As you well know, this last month has been extremely turbulent and we've been communicating with many of you [Blacks' Clients] on a regular basis. With the month [October] at a close, we thought it would be a good time to update you again on what we are seeing in the market.

We are fairly certain that when we see the October trend numbers in a couple of weeks we will see a 30% decrease across the board. This is an acceleration of the decreases we saw in September, when menswear fell off by 25% and women's wear dropped 8%. It is quite clear that the current economic climate is now affecting everyone we know. We have been meeting with our clients repeatedly throughout the month to get a handle on the severity of the problem and to try to begin to understand how long it will last.

We foresee that the downturn will last well into the first half of next year; however, we should see some temporary relief starting in the second half of [this] November as consumers start their holiday shopping in earnest. After the holidays, business is likely to be very slow as merchants try to liquidate inventory. That's why we are recommending that you minimize any excess inventory. At the same time, we have recommended that you flow small amounts of new goods to give customers a reason to keep coming in. Business may be down by 30%, but remember, 70% of customers are still shopping. Keep your focus on these customers.

Remember also that there are some bright spots out there, such as the value of the relationships we have with our primary vendor structure. The vendors have been helping retailers diminish their levels of outstanding on-orders and in some cases have even discounted merchandise. We are very fortunate to have such good partnerships in the vendor community.

Of course, the overhanging issue is the lack of gross profit dollars due to sales slowing faster than expenses. So again, we are emphasizing strategies for developing more gross profit dollars – building higher initial markups (IMUs) and lower markdowns.

To help you, we have developed a formula that states that for every one point of additional maintained markup (M/M) you will need to increase your in-season open-to-buy (OTB) by 5 points. So, if you want to increase your M/M by 5%, you need to increase your in-season OTB by 25% to be able to execute your plan, going after off-priced and immediate buys.

Each company needs to develop its own strategy, so if you don't have one yet, give us a call. We also want to remind you how important it is to meet weekly to discuss your strategy, just to be sure that we are staying on top of events.

About the Author
With over 30 years of experience, Steve Pruitt is a highly respected apparel industry consultant. He works with clients in every sector of this category to identify trends and help clients meet overall financial goals. Steve serves as Principal and Senior Consultant at Blacks Consulting, a retail consulting firm dedicated to helping merchants manage their businesses and navigate change. Steve@Blksretail.com