42 | InsideOutdoor | Fall 2012
Floor Space
Which definition do you use for the word “expense”?
ex.penseik-spen(t)s a: something extended to secure a benefit or bring about a result or b: financial burden or outlay.
Both definitions are correct so how you answer the question is a matter of perception. This is one of those “Do you see the glass as half empty or half full?” questions. I encounter many retailers so overly concerned with part (b) that they never realize the possible benefits of (a). They just have a mental block relative to expenses which unfortunately keeps them from progressing. These are the same folks that time and time again appear to step over dollars to pick up pennies.
I can think of lots of things that I pay a fee for that I would rather not. I bet you can too. Tops on my list used to be insurance. Life health home car disability umbrella etc. all of the insurance options seem like they could go on forever. In fact there are more than 150 different types of insurance policies that you can buy if you are so inclined. You can even insure your dog or cat if you wanted to.
If we all had the ability to predict our futures we could plan our lives accordingly and perhaps avoid insurance premiums altogether. Wouldn’t that be nice? However since most of us don’t possess the ability to accurately predict life’s day-to-day occurrences we opt for the security of knowing that if life does present a problem we can avoid a potentially hefty financial burden by being “covered” by insurance. Insurance is one of those things that most of us complain about paying for until we actually need it and then we are thankful we have it.
In fact if I didn’t have to pay for home-owners insurance I could have “saved” my keyword800 last year but I also would have to come out of pocket for $35000 for a new roof that the insurance company covered due to hail damage. That one incident represented more than 19 years of premiums.
Do you really need a lease negotiator?
Well not if you own your building outright or perhaps have a background in commercial leasing. Anything short of that would make it a good idea and potentially save you thousands in the long run.
Do you really need an architect? How about a CPA?
These services among others are all integral pieces for the financial foundation of a retail operation. They all represent specific areas of expertise that save retailers money above and beyond the perceived “expense.” Most prudent retailers wouldn’t think of building a new store without the input of a qualified architect or store designer. Nor would they attempt to negotiate a lease on their own or navigate financial matters minus an accountant or even open the doors without all types of insurance.
Another important part of any retailer’s financial foundation
is a sound inventory plan. Properly constructed monitored and regularly updated this tool is every bit as vital to the success of a retail operation as the other services mentioned. The merchandise plan provides the structure for all of the buying and selling.
Since inventory is a retailer’s largest asset it stands to reason that time and resources should be allocated in this area. Most larger operations have a staff of planners that are responsible for developing revising and maintaining the merchandise plan. For many independent retailers however outsourcing the inventory forecasting function is a better business option.
This may make sense on several fronts. Outsourcing the planning function usually involves hiring a service bureau that specializes in this area. I am not referring to a POS company that happens to offer an OTB module almost as an afterthought but rather a time-tested results-oriented firm that delivers proven results. The cost of outsourcing pales in comparison to supporting an in-house planning department.
First of all there is no payroll.
Expense Considerations
There is no added benefits expense. There is also no hidden agenda as is often the case with intra-company planners. Service bureaus don’t play politics therefore rendering the plan emotionally neutral with regard to company agendas.
Independent Consultants
The consultant assigned to the account should be an independent objective third-party observer that brings an outside perspective void of emotion and family dynamics. He or she can draw from a wealth of experiences gained from other clients facing similar situations.
Quantifying Savings
In addition to the cost savings and objective analysis a good merchandise planning company should be able to quantify savings through improved inventory turnover higher margins stronger cash flow better inventory balance and increased sales.
Case Study
I personally have been working with a client for nearly a year that is enjoying a 13 percent sales increase a 5 percent reduction in markdowns and has trimmed the retail inventory by nearly my keyword million. Suffice to say the “expense” of the outsourced merchandise planning function has paid for itself for the next several years as well it should.
Reviewing Expenses
The next time you are presented with an expense try reviewing it using part (a) as well as part (b). You just might find those dollars you have been stepping over going back into your checking account.
About the Author
Ritchie Sayner is VP of Business Development at RMSA Retail Solutions. Follow him on Facebook at www.facebook.com/RitchieSayner or email to rsayner@rmsa.com.
Stepping Over Dollars to Pick Up Pennies
by Ritchie Sayner
Summary
The article discusses the perception of expenses in retail emphasizing the importance of viewing them as investments rather than burdens. It highlights the benefits of outsourcing inventory planning to specialized service bureaus which can lead to significant savings and improved financial performance for retailers. A case study illustrates how a client experienced notable sales increases and reduced inventory costs by outsourcing these functions.
“The next time you are presented with an expense try reviewing it using part (a) as well as part (b).”
Real-World Examples of Perceiving Expenses as Investments
The article discusses how expenses can be perceived not just as financial burdens but as investments that yield benefits. Here are some real-world examples illustrating this concept:
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A small business owner invests in a professional accountant to manage financial records. While initially seen as an expense the accountant helps optimize tax strategies resulting in significant savings and better financial health for the business.
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A homeowner decides to purchase comprehensive home insurance. Though it seems like an unnecessary expense at first when a natural disaster strikes the insurance covers extensive repairs saving the homeowner from a major financial loss.
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A retailer outsources inventory planning to a specialized firm. Initially viewed as an added cost this decision leads to improved inventory turnover and increased sales demonstrating the long-term benefits of expert planning.
