Perspectives

From The Co-Founders

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Strategic insights and commentary from The ROI Co-Founders, Pat Johnson and Dick Outcalt
Outcalt & Johnson: Retail Strategists LLC; Retail Turnaround Experts


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Too Sophisticated for "Small Retailers?" Nope!

Turning "Big Picture" Thinking into a Strategic Inventory Buying 

About a year ago, as the pandemics were beginning to hit their stride, we introduced a framework for retailers to "rethink your merchandise mix." 

As depicted in the chart above, we cautioned that once the lockdown was over, as customers resumed shopping, retailers should be prepared for (1) reduced sales totals overall; (2) significantly re-balanced merchandise mixes, initially dominated by "basics/never-outs."

Further, we anticipated that the merchandise mix would continue to change as we re-emerge from the effects of the pandemics. And we urged retailers to take this overall construct and adapt it to their own situation; to develop their own customized strategic response.* 

Now, one year later, here's how this can become "news you can use" to quickly produce your Big Picture buying plan. Especially in the spring of 2021, some practical answers to "What to buy?" , "How much?" and "When?" are likely to be very welcome. 

A game plan, a path forward. Some semblance of clarity. What could be better?

 
Strategic Step 1: Make Your Sales Assumptions

Start by looking at 2019's results, and dial them back for this year. 60% of 2019? 75%? Be as realistic as you can. Remember, shoppers want to buy closer to need.

 

Strategic Step 2: "Best Guess-timate" of the Merchandise Mix of those Sales

Next, a critical step: nail down your assumptions about the MERCHANDISE MIX you will need. Don't be shy about your assumptions; be strategic! 

 

Strategic Step 3: Convert to a Strategic Buying Plan – Auto-magically!

Now, put these sales assumptions into The ROI's online Multi-Department Open-to-Buy Planner.** Here's the key: for this first draft, call one department Basics, and enter the expected sales, based on your assumptions. Do the same for the next two "departments," Expanded Basics and Discretionary.

Then, without bogging down, enter your best guesstimates of expected margins and turns for each category, and an estimate of how much of your inventory @cost is in each category to start. Close counts!

And that's it! 

Immediately, for each of these categories – Basics, Expanded Basics, Discretionary –  you have a monthly inventory buying budget. These OTB plans become the strategic guardrails for you and your buyers. 

  • Within those budget parameters, for each category, you then apply your best judgment of which vendors to purchase from, and what items to select. 
  • You also will have a ready answer when a "special buy" pops up: do we have any Open-to-Buy?

See how empowering this is?
This unique online "calculator" is a tool developed specially for owners. It enables you to quickly develop a strategic game plan for your store, all on your own.

Take advantage of this time-saving and retailer-friendly way to be more strategic. 

 

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(For more about this, see New Dynamics of Merchandise Mix and/or Ready? New Five Stage  Merchandise Mix for the "New Normal" )

** Unlimited access for ROI Members



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