Are you carrying too much retail inventory?

How much inventory does your business need to run effectively to make your sales plan and deliver the appropriate level of profit to the bottom line?        

This question one of the most difficult for retailers to answer- yet the one that holds the most value to the health and well-being of the business. Why not make 2013 the year you get a handle on your inventory once and for all- and stop spending money you don’t have to in order to deliver the sales you want.

Having too much inventory (or the wrong type) during certain periods can slow your cash flow and can reduce your overall profits (by taking too many markdowns in order to liquidate slow moving merchandise.  On the other hand if you don’t buy enough of the right merchandise (that is, the merchandise that your customers really want to buy) you will miss sales opportunities and thus not make the maximum potential profits from your business. One thing can help you get started- an Open to Buy plan.

A retailer can be sure to stock the right amount of the right products at the right time by using a well-planned as well as a continually updated and well executed Open to buy. (OTB)

OTB can be calculated in units or dollars. (Though our recommendation is to do it in dollars so that you can use the tool when going to market and working with your vendors on a daily basis) The calculations are relatively simple. An OTB is essentially the difference between how much inventory is needed and how much is actually available to be sold at any given time during the selling cycle. (OTB’s are most always calculated on a monthly basis then totaled to quarters, seasons and then finally a year total for the business.) This includes inventory on hand, in transit and any outstanding orders.

While the OTB to buy will tell you how much to spend, the key to managing it effectively is to account for trends- both up and down in a given time period and leaving yourself the flexibility to adjust purchase dollars when and if necessary. To do so, it will be best if you plan to hold a percentage of purchases back in order to take advantage of special buys or to add new products. This will also allow you to react to fast-selling items and quickly restock shelves that your store needs to keep sales moving forward.

You should set up your OTB plan with no more than 10-15 classifications that will roll up to total for your business. (We have managed OTB plans for multi-store national chains doing more than $100 million dollars with less than 10 OTB categories- so we know you can plan your business this way to!) Use the annual retail sales as a guide to setting up your OTB classifications/departments – this will help you reduce the number of classifications you need to plan.

In short, there are many ways to manage an OTB plan. The plan can be maintained on paper, in a spreadsheet or by purchasing one of the several retail software packages available that contain Open-To-Buy programs but the key is to start. Your inventory is the biggest expense you have in your business and managing it on a consistent basis can insure that your business is spending on the right products all the time.

If you need/want more help about how to manage your inventory, contact CBCG today. We can create and manage an annual OTB plan for your business to make sure that 2013 is a year of profit and prosperity.

Benchmarking your retail performance

As retailers, we’re always striving to do better. We have previously suggested that benchmarking can help give retailers the unique perspective they need to improve their overall performance. But the question remains, what value can be added to your retail business by benchmarking your performance against other like retail businesses? Here we suggest 4 areas where your retail business can be improved and made more effective from the use of benchmarks.

Sales Effectiveness.By measuring sales, you can determine if your retail business is achieving it’s optimal level of sales on a daily, weekly, monthly or annual basis. Using sales is an obvious measurement tool, but understanding how other retail businesses are performing versus yours can provide some future goals that your business can reach for.

Merchandising Effectiveness. Determining how effective your merchandise assortments are and measuring turnover performance will help maximize your gross profit to it’s fullest potential. Utilizing measurements for like industry businesses can showcase any room for improvement your business can make.

Marketing Effectiveness.Using benchmarks to measure the investment in marketing for your retail business can determine if you are achieving the appropriate level of incremental sales and profit with your marketing dollars. Spending money on marketing activity is critical to your businesses’ long term success, so understanding the return on investment you should expect can give you performance metrics to achieve.

Management Effectiveness. Benchmarks can help you determine if your investments in non-sales generating overhead are appropriate for a business of your size. Recognizing any cost savings that can be achieved or reductions in overhead that are necessary will help improve your overall expenses and improve bottom line profits.

