the science and the art of buying by tom shay and profits plus
TRANSCRIPT
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This is what you expectThis what happens sometimesBuying is science; buying is art
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What is the biggest challenge you have with ordering?
Or is it the biggest challenge with selling?
Buying is not just determining items, quantity, and negotiating prices
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Question the existing budget for each department and fineline/category
Square footage required
Dollar commitment for inventory
Gross sales
Margin
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Turn
Dollar contribution
Uniqueness or expected item
Spoilage, shrinkage, regulations
Dated items
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The owner takes care of the cashflow and establishes the budget
The buyer utilizes the budget
The buyer must do more than just buy
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Within a category/fineline, distribute the budget
___% for one time order category
___% for basics
___% for reorders of basics
___% for new items
___% for new lines
___% for a ‘deal’
___% for reorders
100%
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#1 Right item (s)
Some are the hook; others the gravy
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Right item (s)
Sell the ‘who’ not the ‘what’
People want to talk; just not CB
People want to learn; just not books
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#2 Right price
Dollar contribution?
Margin?
Turn rate?
Never a multiplier factor
Cost has nothing to do with the price yousell it for
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Gross margin – cost as a percentage of selling price.
Gross markup – selling price as a percentage of cost.
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Margin is 50%
Cost is $2.00
Selling price is $4.00
Markup is 100%
Cost is $2.00
Selling price is $4.00
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Margin is the appropriate term with regard to merchandise
Markup is the term used by those wanting to exaggerate the information
For those that decide to utilize the word ‘markup’, this calculator shows how to perform the math
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Dollar contribution?
Cost of $1800; sells for $2000; sales of 3 units per year
Margin?
Cost of $5; sells for $20; sales of 40 units per year
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Turn rate?
Cost of $1.50; sells for $2; sales of 1,200 units per year
How much of each should you have?
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Ever think you will sell more and make more money by lowering the price?
This calculator shows how many more you have to sell to get the same gross sales or same gross profit
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#3 Right salesmanship
The best, and least expensive, form of advertising is staff education
Few items will sell themselves
Fewer will sell a second item
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#4 Right quantity
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Right quantity
Know when to say when
Compare your anticipated markdown to your maintained gross margin
60% off a 30% margin takes a lot of profit with it
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Purchase order of $7,000 with 30% gross margin
Initial sell through of 60% produces $1800 gross profit
Clearance at 60% off produces loss of $400
$1400 gross profit 16.67% gross margin
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Some buyers determine the gross margin of a total purchase before they place the order
They plan their markdowns by date or by amount of merchandise sold
This calculator lets you do the same
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#5 Right customer
Know your target customer
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#5 Right customer
5/1 or 1/5
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Right customer
The price shopper and the catfish
If you gain a customer by price, you will lose that customer by price
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#6 Right location/displayThe 96 square feet in our store
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Right location/display
In relation to POS
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#7 Right time (of year)
If there is a right time
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Right time (of year)
Mental lay away for a season ahead
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#8 Right message
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Right message
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Markdowns occur because:
Someone sells it for less
Someone advertised better
Too many ordered/reordered
Bad display
Poor salesmanship
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Wrong kind for the right customer
Bad weather
‘Run of colors and/or sizes’ incorrect
Incomplete selection
Depended on manufacturer info instead of POS
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A buyer cannot simply buy
Buying without input to all 8 components is like persuading Nike and Under Armor to create conservative uniforms
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Added ordering considerations:
Specify quantity and units of measurement
Extend the order at cost
Specify ship date
Specify if partial orders are acceptable
Specify if display is a part of order
Terms start only after full shipment
Specify cancellation date
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Three last measurements of a buyer’s success
Average saleTotal sales/total transactions
Average line countNumber of items sold/total transactions
Personal productivity ratioTotal payroll/Gross profit
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Buying, and selling, is a science
Buying, and selling, is an art
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Nothing in the world can take the place of persistence.Talent will not. Nothing is more common than unsuccessful men with talent.Genius will not. Unrewarded genius is almost a proverb. Education will not. The world is full of educated derelicts. Persistence and determination alone are omnipotent.—Calvin Coolidge
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