10 Open-to-Buy Takeaways
Top 10 Takeaways About Open-to-Buy
Well friends, you have made it through our open-to-buy mini-series. Below are the 10 most important things we think you should know about creating or maintaining your open-to-buy plan:
- The importance of planning. Planning allows you as a retailer to see your business holistically. It shows you your month by month successes (and failures) and allows you to adapt your plan on the fly to trends. As we always say, retail doesn’t occur in a vacuum…so why plan that way?
- The necessity of having OTB in new retail locations. We always stress the importance of retailers putting their best foot forward. If you are going to put in all this effort (which you will be) to launch a new retail venture, not having an OTB or planning is like wearing a gorgeous suit with flip flops — you’re missing a key component to the perfect outfit.
- The power of a good POS system. You can be the most diligent mathematician but numbers still can get overwhelming. Take some of the stress of your back and invest in a POS system that suits your needs. Would you leave your child with just an “EH” babysitter… we think not, so don’t entrust your store to something that just gets the job done. If you need help choosing a POS system, we are happy to get you to people who can help.
- All those numbers (and there are a lot of them) on a plan are connected. Your stock to sales ratio is related to turn and inventory. Inventory is directly related to sales which is affected by markdowns and the inventory’s fresh factor. The circle of “life” could go on and on…
- Fresh factor is key to generating sales. You should always be looking at your fresh factor for 60 and 90 days. What’s this mean? Good question.”FF” as we like to call it, is the amount of effective (fresh) inventory in stock that is going to most likely convert to full price sales. As a retailer, you should constantly be evaluating this by looking at the numbers and of course, walking the floor.
- Markdowns are not scary but necessary to your retail success. Somehow, “markdown” has become a dirty word and I could not disagree more. If something is not working in store, get rid of it! Mark it down, get it out and move on to greener pastures. By sitting on goods you think should get full price for, you are holding cash and delaying the inevitable markdown. Rip the band-aid off quickly and move on. Great stores are always experimenting and trying new products and while this is very important to staying in tune with market changes it also brings in some items that do not sell.
- In a perfect world, you have a high GMROI. GMROI is the amount of money you (as the retailer) get back for every dollar that is invested. Of course, it’s not a “one for me, one for you” kinda of thing (like I exercise when handing out Halloween candy) because you have to think about your expenses (fixed and variable) in addition to purchasing inventory.
- Having well defined classifications will help you see what’s really happening in-store. Don’t be scared to move things around, break out classes and create a “distress” class. The more you understand about your class structure, the more you will understand the trends in your store.
- The better your Contribution Margin (CM), the quicker your business is to break even. CM and break even are inversely related.
- We can help you be successful! By no means do you have to do this alone. Though I may be new to the whole “planning” and OTB thing, our RC team has years on years on years of experience.
I hope you have enjoyed following me on my journey to learn OTB and stay tuned as I begin to implement everything I have learned and will continue to learn. If you have any questions or want to talk planning, reach out…we don’t bite (typically).