Having bought for a chain of boutiques for more than 18 years, I have made a few mistakes. I always hate when I have to admit that I’m less than perfect but there it is. So lets talk about the 2 most costly mistakes in buying and how to minimize them.
1. Poor timing of orders
2. Incorrect quantities on orders
To improve timing you have to know your peaks and valleys and always keep your eye on the calendar. To improve timing I did the following:
- Wrote delivery dates based on when my customers wanted the merchandise and not when the manufacturer wanted to ship it.
- Specified a Start Ship date and a Complete Ship By date on my Purchase Order. If no date is given the manufacturer can ship when they want.
- Called the week before orders were suppose to ship. If the manufacturer could not meet the Complete Ship By date I: 1) canceled the order 2) or cut back the order quantities to accommodate a shorter selling period 3) or negotiated a discount to cover potential markdowns due to a shorter selling period.
- Did not accept PO extension requests by the vendor without checking where in the season cycle I was. If I was at the end of a season, I almost always canceled the order. I did not want out of season goods to negatively affect my merchandise flow for the upcoming season. If I did decide to grant the extension, I negotiated a discount to offset any markdown or promotion dollars needed to move the merchandise and provide me with my targeted margin.
You can not predict your rate of sale of any item with absolute certainty. No formula has been devised to predict customer demand this accurately. So I looked at every order placed as a speculative bet. And just like in Vegas by knowing your numbers you can improve your odds, the same is true in retail.
Knowing that, here’s how I tackled improving my order quantities:
- Hedged my bet by using only a conservative percent of my open-to-buy until I could establish the trends.
- Improved my sales forecasting and timing. I developed greater discipline in analyzing unit sales by classification. And then built up the unit sales into dollar sales by multiplying by price point.
- Made sure an item checked at retail before aggressively buying a large quantity.
- Critically reviewed the cost and uniqueness of an item. The more expensive the item, the less I bought. The more unique the item the less I bought.
- Within each classification regularly analyzed price points. Then I made sure I concentrated the bulk of my dollars in the strongest price points. Next I flanked the strongest price point up and down one level.
Doing all these things over a period of time improved my flow of merchandise, sales and margins. Give it a try!
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