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  • (Retailers such as Herringbone and G-Star actively position their brand promise and values through all aspects of their retail value chain.)The Internet15% growth nationally in April 08154.0 % growth from 2000- 2008E Bay 35m last year at 28% growthJB Hi Fi + 20% customer visitation with sales increases over 17% Our Findings30% of retailers surveyed did not have a websiteOf this 30% - 85% were not selling from this website35% had a site that bore little relationship to their branded shop experienceObjective - build a seamless multi-channel experience that connects retailers with consumers

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  • 1. Inventory Management
    The Retail Doctor® Group Pty Ltd
    www.retaildoctor.com.au
  • 2. © Copyright 2009. The Retail Doctor® Group Pty Ltd
  • 3. The Top 5 Reasons for Failing Business
    The Top 5 Reasons for Failing Business
    © Copyright 2009. The Retail Doctor® Group Pty Ltd
    In 2007, every 11 ½ minutes one US retailer failed due to one of the top 5 retail killers:
    Out of control growth
    Out of control expenses
    Failure to manage gross margin
    Out of control inventory OR
    Being out of cash
  • 4. Objectives
    Objectives
    © Copyright 2009. The Retail Doctor® Group Pty Ltd
    • How to understand a merchandise management system to improve gross margin and cash flow
    • 5. How to analyse product categories to improve margin profitability and cash flow
    • 6. How to understand inventory productivity
  • Inventory Management
    Inventory Management
    © Copyright 2009. The Retail Doctor® Group Pty Ltd
    Product
    • What would you measure?
    • 7. Quantity
    • 8. Operating margins (Prime & Finish)
    • 9. Cost of goods sold
    • 10. Profit by product
    • 11. Stock turn
    • 12. Sell through
  • Inventory Observations
    Inventory Observations
    © Copyright 2009. The Retail Doctor® Group Pty Ltd
    • Inventory is the “heart” of a retail store
    • 13. Inventory is the single largest investment of capital
    • 14. Inventory is the cause of most successes and failures
    • 15. Ultimately the goal of every retailer is to never own inventory – perfection is sell and buy
    • 16. Businesses that own inventory are called museums
    • 17. ‘Inventory is merely the physical correlate of deficient information’ (Evans & Winster, Blown to Bits)
    • 18. All inventory is evil (Jim Dion, 1986)
    • 19. Treat your inventory like a houseguest that snores…
    • 20. It will make or break you…..
  • Facts
    Facts
    © Copyright 2009. The Retail Doctor® Group Pty Ltd
    • Most retail stores carry two to three times more inventory than necessary
    • 21. Most retail stores penalise their customers for their own mistakes
    • 22. Many retail stores have little idea of how much inventory to purchase each month
  • Inventory Productivity
    © Copyright 2009. The Retail Doctor® Group Pty Ltd
    • Real productivity is about doing more with less
    • 23. Anyone can sell more with more inventory, the real trick is to sell more with less inventory
  • Boosting Low Sellers
    Boosting Low Sellers
    © Copyright 2009. The Retail Doctor® Group Pty Ltd
    • Presentation
    • 24. Seasonal issues
    • 25. Merchandise quality
    • 26. Training product knowledge
  • © Copyright 2009. The Retail Doctor® Group Pty Ltd
    • Identify and clear everything over six months old
    • 27. Are you a museum or store?
    • 28. Prepare aged inventory lists
    • 29. Make the old look new
    Get rid of everything over 12 months old – NOW!
  • 30. Safety Stocks
    Safety Stocks
    © Copyright 2009. The Retail Doctor® Group Pty Ltd
    • Hide problems
    • 31. Increase costs and risk
    • 32. Reduce or eliminate profits
    • 33. Are excuses for poor management
    • 34. Ultimately decrease service levels
  • Why at Retail Value?
    Why at Retail Value?
    © Copyright 2009. The Retail Doctor® Group Pty Ltd
    • Always ‘buy at retail’ because that is what your customer does!
    • 35. Your cash flow in is at retail
    • 36. Your sales budgeting is at retail
    • 37. If you have ‘deals’ at high margin an open to buy at cost can put you way over budget
  • © Copyright 2009. The Retail Doctor® Group Pty Ltd
  • 38. Stock Turn
    Stock Turn
    © Copyright 2009. The Retail Doctor® Group Pty Ltd
    What is stock turn and why is it important?
    • Inventory represents the largest single element of total assets
    • 39. The sale of goods from this inventory is the retailers chief source of operating profit.
