolutions include:

1) Promoting an effective and consistent parking enforcement function, with the primary goal of enforcing the rules, promoting on-street space turnover.

2) Having an effective combination of time limits to support the specific uses of downtown retailers. For example, coffee shops and dry cleaners have different needs than restaurants and clothing stores.

3) Offering to validate parking, paying for part or all of their parking if they make a purchase.

4) Providing directions and parking details on your website. If you have limited parking outside your store and have a B2C site that helps you communicate with your customers, then it might be a good idea to offer up directions to available parking on your website. You don’t want them driving by and deciding to turn back home without ever stepping in your store.

5) Leasing parking space from a neighboring business. If the neighboring business has some available spaces or perhaps traffic downtime, it might be a good idea to lease the parking area for your customers who otherwise would be without a spot

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.