How to ‘Open to Buy’ for volatile summer, Christmas 2009 trading conditions…!

It will be all about mitigating stock risk and making shop floor space work extra hard…profitably?

Preparing your ‘Open to Buy’ for summer, Christmas 2009 will mean almost going back to the time you formulated your first major buying plan.

That is planning an ‘Open to Buy’ with little understanding of the real outcomes; living from hand to mouth; cheque book juggling.

• When you started cash was super tight, the supply chain had to be ruthlessly monitored to pay the bills; every item purchased had to make a profit on tables, racks and bays available.

• It was a time when you limited poor buy risk by quitting slow stock early to avoid cash flow cramp; keeping basics and semi basics in stock and not losing a sale under any circumstance a priority.

• Making windows, front fixtures and internal displays ‘sell’ was normal.

• You found the time to working on the shop floor with store teams every day to make sure service levels were high listening to store teams views on what was moving and what was sticking.

• Resolving, monitoring and fixing out of stocks was a daily event.

• Having cash up your sleeve for buying bargains at all times was a priority.

• Every new store you opened was clinically risk mitigation assessed before entering into a long term lease.

OK you have some history on summer, Christmas 2008 but the information is probably flawed due to the October market crash and the Christmas cash handout.

Where we suggest you start is taking last years typical layout and placing the total of gross profit obtained out of allocated tables, fixtures and bays; assess where ranges were over spaced based gross profit generated and prepare a plan to discuss with the buying team for space planning discussion.

Next calculate on an overage store all the costs including required return on investment and assess if the occupying ranges actually paid for the space occupied.

Apply costs expected and ROI required for the summer, Christmas 2009 by fixture taking into account best judgement of Group, Department and Classification trend for the period.

Setting weekly profit return targets by fixture will set the priorities for the relevant buyer to buy to leaving at least 15% available for special ‘buy in’ bargains and post Christmas sale purchases.

Continually challenging the gross profit return by fixture will force movement of slow selling non profit generating ranges, open up space for ranges under spaced early allowing where possible for second summer range purchases.

Set your exchange rate thinking around sub 65c; if it is higher, a bonus.

What ever stock levels you carried in an average store lighten stock carry from the high risk ranges and compensate known ‘safe’ volume ranges.

Getting the Department price point pyramids right plays an important part in tough retailing times.

Flatten the price points down; broaden sales dependency on the base of basics and semi basics.

Make sure that you avoid the ‘accountants cash flow choke’, that is stopping a blanket stop on all purchases by the accountants; make sure that you do not ‘choke’ bread and butter basics; fix the cash flow by ripping into slow selling stock and ‘choking off’ further buys of proven risky ranges.

It is recommended that there is a minimum 5% reduction in high risk ‘fashion’ or high price ranges; a minimum 5% increase in hero, basic and semi basic ranges.

Hero, basic and semi ranges replenished via basic EDI documents with open visibility for suppliers and factories into your system to make sure future production equates to colour, size, model changes based on real information in real time.

If you have not yet moved to real time EDI using the ORDER, ASN (Advance Shipping Notice, POA (Purchase Order Acknowledgment) from suppliers and set POCH (Purchase Order Change) communications with your suppliers do it now.

In these times you need end to end EDI to keep ‘OTB’s in sync with volatile shop floor demands.

The affect in cost saving, lower stock levels and improved sales from EDI relationships with your suppliers, factories, DC’s and Third Party DC’s will surprise you.

Do not let your IT Department or your POS / ERP supplier fob you off; insist on EDI being embedded in your supply chain from order creation, through distribution to sale and back to replenishment.

If a retailer relying on major supply out of China, suggest locking in tighter replenishment procedures to reduce unnecessary stock hold buffers; aim to reduce stock in distribution centres by at least two weeks sales; staying stock ‘clean and mean’ essential to keep cash flows moving.

For retailers’ who are ‘vertically integrated’ out of China look seriously about changing to RFID ‘bar-codes’ + EAS as a sales driver and cost, loss prevention initiative.

Even if you do not implement RFID + EAS ask for a thorough evaluation of the bottom line benefits of RFID + EAS for winter 2010.

Weight initial store distributions towards favouring stores that might benefit from the break in the drought; in reverse diminish initial distributions areas feeling the effects of the mining and financial slowdown.

Getting the initial distributions right will avoid unnecessary lost sales, the high costs of inter-store transfers and unnecessary mark-downs at season end but more importantly start to set the buying team thinking about stock distributions before round two of seasonal indent drops.

With inter-store transfers make sure you have defined the hub and spoke structure to allow ‘close to the centre’ movements of stock from small, slow performing stores to major trading units.

With high risk ‘fashion’ or high price products set a style life, product life target with clear KPI’s based on sell through to avoid build ups of slow selling, risky product.

This season there will be no room for risky slow selling product clogging valuable selling space.

Working closer to the real demand emanating from the shop floor critical to keeping cash flows under control and reducing the need to prostitute costly mall space to quit slow or high overstocks. 

Plan for a Hero line with a genuine ‘value proposition’ within each category; ride Hero lines hard to keep the cash flow moving and space productive.

Test new ranges on-line before mass distribution.

Buy ranges specifically for on-line to broaden your market offer.

Plan and budget for at least a 15% increase in on-line sales for summer, Christmas 2009.

It is hoped these starter thoughts are helpful and useful in planning your ‘Open to Buy’ for summer, Christmas 2009.

Preparing your ‘Open to Buy’ for summer, Christmas 2009 will mean going back to the time you formulated your first major buying plan but using known category sales per fixture performances as a space plan guide for summer, Christmas 2009.

As this will be a critical, volatile retail trading period it is suggest that you set a time for us to have a general ‘Open to Buy’ chat with your buying team by the end of May, beginning of June at the latest.

To set a time email Discussion ‘Open to Buy’ summer, Christmas 2009.

Tony Standley

Principal
The RETAiL Alert Group (Australia)
Mobile +61 (0)41 924 0497
e-mail info@adsass.com.au
Fax +61 (0)2 9987 0633
Website http://www.retailalert.com.au
 
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