    • 40. Effective merchandise investment is of utmost importance in achieving a profitable operation
  • Inventory Management
    Inventory Management
    © Copyright 2009. The Retail Doctor® Group Pty Ltd
    • The quantity of inventory
    • 41. The profile
    • 42. The aging
    • 43. The Stock turn = net sales / avg stock holding
    • 44. View retail performance against benchmarks
    • 45. * Inventory position / stock management is a key determinant of the health of a retail business.
  • Inventory Management
    Inventory Management
    © Copyright 2009. The Retail Doctor® Group Pty Ltd
    • Inventory generates gross margin dollars BUT it soaks up cash
    • 46. What are their buying processes
    • 47. Sales history, by product, place, time etc
    • 48. Sales forecast etc
    • 49. Do they operate and manage an Open to Buy plan
    • 50. And most importantly…..
  • Some Other Inventory Measures
    Some Other Inventory Measures
    © Copyright 2009. The Retail Doctor® Group Pty Ltd
    • Days Supply (how many days of sales you have with current and insight inventory)
    • 51. Weeks Supply (how many weeks of sales you have with current and insight inventory)
    • 52. Stock to Sales Ratio (stock divided by sales)
    • 53. Percent Fresh (amount of inventory less than four weeks old divided by total inventory)
    • 54. Weeks Supply Units (unit sales divided by weeks)
    • 55. Stock to Unit Sales Ratio (stock in units divided by unit sales)
    • 56. GMROII (gross margin return on inventory investment - always a $)
  • Suggestions
    Suggestions
    © Copyright 2009. The Retail Doctor® Group Pty Ltd
    • Use a four tier system to identify age
    • 57. Current = less than 3 – 4 months old
    • 58. Last season = 3 to 6 months old
    • 59. Old stock = 6 to 9 months old
    • 60. Danger = over 9 months old
    • 61. Goal is to NEVER have anything over 9 months and over a year is dead man walking!
    • 62. Colour code or identify your stock
  • © Copyright 2009. The Retail Doctor® Group Pty Ltd
  • 63. GMROII
    GMROII
    © Copyright 2009. The Retail Doctor® Group Pty Ltd
    • Gross margin return on inventory investment
    • 64. Only financial ROI that returns a $ answer
    • 65. For every $ that you invest in inventory what was the return?
    • 66. Measures impact of margin and turn
    • 67. Use to identify good categories / vendors
    • 68. What is the minimum that is acceptable?
  • © Copyright 2009. The Retail Doctor® Group Pty Ltd
  • 69. Plan for Markdowns
    Plan for Markdowns
    © Copyright 2009. The Retail Doctor® Group Pty Ltd
    • Markdowns are a fact of life in retail
    • 70. Although we cannot be right all the time, we should be right most of the time!
    • 71. Markdowns accurately report the true value of our inventory
    • 72. Historical
    • 73. Replacement
    • 74. Market
    • 75. Great retailers take markdowns every month
  • Suggestions
    Suggestions
    © Copyright 2009. The Retail Doctor® Group Pty Ltd
    • Try to negotiate the longest payment terms that you can
    • 76. Ask yourself if you can sell at least half of what you are buying before you have to pay for it
    • 77. Buy from vendors that give you longer terms or will collaboratively plan to increase your stock turn so turns exceed terms
  • Markdown Budget
    Markdown Budget
    © Copyright 2009. The Retail Doctor® Group Pty Ltd
    For Each Month
    • Identify all your old merchandise
    • 78. Identify what you want to promote
    • 79. Take your ‘regular’ markdowns on the first day of the month
    • 80. Take your promotional as they occur
    Note: Regular Markdowns are permanent reductions in the selling price while promotional markdowns are temporary and only are incurred when the items are sold
  • 81. What Influences Profit?
    What Influences Profit?
    © Copyright 2009. The Retail Doctor® Group Pty Ltd
    • Sell through
    • 82. Stock turns
    • 83. Inventory levels and their effect on profit
    • 84. Prime margin vs. finished margin
  • Stock Turn
    Stock Turn
    © Copyright 2009. The Retail Doctor® Group Pty Ltd
    ADVANTAGES OF A FAST STOCK TURN RATE
    • Retail relies on realising a large volume of sales on as small an inventory investment as possible to meet customer demands.
    • 85. Also, it is important, as fashions and seasons change, to turn the inventory quickly so as to avoid excessive markdowns or carryover of out-of-season inventory.
    • 86. Another advantage is that a fast Stock Turn Rate will actually increase sales due to the increased flow of fresh new merchandise into the store creating excitement and a reason for the customers to come back frequently.
