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Welcome to our seminar on ‘open-to-buy’ planning: “How Much Should I Buy ?”. ROY. BUY ONLY WHAT YOUR OTB PLAN TELLS YOU!. BENES. Open-To-Buy benefits :. Buy the right quantities. Open-To-Buy benefits :. Buy the right quantities Improve your item selection. Open-To-Buy

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Presentation Transcript
slide1

Welcome

to our seminar on ‘open-to-buy’ planning:

“How Much

Should I Buy ?”

ROY

slide2

BUY ONLY

WHAT YOUR

OTB PLAN

TELLS YOU!

BENES

slide3

Open-To-Buy

benefits :

  • Buy the right quantities
slide4

Open-To-Buy

benefits :

  • Buy the right quantities
  • Improve your item selection
slide5

Open-To-Buy

benefits :

  • Buy the right quantities
  • Improve your item selection
  • Increase your turnover
slide6

Open-To-Buy

benefits :

  • Buy the right quantities
  • Improve your item selection
  • Increase your turnover
  • Reduce your markdowns
slide7

Open-To-Buy

benefits :

  • Buy the right quantities
  • Improve your item selection
  • Increase your turnover
  • Reduce your markdowns
  • Raise your margins

MMM

slide8

you need an OTB !

  • New Stores
  • Old Stores
  • Small Stores
  • Large Stores
  • Multi-Stores

POS

slide9

p.o.s.

IS tracking

o.t.b.

IS forecasting

WHICH

slide10

p.o.s.

IS a luxury

o.t.b.

IS a necessity

HANDOUTS

RULES

slide11

Open-To-Buy

Rules of the Game

1. In RETAIL Dollars

slide12

Open-To-Buy

Rules of the Game

1. In RETAIL Dollars

2. By DEPARTMENT

slide13

Open-To-Buy

Rules of the Game

1. In RETAIL Dollars

2. By DEPARTMENT

3. By the MONTH

slide14

Open-To-Buy

Rules of the Game

1. In RETAIL Dollars

2. By DEPARTMENT

3. 1st of the MONTH

SETUP

slide15

The Open-To-Buy Process

Part 1

The Setup

Part 2

Monthly Figures

ORG

slide16

merchandise organization

Set up

departments

that reflect your product mix.

slide17

activewear departments

T-Shirts

Baggies

Shorts

Pants

Shirts

Skates

Surfboards

Sun Glasses

Accessories

Womens

Bikinis

Shoes

Wetsuits

Body Boards

Sweats

Boys

Jackets

Snowboards

SALES

slide18

forecast a

sales plan

for the next

12 months

HIST

slide19

Got History?

Use the past

12 months

No History?

Use percentages

PROJ

slide20

sales projections

1. Total Annual Sales$200,000

slide21

sales projections

1. Total Annual Sales $200,000

2. Annual Department Sales

1. Swimwear 50% = $100,000

2. Boards 30% = 60,000

3. Accessories 20% = 40,000

100% = $200,000

slide22

sales projections

1. Total Annual Sales $200,000

2. Annual Department Sales

1. Swimwear 50% = $100,000

2. Boards 30% = 60,000

3. Accessories 20% = 40,000

100% = $200,000

3. Monthly Department Sales (Department 1)

Jan 10% 10,000 Jul 10% 10,000

Feb 10% 10,000 Aug 6% 6,000

Mar 3% 3,000 Sep 10% 10,000

Apr 3% 3,000 Oct 8% 8,000

May 10% 10,000 Nov 5% 5,000

Jun 10% 10,000 Dec 15% 15,000

100% $100,000

slide23

don’t

include

special

orders!

TURN

slide24

project

turn rates

slide25

Turnover is the key

to retail profitability!