Understanding that benchmarks can measure both internal and external company effectiveness, the next step in setting up a benchmarking practice for your retail business will be to determine what you want to measure. Determining which benchmarks to measure should align with your strategic and operational goals for the business and be appropriate for current stage of your business life cycle. Some possible benchmarks for your business to focus on include:

•Sales Per Transaction
•Customer Conversion Rate
•Sales Per Employee Hour
•Average Inventory Turn
•Average Inventory Shrinkage
•Sales Per Square Foot
•Average Gross Margin Percentage
•Sales Per Marketing Activities
•Sales Per Promotional Investment
•Overhead Percentage Of Sales
•Operating Margin
•Return On Invested Capital
•Sales Per Working Capital Invested

(Note: When gathering comparative benchmarking data, choose the industry figures that best fit your company descriptions. Unless you measure against your own industry standards, you won’t measure your business within the right industry context.)

Setting up a benchmarking process for measuring your business effectiveness can help insure the long-term success. Looking outside the walls of your retail business will help you to gain internal knowledge that can and will lead to improvements in your businesses’ bottom line results.

Is your retail business a peak performer?

As retailers, we’re always striving to do better. Whether we’re looking for more sales, higher profits or better customer service. But do we really understand what doing better means? When we’re “judging” our businesses performance, what are we measuring our success against? And when we measure performance, how do we determine what results should be expected?

The answer is Benchmarking. For some of you, this may be a common occurrence, for others, a new concept that can be a game changer for your business. So, let’s spend some time here trying to explain what benchmarking is and how it can help your retail business profit on a regular basis.

For those who are new to benchmarking, let’s start with a definition. Simply put, benchmarking is the practice of being humble enough to admit that someone else is better at something, and wise enough to learn how to match and even surpass them at it. Benchmarking is a systematic and continuous process of searching, learning, adapting and implementing the best practices from within your own organization, or from other organizations, towards attaining superior performance.

Another way to define benchmarking is as a measured “best-in-class” achievement or a recognized as the standard of excellence for a particular process reference point or a standard against which other performance may be measured against.

There are many different ways to focus your benchmarking efforts within a business. Typically retailers will focus their benchmarking efforts on the review of key business drivers including market share and comparative data on sales and operations. Some examples of benchmarking for a retail business may include:
-Gross margin
-Annual sales per square foot
-Rate of customer complaint
-Annual sales per square foot
-Employee satisfaction rate

So why should retailers understand and utilize benchmarking? Most importantly, improving overall performance with the most up to date information can help any retailer improve their bottom line. Benchmarking can be used to help your retail business determine what optimum performance benchmarks should be from an objective source. These indicators can help your retail business define success more effectively and help you to determine any potential areas of weakness in your business. Benchmarks can also help you create realistic goals for improving your performance that is realistic and achievable. Some key benefits of benchmarking include:

-Understanding world-class industry performance
-Encouraging and stimulating company innovation
-Improving organizational quality
-Creating company buy-in for change
-Exposing employees to new ideas
-Broadening company learning
-Increasing employee satisfaction
-Raising level of potential performance
-Sharing of best practices

Obviously, there are quite a few areas where benchmarking can be applied to your retail business. Determining which benchmarks to measure should align with your strategic and operational goals for the business and be appropriate for current stage of your business life cycle. Then if you uncover opportunities for improvement, they can have the greatest effect on delivering results that align with your overall business objectives.

While benchmarking is not an easy task to undertake, the results can have profound results on your businesses’ bottom line. Is 2011 the year you look outside of your own company walls and utilizing benchmarking to determine if you are truly achieving the success possible from your business?

Who are your partners?

Retail Tip of the Day: Develop partnerships w/local biz like banks or rest. It's a great way to create loyalty w/your cust by offering them added value from their experience with your store.

Who works at your store?