  • Turnover Benefits
    Turnover Benefits
    © Copyright 2009. The Retail Doctor® Group Pty Ltd
    • Lower inventory investment
    • 87. Lower inventory risk
    • 88. Less space
    • 89. Fresher product
    • 90. Always new to show customer
    • 91. Lower selling price (maybe)
  • Stock Turn
    Stock Turn
    © Copyright 2009. The Retail Doctor® Group Pty Ltd
    A few suggestions on how to reduce stock holding:
    1. Buy more frequently, in smaller quantities.
    2. Reduce number of assortments (vendors, styles, colours, sizes, prices).
    3. Eliminate slow-selling merchandise.
    4. Buy closer to the selling season.
  • 92. Developing Sales Forecasts
    Developing Sales Forecasts
    © Copyright 2009. The Retail Doctor® Group Pty Ltd
    • Review past sales
    • 93. Review past holiday and seasonal activities
    • 94. Analyse changes in economic conditions
    • 95. Analyse changes in the sales potential
    • 96. Analyse changes in marketing strategies of the retail organisation and the competition
    • 97. Check weather forecasts
    • 98. Create the sales forecast
  • Competencies forInventory Management
    • Calculate min / max levels for retail inventory and demonstrate how to set correct inventory levels for a variety of retail situations.
    • 99. Apply the concepts of top sellers / slow movers and inventory aging to retail inventory to maximise profitability.
    • 100. Explain why the retail method is preferred over the cost method for the purposes of inventory management.
    (continued)
    30
  • 101. Managing the Merchandise
    Managing the Merchandise
    © Copyright 2009. The Retail Doctor® Group Pty Ltd
    • Developing a sales forecast
    • 102. Determining the merchandise requirements
    • 103. Merchandise control
    • 104. Assortment planning
  • © Copyright 2009. The Retail Doctor® Group Pty Ltd
  • 105. Receiving Merchandise
    Receiving Merchandise
    © Copyright 2009. The Retail Doctor® Group Pty Ltd
    • Check the merchandise to make sure it agrees with the order, as well as the invoice.
    • 106. Check the cost billed on the invoice against the quoted price on the order.
    • 107. Enter the retail selling price next to the cost price on the invoice.
    • 108. Price all merchandise showing the correct classification letters or numbers.
    • 109. Record the merchandise received on the correct category or classification page.
  • © Copyright 2009. The Retail Doctor® Group Pty Ltd
  • 110. Open To Buy
    Open To Buy – Strategies for Profitable Buying
    © Copyright 2009. The Retail Doctor® Group Pty Ltd
    Open to Buy Myths
    • OTB is only for fashion stores
    • 111. OTB does not work with basics
    • 112. OTB is complex and constraining
    • 113. OTB budgeting is difficult
    • 114. OTB is not for outdoor stores
  • Open To Buy
    Open To Buy – Strategies for Profitable Buying
    © Copyright 2009. The Retail Doctor® Group Pty Ltd
    Open to Buy Realities
    • OTB leads to greater productivity
    • 115. OTB works with basics
    • 116. OTB is not complex
    • 117. OTB leads to better customer service
    • 118. OTB improves cash flow
  • Open to Buy Begins With
    Open to Buy Begins With
    © Copyright 2009. The Retail Doctor® Group Pty Ltd
    Sales forecast:
    External factors.....….
    Internal factors....…..
    Then ask the question:
    ‘How much inventory do I need to support my sales plan?’
  • 119. OTB is Best Done By Category
    OTB is Best Done By Category
    © Copyright 2009. The Retail Doctor® Group Pty Ltd
  • 120. Benefits of an Effective Merchandise Management System
    Benefits of an Effective Merchandise Management System
    © Copyright 2009. The Retail Doctor® Group Pty Ltd
    • Carry the right inventory
    • 121. Carry the right amounts of inventory
    • 122. Manage cash flow
    • 123. Earn a profit
  • The Retail Doctor® GROUP Pty Ltd
    For more information and to see how The Retail Doctor can help you become ‘Fit for Business’ please connect with us.
    Facebook: www.facebook.com/retaildoctor
    Twitter: www.twitter.com/retaildoctor
    LinkedIn: www.linkedin.com/in/brianwalkerretaildoctor
    Alternatively, you can contact us on the details below:
    Mailing AddressPO Box 209 Milsons Point NSW 2061
    Phone | +61 (0)2 9460 2882
    Fax | +61 (0)2 9460 3883
    E-mail | businessfitness@retaildoctor.com.au
    Web: | www.retaildoctor.com.au
    © Copyright 2009. The Retail Doctor® Group Pty Ltd