the more you turn

the more you make

INV = $1

slide26

HOW TURNOVER WORKS

AVERAGE inventory

slide27

HOW TURNOVER WORKS

AVERAGE inventory TURN

1x

slide28

HOW TURNOVER WORKS

AVERAGE inventory TURN

1x

sales mdse cost overhead PROFIT

$1.00 $0.50 $0.40 $0.10

slide29

HOW TURNOVER WORKS

AVERAGE inventory TURN

2x

sales mdse cost overhead PROFIT

$2.00 $1.00 $0.80 $0.20

slide30

HOW TURNOVER WORKS

AVERAGE inventory TURN

6x

sales mdse cost overhead PROFIT

$6.00 $3.00 $2.40 $0.60

slide31

HOW TURNOVER WORKS

sales mdse cost overhead PROFIT

$200,000 $100,000 $80,000 $20,000

slide32

HOW TURNOVER WORKS

sales mdse cost overhead PROFIT

$200,000 $100,000 $80,000 $20,000

TURN

6x

slide33

HOW TURNOVER WORKS

sales mdse cost overhead PROFIT

$200,000 $100,000 $80,000 $20,000

TURN

6x

$34,000

slide34

HOW TURNOVER WORKS

sales mdse cost overhead PROFIT

$200,000 $100,000 $80,000 $20,000

TURN average inventory

2x

$100,000

DIFF #1

slide35

difference

#1

invested

capital

100/34

slide36

HOW TURNOVER WORKS

sales mdse cost overhead PROFIT

$200,000 $100,000 $80,000 $20,000

TURN average inventory

$34,000

6x

2x

$100,000

MATH

slide37

$100,000(2x)

-34,000 (6x)

$66,000

what could you

do with $33,000?

$33,000 cost

FILL SPACE

slide38

BUY TO

SUPPORT SALES,

NOT TO

FILL SPACE!

DIFF#2

slide39

HOW TURNOVER WORKS

sales mdse cost overhead

$200,000 $100,000 $80,000

TURN average inventory

2x

$100,000

20% MDS = $20,000 PROFIT = $0

MDS

slide40

difference

#2

markdowns

34,000

slide41

HOW TURNOVER WORKS

sales mdse cost overhead

$200,000 $100,000 $80,000

TURN average inventory

6x

$34,000

20% MDS = $8,600 PROFIT = $13,200

100,000

slide42

It’s YOUR MONEY

going...

FACTORS

slide43

turnover projection

Annual Turn Rate Factors

  • Delivery Time
  • Shelf Life
  • Item Quantity

CALC

slide44

turnover projection

Annual Turn Rate

Calculation

Annual Sales

Turn Rate =

Average Monthly

Beginning Inventory

slide45

turnover projection

Our Example:

Sales:$200,000

= 4

Inventory:$50,000

ADJ

slide46

turnover projection

Adjusted Monthly

Turn Rates*

*(the formula is in the handout)

YOUR

slide47

your

Annual Turn rate =

annual sales

average inventory

IDEAL

slide48

the

ideal

turn rate

INV

slide49

project

inventory

levels

FACTOR

slide50

calculate ideal

beginning inventories

Inventory Factor

12

Turn Rate

slide51

calculate ideal

beginning inventories

Inventory Factor

12

= 3

4

SALES

slide52

calculate ideal

beginning inventories

Projected Sales

Jan 10% 10,000 Jul 10% 10,000

Feb 10% 10,000 Aug 6% 6,000

Mar 3% 3,000 Sep 10% 10,000

Apr 3% 3,000 Oct 8% 8,000

May 10% 10,000 Nov 5% 5,000

Jun 10% 10,000 Dec 15% 15,000

100% $100,000

CALC

slide53

calculate ideal

beginning inventories

Beginning Inventory Calculations

Inv. Proj. Beginning

MonthFactorxSales = Inventory

Aug 3 x $6,000 = $18,000

Sep 3 x $10,000 = $30,000

Oct 3 x $8,000 = $24,000

ACTU

slide54

determine your

current inventory

P.O.S.

Physical

Guess

OVER?

slide55

determine your

actual inventory

Find out where

you are

over-stocked

or

under-stocked.

BENE 1

slide56

Benefit #1

analyze current inventory

TAKE ACTION

slide57

take action to

correct your inventory

1. Good Sellers

slide58

take action to

correct your inventory

1. Good Sellers

2. Slow Sellers

slide59

take action to

correct your inventory

1. Good Sellers

2. Slow Sellers

3. Non Sellers

BENE 2

slide60

Benefit #2

correct YOUR inventory problems

END 1

slide61

The Open-To-Buy Process

Part 1

The Setup

Part 2

Monthly Figures

CARD

slide62

open-to-buy

calculations

slide63

Open-To-Buy calculations

August Beginning Inventory $18,000

August Projected Sales - 6,000

Inventory Balance 12,000

slide64

Open-To-Buy calculations

August Beginning Inventory $22,000

August Projected Sales - 6,000

Inventory Balance 16,000

slide65

Open-To-Buy calculations

August Beginning Inventory $22,000

August Projected Sales - 6,000

Inventory Balance 16,000

-------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------

September Beginning Inventory 30,000

September Projected Sales - 10,000

slide66

Open-To-Buy calculations

August Beginning Inventory $22,000

August Projected Sales - 6,000

Inventory Balance 16,000

-------------------------------------------------------------------------------------------------------------

