In case you missed it, our May Webinar helped crack the code on using retail data to inform purchasing strategies. Guest speaker Ryan Long, Footwear Buyer & Operations Manager at Potomac River Running, joined us to help shed light on this often tricky topic.
Check out 5 key takeaways from the Webinar and catch the full recording here:
1. To start creating your buying plan for next season, determine your inventory turnover rate AND return on investment.
In retail, inventory turnover rate and return on investment (ROI) are interconnected, so it’s important to consistently analyze both of these key performance indicators (KPIs). You can improve your cash flow by 1% for every 1 week of improvement you achieve in inventory turns.
- Turnover measures how quickly your inventory is being sold, but does not consider how much profit was generated when the sale was made. To calculate turnover, divide your cost of goods sold (COGS) by your inventory cost (over the same sales period). Products selling at a faster rate usually sell at full price, resulting in higher margins, while those selling slowly are probably overstocked.
- ROI measures how many dollars of gross profit or margin you’re getting back for each dollar you have invested in inventory. To calculate ROI, divide profit by inventory cost (over the same sales period). A high ROI indicates that you have the right amount of inventory, at the right time, for the right price; a low ROI indicates that you are missing out on sales opportunities and leaving money on the table in the form of old inventory or excess markdowns.
Products with both high turnover and high ROI should be purchased again.
2. Evaluating supplier performance BEFORE product performance will help you focus on the right data needed to create your buying plan for next season.
Understanding data is a lot easier when you look at the full picture. Just like a camera, where too much zoom can blur a photo beyond recognition, it’s easier to analyze supplier performance before product performance. Starting with your store’s supplier performance analysis allows you to quickly and easily drill down into products, classes, colors, and sizes, for more detail. But if you start with product performance analysis, you risk drawing inaccurate conclusions, and you’ll inevitably create more work for yourself.
3. Share relevant metrics with your suppliers and brand reps.
Analyzing sales performance by supplier and best/worst selling products by supplier is a good way to see how a brand is performing in your store overall and should influence your purchase decisions. When shared, supplier performance data empowers your vendors to help you ensure the success of their products in your store. When they have visibility to your data, brand reps can provide helpful info on new products, your competitors’ products, and so on. But you have to give them the resources to take an active role in growing their brand(s) within your business.
4. Avoid over-ordering by keeping a pulse on all “on order” quantities.
If you can identify your store’s on-hand inventory quantities, you can also identify opportunities to
- Reorder products, based on quantity sold and at once/future/total on-order quantities.
- Markdown overstock, based on SKUs with a limited size selection.
- Transfer items between stores, to consolidate limited sizes in the best performing store for said SKU.
- Fix errors like negative on-hand quantities.
RICS’ Stock Status report is one of the most versatile RICS reports, enabling retailers to view current inventory based on a variety of selected criteria (e.g. on hand, negative on hand, on order, quantity sold, etc.).
5. Fitting data into your buying plan is a lot easier with merchandising reports built to help you grow profit.
Gambling with inventory investments is risky and analyzing data can be challenging. But retail merchandising reports streamline the data analysis process, guiding your buying decisions with ease and accuracy.
RICS offers 180+ reports, custom-built for specialty retail, to help you make better business decisions. Retail metrics are built into our reports, so you’ll know exactly what to buy, when, what to markdown, and when to edit orders.