Holiday Checklist
Part 2 - Inventory and Receipt Flow
The first
post in this series dealt with finalizing Assortments. This post will focus on your biggest cash investment - your inventory and receipts.
Back-to-School was, to say the least, pretty soft, with little likelihood that Holiday will be much better. Even against a very tough 2008, you're probably planning sales flat to down over last year. A recent
article by Sandra Jones in the Chicago Tribune reports on a recent trend of cutting inventories even lower than the relative drop in sales volume. If this is your approach, you've essentially committed to an improved sell-through at full-price relative to 2008, otherwise the math doesn't work.
So the big question is "how do I get better sell-through on less inventory?". Here's some proven techniques:
- Finalize your plan. If you haven't done so already, take a hard look at the Q4 plan and adjust the sales plan and Open-to-buy based on current trends.
- Set yourself up to win:
- Clear out dead wood. Take aggressive markdowns now on slow selling merchandise. This merchandise is not likely to start selling better, it takes space, and it detracts from the best sellers.
- Filter out the weakness in your On Order. Go through your outstanding orders and reduce or eliminate slow-selling basic or commodity SKU's.
- Get balanced. Look at On Order by classification as a percent to total and compare to sales by classification for Q4 2008, adjusted for changes in current trend. Balance the On Order with this selling pattern, increasing on order for classifications that are low and reducing on order in classifications that are overbought relative to selling. Hoping for the best is not a strategy.
- Focus on receipt flow, not inventory. Break your On Order into multiple deliveries based on your seasonal selling pattern. Do NOT bring in all your Holiday receipts in at once. There are surprises in every season. As Yoda says "later you ship, smarter you are". This also gives you the flexibility to reduce/cancel deliveries if sales are worse than you planned.
- Hold on to some ammunition. If you're set up for it, hold back a portion (10-20%) of new deliveries so you can ship when relative sales strength by store becomes clearer. This will reduce the need for interstore transfers and help avoid the lose/lose situation of taking post-season markdowns on merchandise that sold out in some stores.
- Don't wait. Every Holiday season has some dogs. Take the markdowns in season while the traffic is high. It will be a lot more expensive later.
- Don't chase the last dollar. Begin to bring in early Spring receipts in December. Remember, (profitable) sales drop off the table on January 1st.
Following these steps won't guarantee you a successful Holiday season. They will, however, guantee you a more profitable one.
Next post - Part 3 The Stores
Back-to-School was, to say the least, pretty soft, with little likelihood that Holiday will be much better. Even against a very tough 2008, you're probably planning sales flat to down over last year. There's a recent trend towards cutting inventories even lower than the relative drop in sales volume. If this is your approach, you've essentially committed to an improved sell-through at full-price relative to 2008, otherwise the math doesn't work.
The protracted drop in consumer spending has created a new reality for retailers. Part of this new reality is much lower base inventories. The big issue is that, while inventories have shrunk, the sales floor has not.