Casual Living Staff -- Casual Living, June 5, 2012
Barbara Crowhurst, leading retail business coach, recently sat down with Casual Living to pinpoint retail strategies for today's marketplace. Crowhurst, who served as a judge for our 2012 Merchandise Awards featured in this month's issue, will also reward Best First-Time Entry winner, Hartville Hardware, with a retail consultation.
CASUAL LIVING: Barbara, what are the four sure-fire strategies for making more money and putting more cash in retailer's pockets?
CROWHURST: The four sure-fire strategies for putting more cash in retailer's pockets are setting sales targets, buying with the bottom line in mind, learning how to increase turns and utilizing add-on sales.
CASUAL LIVING: When should sales targets be set?
CROWHURST: Sales targets for the coming year should be set and based on an intensive review of sales from the previous year. I encourage my retail clients to do this work in the very early parts of January before any buying activities take place.
CASUAL LIVING: How do you arrive at an appropriate sales target for the upcoming year? What is it based on?
CROWHURST: Let us say that a retailer's sales were $500,000 for the last year. I recommend increasing sales a minimum of 20% year on year. Multiply $500,000 by 20% - that's an increase of $100,000 for a total sales target of $600,000. $500,000 in sales divided by 10,000 customer transactions equals an average sale of $50. Now take $50 and add 20%, that increase of $10 represents the add-on sale program dollar amount in your store.
CASUAL LIVING: How do retailers keep sales accountable?
CROWHURST: I believe the best strategy here is a daily review, but as a minimum, weekly. In addition, I would like to see retailers meet with their staff weekly if possible, twice a month as a minimum.
CASUAL LIVING: Do you assign staff individual sales targets and implement a bonus system?
CROWHURST: When a retailer reaches their monthly sales goals every staff member should be congratulated. It is a team effort. Bonus systems work, I have not met anyone that does not like a little extra money added onto their pay for a job well done.
CASUAL LIVING: Do most storeowners even know which categories give them the best margins, which suppliers?
CROWHURST: More and more retailers are tracking sales by category, by supplier and know where their best margins are coming from. If you are a retailer that does not do this type of tracking yet, please start. Calling up the reports that give you margin information on each item is what you want here.
CASUAL LIVING: Is it possible for retailers to buy items with higher price points to increase their sales.
CROWHURST: Yes, absolutely. A current client of mine just reduced the amount of inventory and SKUs they carry. They have brought in a higher priced test product line which has increased the average sale and thus sales in general have increased.
CASUAL LIVING: In your experience, how much of an impact can this type of category clean-up have on the bottom line?
CROWHURST: I believe that any product that has been in a retailer's store for a year or longer and not sold gets invited to leave. Any product that contributes to less than 1% of sales receives a serious review and may be removed from the lineup, releasing money to be spent on other better lines and new test products.
CASUAL LIVING: How much can sales improve just by this one strategy alone?
CROWHURST: Inventory management is key to cash flow. I would say that this is an area that most retailers do not spend enough time on.
CASUAL LIVING: What strategies can retailers use to increase turnover?
CROWHURST: Two main strategies I can recommend - keep to strict monthly buying budgets based on sales and invite your customers to come into your store monthly to shop and check out what's new.
CASUAL LIVING: What role does merchandising play in increasing turnover?
CROWHURST: Retailers should put out merchandise several weeks before a season starts and then again start clearing it before the season ends. Do not pack up merchandise that has not sold, planning to bring it out next year. It is like packing up money. To ensure sales, retailers should go to great lengths to make sure that their products are visible in their stores and are presented in an appealing and sellable way. The use of product packaging and informative in store signage, combined with product feature placement is key.
CASUAL LIVING: Can you explain what turnover or "turns" means?
CROWHURST: The definition of inventory turnover can begin with one of two starting points, either turning your inventory at cost or turning your inventory at retail. I am going to explain turning your inventory at retail pricing not at cost. One is not a better calculation then the other, it is a choice. If you are a casual furnishings retailer, you should expect to turn your inventory three to four times a year.
You figure out what your turnover is by calculating how many times you sell and restock your store.