Flexibility in price points isn’t all the company has to offer, as retailers such as grocery stores, discount stores, convenience stores and even flea markets, are provided with a vast selection of displays and merchandise. With an average of two million DVDs and BluRays in inventory, retailers can choose based on categories such as blockbuster hits, classics, horror and children’s titles, or opt for an assortment of titles based on the demographic and price point of their individual markets. “To assist in selling the merchandise we provide proven programs such as our permanent bins with replenishment options, corrugated shelf and floor displays, and even multipacks that come packaged from two to ten packs, and more,” says Toombs. With so many options retailers can showcase these impulse buys on the floor, a shelf or at the checkout counter.

Toombs also notes that 303 Marketing is looking for DVD and BluRay closeouts. “While we have an average inventory of two million items, there is constant turnover that needs to be replenished,” he explains. “We do this through closeout buying opportunities.” With 30 years experience in the retail supply business, 303 Marketing has gained the knowledge of what sells, and the best price points and displays in which to market its products.

For more information:

303 Marketing

Tel.: 931-854-9088 (U.S.), 905-850-3393 (Canada)

Email: Use online form

Website: www.303marketing.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.

Layaway Success in the News

In an effort to make the shopping experience fun and affordable once again, retailers are listening to customer requests, innovating for convenience, and testing out new promotional tactics. And before any indies think such a tactic wouldn’t work for them, they have to first consider the fact that layaway programs are customizable, from start and end date, to products available, to required down payments. A layaway program can be made to fit your store and your customers’ needs.

And if that isn’t enough to promote a little research on the topic of layaways, recent news of the competition’s fourth quarter may have you think twice. Analysts, on average, expect Walmart U.S. sales rose 1.8 percent in the fourth quarter, according to Thomson Reuters I/B/E/S, the best performance in the last 10 quarters most of which saw a decline. As Reuters reporter, Jessica Wohl, writes, “A key component to Walmart’s success during the recent holiday season was the well-publicized return of layaways. The plan was so popular that Walmart parked more than 3,000 trailers outside many U.S. stores in order to hold toys and electronics until shoppers finished paying and picked them up.”

No one says your layaway plan needs to follow these structures or be a year round offer, but the word “layaway” has doubled in interest among U.S. shoppers, as they face the interest charges on their credit cards. Doubled interest might mean doubled sales.

Click here to find out about the other factors leading to Walmart’s turnaround.

Check out our News section for other big box retail news that may help you stay ahead of the competition.

Economy and Retail Gain Momentum

All in all, the economy seems to be turning around and much in the favor of retail operators. Some of the contributing factors according to Bloomberg.com include, “The drop in unemployment to a three-year low, evidence of an improving job market that’s essential to sustaining purchases.” Job growth has caused less apprehension in customer purchases, including big-ticket items. In effect, these gains in consumer and business spending have caused an increase in inventory replenishment as retailers and suppliers look to meet the demand of their customers. Business inventories, in fact, climbed 0.4 percent in January, a 0.1 percent increase from the prior month’s gain.

It is forewarned, however, that economists are worried that a recent increase in gasoline prices, could negatively affect spending in the months ahead. As Mark Vitner, a senior economist at Wells Fargo Securities in Charlotte, NC, states in a recent Reuters article, “The rise in gasoline prices will likely take a toll on spending in coming months unless income growth improves.” Still, the retail sales report adds to a recent run of fairly upbeat economic data, which some analysts say reduce the need for the Federal Reserve to ease monetary policy further, according to Reuters. With so many upward trends, “It’s hard to argue against the case that the U.S. economy is gaining momentum,” says Millan Mulraine, a senior U.S. strategist at TD Securities in NY to Bloomberg.com.

1) How did the past year’s sales compare with sales in the past three to five years? If your business has a history, use the archived statistics to your advantage. Look for trends within your sales performance. Hoagland-Smith emphasizes, “You can predict, based on the analysis, what will happen in the future.”

