When I started in retail, training to be a buyer, I got my first taste of the retail tug of war. I remember my first planning meeting very well. It's a relationship that has relevance for independent retailers today, as we start to plan for 2010.
On one edge of the table were the buyers, planning from the bottom up, following the fashion trends, and seeing big increases there for the pickings. They believed in planning for an aggressive increase, and backing it up with product in the stores. They could not sell it if it was not bought, they believed, and getting it sold was how they made their bonus. Trust us, they would say, it'll be good, it'll sell.
On the other side were the Merchandise Controllers (with Finance lurking in the shadows), waving their histories, open-to-buys and markdown budgets. They did not see a rational basis for such an aggressive plan. They had crunched the numbers and what the Buyers wanted just did not add up. They understood the financial implications if all of that inventory were bought, and ended up getting marked down. Their bonuses were on the line. Let's plan conservatively, they 'd say, and you can chase if you begin to break plan.
Although such activity requires an initial investment, this doesn't have to be very and the firms that spend such money may well see financial rewards as a result.Mr Mutt also pointed out that marketing isn't the one thing that companies need so as to be successful. For example, it is crucial they have a good plan in place. Putting down a vision and mission on paper can be beneficial for this, he claimed.
In reality, there is a lot to be said for both points of view. This is why senior managements actually encourage the give and take. The right approach is not always cut and dried. It depends, like many things in life.More About Merchandise Financial Planning.
This tug of war can take on an added dimension, for independent retailers. In a closely-held business, the debate may spill over from the store to the kitchen table. Or, the debate may go on inside the mind of a single owner, as he wrestles with how best to approach a new season.
It's the tug of war between aggressive merchants and prudent managers. Put another way, it the back and forth among those who primarily focus on the upper line, and those who're more concentrated on the margin line, and the bottom line. In independent retailing, both are powerful instincts.
Their focus is on sales and revenue growth and increasing market share, for merchants. If we continue to aggressively grow the top line, they think, it will take pressure off of our expenses, we'll have more to reinvest in the business, and the profits will flow from there. Find the hot item, and ride it hard. If I stock it I can sell it, but if I do not I can't.
Their focus is on hedging bets, for managers. If we are most likely to sell 500 units in a classification, let us plan for 500, not 600. Let's not buy merchandise we are not likely to sell. Those extra 100 units are inventory we'll have to carry (and finance). we'll probably have to mark it down to move it through. Let's plan prudently, protect our margins, manage our expenses and be sure to provide a profit.
I've always liked to employ a baseball analogy to think this through. If a batter has worked the count to three balls and one strike, they are sitting pretty. The pitcher has to throw them a good pitch, probably a fastball right down the middle, or risk walking him. So the batter takes a deep breath, digs in, and prepares to push forward the ball, hard. It's time to swing for the fences.
Conversely, if the pitcher has the batter down, two strikes, and no balls, the pitcher is in control. He can nibble for a pitch or two, see if he'd get the batter to swing at a ball outside the strike zone. The batter in that case knows he has to choke up, shorten his swing, protect the plate and be prepared to swing at anything close. He'll foul off the close pitches and hope for something he can shoot back up the middle for a single.
When the sales trends are running against you, however, it's time to become more cautious, protect your cash, and focus on the bottom line. Place fewer long bets. Narrow and focus your assortments. Let the business come to you. Sell and chase. Have a bias toward less inventory rather than more. Take each pitch back up the middle. Be a prudent manager.
Over the past few years, independent retailers have had to manage their businesses very prudently, with a particular focus on cash flow. This has grated against their natural instinct to be an aggressive merchant, for many. After all, they're entrepreneurs, who understand and accept risk, and are optimistic by nature.
The decision to proceed aggressively or more cautiously comes down to the environment you find yourself in. Most independent retailers recognize that they cannot plan for a great turnaround in their business at this time until they actually see it happening. And for every one who believes a turnaround is right in the corner there are ten others who're preparing for a long, slow, tough slog.
The time to swing for the fences will come again. Unfortunately, it's not likely to come soon. In the never-ending retail tug of war, finding a good balance between the aggressive merchant and the prudent manager is still a challenge. Looking to 2010, prudence remains the ordinance of the day.