I meet lots of retailers every month. In almost every conversation, store staffing comes up because it is such a critical issue. These retailers share stories (some good, some not so good) and usually point to having 2 different types of employees in their store. Which employees do you have working in your store today? Employee #1 looks at the clock longing for quitting time, doesn’t move from behind the register when there are no customers in the store, and has little interest in helping grow/build sales with any customer. Employee #2 is constantly busy doing tasks (some assigned, some on their own) that make the store achieve sales goal faster, make the store cleaner or run more efficiently. This employee is always asking what else can be done to help make the business better. Of course, we’d all like to have a store full of #2 employees all the time because we know that we would have the running smoothly and that sales would be humming along- even if you didn’t go in to the store for weeks on end. So how do you find employees that are constantly engaged with the business and who are looking to make your store the best it can be every time they work? YOU DO. Your leadership and training from the first day they step into the store sets the tone for their success. YOUR training makes the difference. Today we share tips for creating top-notch employees who are as committed to your store’s success as you are 1) Make your employees THE KEY part of your store success. Share overall store goals and missions with all associates every day so they know what is expected. 2) Create a new employee handbook (can be as small as 2-4 pages) Use this book to share goals and expectations from their first day of work. These can be dress codes, hourly sales goals or any departmental responsibilities they have. 3) Lead by example. Be on the floor to show them how to work with customers, teach them to merchandise the selling floor and windows and how to close a sale properly. 4) Have a sales book at the register with financial goals for every day. Make sure every associate knows the goal from the time the store opens. 5) Track sales results during the day. (Or have your manager do it – show that making goal is priority one EVERY day.) 6) Let your employees know that they must be creative and deliver contingency plans if sales are not trending toward daily goals- empower them to do small things to boost sales in the middle of the day. 7) Announce sales results daily. Praise associates for making goals, work on re-strategizing if sales are down to plan. 8) Give every associate an area of responsibility in the store. Wiping shelves in a certain department, cleaning cash wrap, front door or windows. Everyone is responsible for how the store looks. Not just you. (Rotate tasks if some are more tedious than others.) These are just a few tips to get your associates on board for your stores success. They are not the only ones. Share with us what you do to keep your associates motivated and delivering results. We’d love to hear.

Marketing Strategy Rules to Improve Effectiveness of Your Campaigns

A good marketing technique is one part of the business that is absolutely essential to its success. In fact, the ability to properly market a product or service is actually more important than the product itself. Even an inferior product can be a financial success if marketed properly.

Regardless of the nature of your business, the managing of the marketing function will demand more creativity and more astute judgment than any other single phase of the business. The end purpose of all the activity – e.g. inventory accumulation and production – is the accomplishment of those exchange transactions called “sales.” A smart entrepreneur designs the firm’s organizational structure so as to give the marketing component its deserved prominence. Below are some rules to increase the effectiveness of your marketing strategies.

Consider the "80/20” rule
Do you know that but 80% of your marketing efforts are often spent on the customers or clients yield­ing only 20% of the annual revenues? A practical rule of thumb that you can apply to your marketing planning is the eighty-twenty principle. Look at your client list and identify those customers that were taking up all of your time and not producing results. Some of your prospects may recognize their need or problem and understand that you have a solution, but are not ready or able to pay you. Find customers who will pay you to meet their needs or solve their business problem. Shift your focus to the more productive clients and less time-consuming with long-term growth potential.

Get close to the customer
In today's marketplace, getting close means treating customers and clients (and in certain cases, even vendors) as if they truly are your strategic part­ners and you truly care about them and their employees. It is important to try to satisfy them with the right products and services, supported by the right promotion and available at the right time and location. Customers can easily detect indifference and insincerity, and they simply will not tolerate it. Long-term client and customer loyalty is a long-term challenge that you must earn every day and with every transaction. Building customer loyalty is particularly difficult for e-commerce businesses, where competitors are but a mouse click away. Small business, in order to compete with big conglomerates, should strive to establish a culture of customer service that aims to delight the customers.

Work smarter
Often the most effective marketing strategy or campaign is not necessarily the most expensive or the most complex. Traditional businesses – from the emerging growth companies to the industrial giants -- are getting better results by focusing on simplification. Simplification is achieved by reducing unnecessary product and service lines, outsourcing post-sale functions such as training and support, cutting back on trade promotions, easing up on coupons, trimming new product launches, spinning off marginal brands, and using old-fashioned face-to-face meetings for maintaining relation­ships with clients and customers.

Take advantage of advancements in technology
More and more firms are setting up web sites and learning how to use the Internet as a marketing tool. The Internet has allowed even small entrepreneurs to reach a much wider market, providing information about the company and serving customers’ needs 24 hours a day, 7 days a week. Some traditional companies use the Internet as a powerful complementary marketing tool, while some small businesses start directly on the Internet.

Reach out to the global markets
The World Wide Web has allowed every e-commerce web site to make its offerings globally accessible. Small businesses therefore need to expand their marketing and sales efforts beyond the domestic markets. Take the time to learn the challenges of doing business overseas and how to serve foreign customers well. Many small and growing companies that have ventured abroad as pioneers of doing business in the global village have discovered lucrative and receptive new markets. Remember, if your business is not yet global, then you are missing the opportunity – and the point – of conducting business on the Internet.

