Merchandise with Both Sides of Your Brain

– Mort Haaz

How do you approach the merchandising of your store? What are your priorities? What is the foremost goal in your merchandising?

Most merchandisers work with the right side of their brain-the artistic or creative side. They ponder shop layout, displays, staffing, stocking the right items, promotions and selling techniques. Their efforts are rewarded with complements, happy customers, happy sales people, and happy manufacturers’ reps.

The only beneficiary of markdowns are your customers, and while we like to see them happy, it should be because of great products and service-not because of reduced prices.

The problem is usually the bottom line. While sales may be acceptable or even increasing, if merchandise growth is greater than sales growth (and it usually is), the bottom line will suffer. Markdowns will become a regular part of the business in an effort to keep stocks at a reasonable size and reasonably fresh. The only beneficiary of markdowns are your customers, and while we like to see them happy, it should be because of great products and service-not because of reduced prices.

So it becomes important that merchandisers work with both sides of their brain if they want to be successful. You must crank up the left side and make its use a regular part of your business strategy. The left side is the analytical side and when used in conjunction with the creative right side produces merchandising winners.

Use of the left brain in no way diminishes the results of working with the right brain, it just keeps a good balance so that the bottom line is always positive. You will still invoke all of your creative powers to keep your shop properly stocked with great merchandise, displayed with flair, and sold with warmth and expertise. The difference will be in the purchase of proper quantities, reduced markdowns, increased turnover, fresher merchandise and more cash at the end of the bills.

Since your bottom line is controlled by your buying, it makes sense that by controlling your buying, you will control your bottom line. The only way to properly plan and control your buying is with open-to-buy planning. This forecasting tool will help you develop a buying plan based on anticipated sales and desired turn rates. Buying must be built around your selling, not the other way around. Buying great merchandise to fill your store and hoping to sell it is not going to get you to the finish line a winner. First you must plan your sales and then plan your buying. That way, you will be buying to support sales, not just to fill space. Remember, the most expensive thing you can put in your store is merchandise.

If you think of all of your merchandise as dollars-your invested dollars-you begin to see the need to turn over these dollars so that you can pay your vendors, contribute to overhead, and take profit.

The other important ingredient in the merchandise mix is turnover. Too few merchandisers pay attention to turnover, but it is the key to making money in retailing. Very simply put-the more you turn, the more you make! When you bring merchandise into your shop, you must not think of it as merchandise. It is too easy to get attached to products, even when they don’t sell. If you think of all of your merchandise as dollars-your invested dollars-you begin to see the need to turn over these dollars so that you can pay your vendors, contribute to overhead, and take profit. The more frequently you do this, the more you will profit. The smartest retailers will turn a smaller investment more frequently and profit many times from the same inventory dollars. If you can produce the same sales with a smaller investment, you will not only be making a higher return on your invested capital, but you will free up a lot of dollars that can be productive for other uses.

Anticipated sales and desired turn rates are the two driving factors in an open-to-buy plan. Open-to-buy develops a buying plan that is always looking 12 months ahead. The idea is to develop a buying/receiving plan that insures that you begin each month with the right amount of merchandise to support planned sales for that month at desired turn rates. If you can accomplish that, you will always have just the right amount of invested dollars and a positive cash flow.

So by using open-to-buy planning, your left brain is helping your right brain to make money. It’s been said that retailing is a blend of art and science. While you might get by with just one or the other, you can really reward your efforts by using both.