When I work with independent retailers, I usually start by asking them how much they give away each year in discounts. As a rule of thumb, total yearly discounts should not exceed 10-15 per cent of net sales in a multilabel store or 25-30 per cent of net sales in a mono brand environment. If you suspect that your discounts exceed these guidelines, it’s time to do something about it!
You need to have measurements in place to tell you how things are going and when to take action. If you can’t measure it, you can’t fix it! What interests me is exactly what you buy in terms of products and numbers and how you analyse what you’re selling. If your buying consists of an exhausting couple of weeks spent visiting trade shows and agents’ showrooms, making sure you’ve got the next hot trends covered, then just bear this in mind: all that leg work could leave you with a shop full of goods at the end of the season that you’ll end up discounting heavily, unless you do your homework and get the numbers right first.
Your stock should not represent more than 2-4 months of sales (possibly less if you bring in fresh goods every week or every month).
You need to know exactly what you’re selling by product category every month. You can look at brand performance further down the line, but tracking by product type is more reliable. As you will never buy a brand forever, it doesn’t make sense to only track data per brand and, of course, no brand is equally strong in every product category.
You can get the right numbers by using a merchandise or Open to Buy plan. The plan supplier will analyse the numbers to provide sales forecasts and control stock. Markdowns should be budgeted into the plan. This enables retailers to
• Have plenty of stock for key months
• Get rid of old stock (without making a loss)
• Start the next season with new goods
• Have new stock coming in regularly.
Open to Buy plans should take care of the science part of buying, getting the numbers and forecasts right, providing the buyer with the right information to get on with the art of buying: knowing what’s hot and what’s not.
Thierry Bayle is the founder of Global Fashion Management. Find out more at www.globalfashionmanagement.com