Keep your eyes open
A growing small business needs to constantly have their eyes and ears open to emerging trends in their markets, technological develop­ments, and steps taken by their competitors. To keep you informed, closely monitor the attitudes of your employees and the opinions of your "stakeholders" such as vendors, customers, staff, landlords, lenders, directors, and stockholders. Successful entrepreneurs are focused 24 hours a day, seven days a week, on how to get new customers and clients as well as how to keep existing clients happy.

Take care of existing clients, while getting new ones
While small businesses need to constantly capture new customers, the priority should be continue pleasing the existing customer base. Companies that fail to nurture their customer base ultimately fails. Your ability to attract new customers will be limited and eventually impossible if you can't hold on to, and delight your existing customers and clients. It costs twice as much to get new clients rather than maintaining your customer base. Remember, one of the keys to marketing and growth is getting more business from existing clients and customers.

Prioritize your relationship with customers
This old adage is also applicable to marketing and customer service. Too often growing companies’ focus on the customers only, not on where the customers come from. The sources of client and customer referrals are relationships that must be coveted and maintained just as effectively as direct client and customer relationships. This is particularly true on the Internet, where it is important to build, enhance and maintain relationships that direct traffic to your site, by reciprocating wherever possible and refining the relationships as they evolve.

Think outside the box
The traditional solutions to sales and marketing problems yield traditional results. Putting your company on a rapid growth track means being willing to break through old paradigms, engage in street fighting with your competi­tion, and approach marketing and promotion with fresh ideas and approaches. For example, instead of focusing on lowering prices to meet the competition, retool your strategy around adding value and enhancing the customer's experience. Nordstrom's strategy of focus­ing on the quality of the customer's experience and not on the price is very effective. The old adage "Quality is remembered long after price is forgotten" is true in many types of industries and can be a much more profitable strategy in the long run.

Marketing is as much about perception as it is about reality
Marketing is the art and science of moving the image of your business to the forefront of a prospect’s mind. In the mind of the customer, a product or service has an assured baseline level of quality. Hence, small businesses need to emphasize the intangible and often elusive “value added.” The task of the marketing plan, therefore, is to advance the image of your product – preferably one that emphasizes customer benefits and your “distinctive competency.” Entrepreneurs must strive to build brand image and loyalty as well as establish market leadership. In several instances, market leadership and consistency in the customer's experience can often triumph over quality. For example, the market leadership and world­wide consistency of McDonald's keeps sales growing, even if its hamburgers are not the best on the planet.

Remain focused on your core products
Most success­ful companies have stayed focused on a particular product or service category, even if it meant the sacrifice of ancillary sales or the loss of certain customers. For example, when you think about Blockbuster, you think about video rentals. Over the years, Blockbuster has also inched its way into video game rentals and a limited line of candy and merchandise, but the focus has remained on video rental. The key point is that Blockbuster could have tried to sell other products and services to the "captured customer" who spends 15 or 20 minutes choosing a video in its stores, but it had the discipline to stay focused on its core business, which has propelled its growth worldwide.

Source: Powerhomebiz.com

Retail Resolutions for 2009

2009 is going to be a challenging year for retailers everywhere. CBCG has resolved to help retailers-big and small - survive- and even thrive in this challenging economy.

We've compiled our top 10 resolutions for the New Year. We hope you will make them part of your everyday business life in 2009.

1) Conduct An Objective Strategic Assessment Of My Business
2) Investigate Less Expensive Electronic Marketing Methods
3) Improve Effectiveness Of My Email Marketing Campaigns
4) Increase Utilization Of Social Networking Applications (Or Resolve To At Least Learn More About The World Of Web 2.0 Before It Becomes Web 3.0)
5) Be Disciplined In My Inventory Management Practices
6) Get Face-To-Face With My Customers More Often
7) Be More Assertive In Negotiations With My Suppliers
8) Optimize Cash Flow Management And Financing Terms
9) Objectively Assess The Opportunity For Additional Sales From Alternative Channels Of Distribution– Internet, Corporate, Etc.
10) Overcome Fear To Ask For Help When I Need It