2) How did the past year’s profits compare with profits in the last three to five years? When measuring profitability, add up revenues and then subtract expenditures. Every little bit counts, and if you are saving/earning a little more each day, week, month or year, you are making a profit. Profitability is the key to sustainability.

3) Did your business meet its goals? While most retailers share a similar goal in making a profit and increasing customer traffic, each store owner may have a list of goals they were hoping to meet and exceed for the year. These goals could be in sales, marketing, management, or finances. Meeting goals shows determination, innovation, and makes next year’s goals that much easier to attain. If you haven’t made goals in years past, consider this an opportunity to start your success off on the right track.

4) Are repeat sales up, down or flat? Remember, the target is not only new customers, but loyal customers who continue to add to your bottom line and provide free marketing through recommendations. Hoagland-Smith mentions, “Encouraging repeat business increases profitability, because you don’t have to spend to bring in new customers.”

5) Is overall equity up, down or constant? While your business may seem like your life, as you continually pour your blood, sweat and tears into it, the real value can’t be determined by sentiment. Looking over balance statements and considering items such as the property’s worth, sales figures and the current customer base may help give a more accurate perspective. However, as time is critical in the retail industry and you have products to purchase, inventory to check and your first sale to plan, there are three simple considerations to help you better understand the business numbers, and grow profits in the upcoming year.

First, think of expenditures as assets, and not always as a negative. It can be beneficial to cut out expenses, but not if that expense helps improve your efficiency, build future revenue, or is enhancing your business as a whole. Second, create a smart budget that tells you how much you can afford. If you don’t spend all the budgeted money, you haven’t necessarily done something wrong. Any penny saved may help out with those unexpected seasonal expenses (i.e., energy in the winter or tax season accounting). Lastly, recognize the strategies that work, but more importantly, abandon those that don’t. As Intuit Blogger, Peter Vessenes, writes, “Especially for newer businesses, some strategies will inevitably go awry. A failed strategy does not have to mean a failed business, as long as you know when to pivot or pull out.”

Sales planning, projecting, forecasting or whatever label you wish to assign to it, needs to be done at the classification level and not by brand. Most independents almost always want to plan for an increase in business, whether warranted or not. An unrealistic sales forecast will generally lead to an overbought situation, which in turn will lead to increased markdowns at best, and decreased turn and cash flow at worst. Classifications get planned up based on profitable sales and trends, and down when the reverse happens. Merchandise planning that originates at the class level and rolls up to the department and then store level is referred to as bottom-up planning, as opposed to top down planning, which emanates from a total company plan and works its way down to the class level.

Planning the needed stock level to support the sales plan is the next phase. This is accomplished by the use of stock/sales ratios. A stock/sales ratio is simply the relationship between stock and sales. It is related to the turnover and the proper timing of deliveries. Stock/sales ratios are different for each classification and for every month. This is perhaps the single most compelling reason for automating the planning process. For example, a classification that is planned to turn three times would have a stock/sales ratio of 4. This can also be viewed as a number of months of supply to have in stock. (12 months/3 turns = 4 months of supply). If a classification holds more than it can sell for a given period of time, the stock/sales ratio increases, and over time, turnover will decrease. In severe examples, this can lead to higher markdowns than usual, reduced margins and an overall reduction in gross margin return on inventory (GMROI) as well.

Suffice to say, getting the inventory planned correctly is vital. When using the retail method of accounting, as we are assuming in this discussion, stocks are planned at the current retail value. This means that markdowns are recognized when they are taken, as opposed to when the merchandise is actually sold. This reduces the “market” value of the inventory by the amount of the markdown, which increases turnover and generates additional OTB dollars to land new merchandise. Some systems do a much better job at handling this than others; you can trust me on that.

