10 TODAY MAR-APR 24
There are many reasons why some stores experience strong growth year over year while others struggle to maintain what they did the previous year. The stores that do find ways to grow typically have traits in common. These might include better vendors or possibly better buyers. Their sales associates could be more motivated. They might even have better locations.
On the other hand many stores that don’t grow oftentimes share similar characteristics as well. There is however one difference that I regularly see that separates the growth group from the non-growth group of retailers. The stores that experience the greatest growth rates year after year are the ones that use their data to help drive buying decisions.
Characteristics of Slow-Growth Retailers
- Retailers that grow at a very slow rate if at all are easy to spot.
- You can recognize them at market by being indecisive when in showrooms and by buying the same vendors season after season regardless of profitability.
- This buying practice is often justified as either protecting long-standing relationships or out of concern that a competitor may end up with the line if they fail to buy.
- Performance is seldom if ever evaluated using a vendor scorecard.
- These retailers are most likely over-assorted carrying too many vendors and/or too many SKUs.
The result of which leads to duplication resulting in higher markdowns than normal. They are unable or unwilling to fill in fast sellers due to lack of cash lack of time or simply not paying attention and are slow to deal with poor sellers. This pattern of performance continues season after season year after year with very little change.
The year-end numbers always look the same: flat sales inconsistent margins and below average turnover and GMROI. When asked about business the excuses are predictable they often cite slow traffic difficult economy rising prices lack of good
A Strategy to Grow Sales (Along with Some Tough Love)
Ritchie Sayner
Published in the March/April 2024 issue of Shoe Retailing Today Copyright © 2024 National Shoe Retailers Association Tucson AZ www.nsra.org. All rights reserved.
Salespeople no parking late shipments weather etc. The list is endless but generally the same. What is seldom if ever heard is that the selection was poor key sizes were absent markdowns weren’t addressed quickly enough or that too little time was devoted to sales training. In other words the real issues are being skirted and the tough questions are not being addressed.
These store owners are stuck in what is called the non-profit cycle (see graphic on page 11) which is very difficult to break out of without seeking out some sort of professional mentorship. Most likely these stores don’t plan their purchases by location AND classification. This process does take more effort and it does take more time—hence the word work. The results of following a well-managed merchandise plan are always better than having no plan at all.
One of the strategies that I use with retailers
To help them grow sales volume profitably is to focus on keeping BOM (beginning of month) inventory levels close to plan. It is virtually impossible to maximize upside sales potential if stock levels are below plan month after month.
This link – https://www.management-one.com/blog/uncovering-hidden-opportunities-in-your-retail-data – will take you to an interview I participated in a few months back showing exactly why sales are missed when beginning stock levels are too low. I encourage you to watch the interview if you find yourself missing business in key classes.
The strategy works with any category of merchandise and any retail vertical
- Try it in your seasonal categories like sandals or boots.
- Then apply it to dress or casual footwear athletic shoes and even socks.
You will be surprised at what you might be missing.
The strategy described in the link in the preceding paragraph involves the use of inventory targets and stock-to-sales ratios found in a well-constructed merchandise plan (aka open-to-buy plan). The good news however is that all the data needed should be available through your POS system. You already have it so why not put it to use? Point-of-sale systems can be real timesavers but you must put the effort in to learn what they are capable of. You can’t just buy a new system turn it on and expect knowledge to come flowing out of it.
POS systems can generate all sorts of data. Some is nice to know and some is need to know. For this exercise we are only focused on the need-to-know data. Too many merchants end up using their POS systems as not much more than expensive cash registers or price tag printers which is unfortunate in this data-driven world.
Make this year the year that you strive to use the data you are already creating to help you make better buying decisions and keep inventory levels in balance and on plan. Trust me if you do this your sales will increase.
Ritchie Sayner is with Advanced Retail Strategies LLC an affiliate of Management One. Sayner’s book Retail Revelations: Strategies for Improving Sales Margins and Turnover (2nd Ed.) is available on Amazon. He can be reached at www.advancedretailstrategies.com.
- No Inventory Balance
- No Information
- No Profits
- Increased Expenses
- Excessive Markdowns
- Additional Loans
- Incorrect Planning
- Late Deliveries
- Poor Cash Flow
- Incorrect Timing
- Slow Turnover
- Overbuying
- Lost Sales
One of the strategies that I use with retailers to help them grow sales volume profitably is to focus on keeping BOM (beginning of month) inventory levels close to plan. It is virtually impossible to maximize upside sales potential if stock levels are below plan month after month.
The Non-Profit Cycle
Retail Growth Strategies
Retailers experiencing significant growth often utilize data-driven decision-making to guide their buying strategies setting them apart from those with stagnant sales. Slow-growth retailers typically exhibit indecisiveness over-assortment and poor inventory management leading to missed sales opportunities and a cycle of non-profitability. Focusing on maintaining planned inventory levels and leveraging POS data can help break this cycle and drive profitable sales growth.
“Make this year the year that you strive to use the data you are already creating to help you make better buying decisions.”
Real-World Examples of Data-Driven Retail Growth
The following examples illustrate how retailers have successfully utilized data to drive their buying decisions and achieve significant growth.
- A clothing retailer analyzed sales data to identify top-selling items and adjusted their inventory accordingly. By ensuring popular sizes and styles were always in stock they increased sales by 20% in one year.
- A footwear store implemented a data-driven approach to manage their seasonal inventory. By using stock-to-sales ratios they optimized their inventory levels for sandals in summer and boots in winter leading to a 15% increase in seasonal sales.
- An electronics retailer used POS data to identify slow-moving products and quickly implemented markdowns to clear out excess inventory. This strategy improved cash flow and reduced markdown expenses by 10%.