On one edge of the table were the buyers, planning from the bottom up, following the fashion trends, and seeing big increases there for the pickings. They believed in planning for an aggressive increase, and backing it up with product in the stores. They could not sell it if it was not bought, they believed, and getting it sold was how they made their bonus. Trust us, they would say, it'll be good, it'll sell.
On the other side were the Merchandise Controllers (with Finance lurking in the shadows), waving their histories, open-to-buys and markdown budgets. They did not see a rational basis for such an aggressive plan. They had crunched the numbers and what the Buyers wanted just did not add up. They understood the financial implications if all of that inventory were bought, and ended up getting marked down. Their bonuses were on the line. Let's plan conservatively, they 'd say, and you can chase if you begin to break plan.
Although such activity requires an initial investment, this doesn't have to be very and the firms that spend such money may well see financial rewards as a result.Mr Mutt also pointed out that marketing isn't the one thing that companies need so as to be successful. For example, it is crucial they have a good plan in place. Putting down a vision and mission on paper can be beneficial for this, he claimed.
In reality, there is a lot to be said for both points of view. This is why senior managements actually encourage the give and take. The right approach is not always cut and dried. It depends, like many things in life.More About Merchandise Financial Planning.
This tug of war can take on an added dimension, for independent retailers. In a closely-held business, the debate may spill over from the store to the kitchen table. Or, the debate may go on inside the mind of a single owner, as he wrestles with how best to approach a new season.
It's the tug of war between aggressive merchants and prudent managers. Put another way, it the back and forth among those who primarily focus on the upper line, and those who're more concentrated on the margin line, and the bottom line. In independent retailing, both are powerful instincts.
Their focus is on sales and revenue growth and increasing market share, for merchants. If we continue to aggressively grow the top line, they think, it will take pressure off of our expenses, we'll have more to reinvest in the business, and the profits will flow from there. Find the hot item, and ride it hard. If I stock it I can sell it, but if I do not I can't.
Their focus is on hedging bets, for managers. If we are most likely to sell 500 units in a classification, let us plan for 500, not 600. Let's not buy merchandise we are not likely to sell. Those extra 100 units are inventory we'll have to carry (and finance). we'll probably have to mark it down to move it through. Let's plan prudently, protect our margins, manage our expenses and be sure to provide a profit.
I've always liked to employ a baseball analogy to think this through. If a batter has worked the count to three balls and one strike, they are sitting pretty. The pitcher has to throw them a good pitch, probably a fastball right down the middle, or risk walking him. So the batter takes a deep breath, digs in, and prepares to push forward the ball, hard. It's time to swing for the fences.
Conversely, if the pitcher has the batter down, two strikes, and no balls, the pitcher is in control. He can nibble for a pitch or two, see if he'd get the batter to swing at a ball outside the strike zone. The batter in that case knows he has to choke up, shorten his swing, protect the plate and be prepared to swing at anything close. He'll foul off the close pitches and hope for something he can shoot back up the middle for a single.
When the sales trends are running against you, however, it's time to become more cautious, protect your cash, and focus on the bottom line. Place fewer long bets. Narrow and focus your assortments. Let the business come to you. Sell and chase. Have a bias toward less inventory rather than more. Take each pitch back up the middle. Be a prudent manager.
Over the past few years, independent retailers have had to manage their businesses very prudently, with a particular focus on cash flow. This has grated against their natural instinct to be an aggressive merchant, for many. After all, they're entrepreneurs, who understand and accept risk, and are optimistic by nature.
The decision to proceed aggressively or more cautiously comes down to the environment you find yourself in. Most independent retailers recognize that they cannot plan for a great turnaround in their business at this time until they actually see it happening. And for every one who believes a turnaround is right in the corner there are ten others who're preparing for a long, slow, tough slog.
The time to swing for the fences will come again. Unfortunately, it's not likely to come soon. In the never-ending retail tug of war, finding a good balance between the aggressive merchant and the prudent manager is still a challenge. Looking to 2010, prudence remains the ordinance of the day.