Sales and inventory forecasting are the two most important elements in the creation of an OTB plan. If errors are made in either of these areas, the OTB plan is going to be wrong. Results of poor OTB planning or no planning can be quite costly, and generally lead to inventories that are out of balance. Under planned classifications lead to lost sales, while over planned categories typically end up less profitable due to markdowns and slower turnover. Attention also needs to be given to reporting accuracy, since inventory variance can substantially alter the merchandise plan. The capture of markdowns and transfer reporting is a good first place to look if you encounter an inventory variance that is outside of industry norms. Not using an open-to-buy plan is like driving a car without insurance or building a house without a blueprint. It is dangerous and sometimes the outcome can be disastrous.

Ritchie Sayner is Vice President of Business Development for RMSA Retail Solutions

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.

“October retail sales support the assertion that consumers have a distinct desire to spend, bolstering hopes for solid sales growth in November and December,” said Jack Kleinhenz, Chief Economist, NRF. “This momentum bodes well for the upcoming holiday season.”

Wholesale Prices Dropping

In addition, U.S. wholesale prices in October fell at the fastest monthly pace since February 2010, with the producer price index dropping a seasonally adjusted 0.3 percent from a month earlier. Consumer confidence continues to rise, as Thomson Reuters/University of Michigan’s preliminary gauge of consumer confidence taken last week improved to 64.2 for November, from 60.9 in October.

Retailers Think the Recession Is Still a Serious Reality

However, according to the American Express OPEN® Small Business Monitor, a semi-annual survey now in its tenth year, economic sluggishness is only slightly impacting the psyche of entrepreneurs and business owners, as a small 27 percent say they do not plan to grow in the next six months (up from 21 percent in the spring). The other 77 percent describe themselves as glass half-full optimists (down from 85 percent a year ago). Below are some signs that have reassured these glass half-full optimists that a state of recovery in the retail sector is on its way:

Cash flow is more under control: 55 percent have concerns, down from 66 percent in the spring

There are plans for capital investments: 48 percent plan investments, up from 44 percent in the spring

Hiring is still in the cards: 31 percent say they will hire over the next six months, down slightly from the spring (35 percent). According to the latest Intuit Small Business Employment Index, retailers and small businesses in general are starting to interview and hire an influx of interested candidates. July alone marked an addition of 50,000 employees to the payroll of small businesses nationwide. Theupward trend in job openings and affiliated hires began in October 2009, and as the economy continues to recover, retailers and other small business operations are responsible for the addition of 715,000 jobs.

To Download Click HERE

To read more of the American Express OPEN® Small Business Monitor results, click HERE.

Develop a Pricing Structure to Bring in Profits

1) Competitors are charging more for inferior products. Lowering prices to beat out a well known competitor always seems to be the first strategy when opening up a new business, or possibly a fall back for those retailers experiencing sluggish sales. While consumers would love to purchase your products for next to nothing, you have to ask yourself how such a strategy will keep you in business. Is there really a need to drastically lower prices? The products or services you supply are the only thing that will set your business apart from the competition, and hopefully provide you with a sustainable advantage when it comes time for your customers to make purchasing decisions. If your competitor is charging more for an inferior product or service, you are doing yourself an injustice. Girard recommends, “Only if you can produce a product more cheaply and maintain a decent profit should you consider a lower price.”

2) Your storefront is covered with sale signs. The intention of opening a store was to service a certain kind of customer. Sales and promotions boost foot traffic, but can also alter the intended clientele. It’s about fitting the budget of your target market. As Girard suggests, “Look at the purchasing motivation and requirements of your target market, and set prices based on how much the customers in that market are willing to pay.”

3) Your cash on hand takes a dive at the end of the fiscal year. If you aren’t seeing the signs, the cash you have at the time the books are closed at the end of the fiscal year will tell you a thing or two about your prices. Chances are your costs aren’t getting smaller, so if you have less this year than last year, your prices may need to be altered. The rule of thumb, according to Girard, is that when your costs go up, your prices should too.

4) Business is attracting bargain hunters. This goes hand in hand with the advice given about too many sale signs and promotions. Your prices are attracting customers only looking to pay cheap. Profit margins will be thin, and any plans you had to market your products will be unsuccessful. Don’t let pricing set the value of your products and your store.

This article was adapted from Entrepreneur.com.