MONEY SHOP What to offer the Customer
Financial plumber, David Gummers, takes a look at a very important area of any stock based footwear business - what to offer the customer?
T
his is probably the hardest part of any retail business. Too much stock and your cash flow is scuppered, too little and you get a reputation for not having the stock when the customer wants it.
At the start of the season you need to have most styles in the majority of
sizes. This is where it gets complicated, when do you decide to cease filling in on seasonal stock. I guess this is the knack of having a feel for what sells. I try to listen to my staff as much as possible without giving them everything they want. It is always the one big part that causes staff friction: ”How can we sell if you don’t give us enough stock.” On the other hand, if you have too much stock left the finance man or woman knows spells huge problems.
What I try to do is identify the core products and keep those styles filled in on a monthly basis-again this is designed to ensure my cash flow is not compromised. Most suppliers have minimum orders for the carriage to be paid. I NEVER pay carriage(unless it is a special order and the customer is willing to pay for this service).
When I was training David Farrar always said that 80% of your sales
comes from 20 % your stock. I believe this holds true today. Yes you have to take the occasional punt, but this should never be done at the expense of your core business. If you are out of stock of a size 5 in a basic line when a tourist comes in to your store that it is a sale you will not get back.
I still think the hardest part of stock control for a small business is
clearing end of lines, this is one thing I have not managed successfully. In the old days there were plenty of traders who would take this redundant stock off you at the end of the season. If anyone has a solution to this I would be grateful for your help.
Sales are, obviously, the first attempt on this. Your first loss is always your
smallest. It is worth bearing in mind that customers have a different attitude to sales now than when I started twenty something years ago, they are much more discerning and do not see a sale ticket as a reason to buy. Most now expect 50% off the original price. At times this is not really in the best interest of the business so in the early part of the sale I try to offer 20% and 25% off and then go for larger discounts after the initial surge.
The simple rule for buying stock though is do not buy anything you
cannot afford as your reputation for financial competence is too valuable to throw away on the whim of trying to bigger than you are. I think I have mentioned before the importance of paying in discount terms-as manufacturers have this built into the price.
The financial aspect of this cannot be understated, but it has got to be
coupled with a sound understanding of who your customers are. If your age demographic is 18-30 then there is little point of having a library atmosphere in your shop. In a similar vein I do not know too many mature customers who want Rhianna belting out. If you are starting out it is very tempting to try to be all things to all people, but it is generally better to look for a gap in the market and target that.
Pricing is also very important whatever type of clientele you are selling to.
If you are looking to selling volume you can have a smaller gross margin than if you are selling bespoke products, where people are prepared to pay a premium for excellent products coupled with first class service. From a financial perspective under selling a product is as bad as ripping your customers off. The key here is ensuring that pricing policy is consistent with the quality you are offering. In my experience customers will return if they feel the product is value for money.
We are at the moment experimenting with a loyalty card, which I will comment on in a future article once I have judged how well it works.
In conclusion to keep your business in a healthy financial state as regards stock:
• Identify your market, keep your core stock levels at a good level, offer enough seasonal stock to give your customers a wide enough stock.
• Know when to cease buying (have a cut off date in mind). • Ensure that you not over stocked though or you will run out of money.
• Make the surroundings commensurate to your customer base and price consistently to ensure you offer value but make sure your gross margin covers those overheads!
Get it right and your yearend accounts will reflect this. I do not need to explain what happens if you get it badly wrong....!!
If you would like David to look at your business costs, he promises that if he cannot save you any money you pay him nothing. But for every pound he saves you pay him, 15 pence. If you want to learn more email David on david@fdickinsonfootwear
Website: http://www.fdickinsonfootwear 16 • FOOTWEAR TODAY • SEPTEMBER 2013
.co.uk or call 01229 580654
.co.uk/
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