AUGUST OPEN-TO-BUY14,000

-------------------------------------------------------------------------------------------------------------

September Beginning Inventory 30,000

September Projected Sales - 10,000

slide67

Open-To-Buy calculations

August Beginning Inventory $22,000

August Projected Sales - 6,000

Inventory Balance 16,000

-------------------------------------------------------------------------------------------------------------

AUGUST OPEN-TO-BUY 14,000

-------------------------------------------------------------------------------------------------------------

September Beginning Inventory 30,000

September Projected Sales - 10,000

Inventory Balance 20,000

slide68

Open-To-Buy calculations

August Beginning Inventory $22,000

August Projected Sales - 6,000

Inventory Balance 16,000

-------------------------------------------------------------------------------------------------------------

AUGUST OPEN-TO-BUY 14,000

-------------------------------------------------------------------------------------------------------------

September Beginning Inventory 30,000

September Projected Sales - 10,000

Inventory Balance 20,000

-------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------

October Beginning Inventory 24,000

October Projected Sales - 8,000

slide69

Open-To-Buy calculations

August Beginning Inventory $22,000

August Projected Sales - 6,000

Inventory Balance 16,000

-------------------------------------------------------------------------------------------------------------

AUGUST OPEN-TO-BUY 14,000

-------------------------------------------------------------------------------------------------------------

September Beginning Inventory 30,000

September Projected Sales - 10,000

Inventory Balance 20,000

-------------------------------------------------------------------------------------------------------------

SEPTEMBER OPEN-TO-BUY 4,000

-------------------------------------------------------------------------------------------------------------

October Beginning Inventory 24,000

slide70

Open-To-Buy calculations

August Beginning Inventory $22,000

August Projected Sales - 6,000

Inventory Balance 16,000

-------------------------------------------------------------------------------------------------------------

AUGUSTOPEN-TO-BUY14,000

-------------------------------------------------------------------------------------------------------------

September Beginning Inventory 30,000

September Projected Sales - 10,000

Inventory Balance 20,000

-------------------------------------------------------------------------------------------------------------

SEPTEMBER OPEN-TO-BUY 4,000

-------------------------------------------------------------------------------------------------------------

October Beginning Inventory 24,000

slide71

Open-To-Buy calculations

August Beginning Inventory $22,000

August Projected Sales - 6,000

Inventory Balance 16,000

-------------------------------------------------------------------------------------------------------------

AUGUST OPEN-TO-BUY 14,000

-------------------------------------------------------------------------------------------------------------

September Beginning Inventory 30,000

September Projected Sales - 10,000

Inventory Balance 20,000

-------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------

October Beginning Inventory18,000

October Projected Sales - 6,000

slide72

Open-To-Buy calculations

August Beginning Inventory $22,000

August Projected Sales - 6,000

Inventory Balance 16,000

-------------------------------------------------------------------------------------------------------------

AUGUST OPEN-TO-BUY 14,000

-------------------------------------------------------------------------------------------------------------

September Beginning Inventory 30,000

September Projected Sales - 10,000

Inventory Balance 20,000

-------------------------------------------------------------------------------------------------------------

SEPTEMBER OPEN-TO-BUY - 2,000

-------------------------------------------------------------------------------------------------------------

October Beginning Inventory 18,000

slide73

Open-To-Buy calculations

August Beginning Inventory $22,000

August Projected Sales - 6,000

Inventory Balance 16,000

-------------------------------------------------------------------------------------------------------------

AUGUST OPEN-TO-BUY 12,00014,000

-------------------------------------------------------------------------------------------------------------

September Beginning Inventory 30,000

September Projected Sales - 10,000

Inventory Balance 20,000

-------------------------------------------------------------------------------------------------------------

SEPTEMBER OPEN-TO-BUY 0 - 2,000

-------------------------------------------------------------------------------------------------------------

October Beginning Inventory 18,000

slide74

Open-To-Buy calculations

August Beginning Inventory $22,000

August Projected Sales - 6,000

Inventory Balance 16,000

-------------------------------------------------------------------------------------------------------------

AUGUST OPEN-TO-BUY 12,000 14,000

-------------------------------------------------------------------------------------------------------------

September Beginning Inventory 28,000

September Projected Sales - 10,000

Inventory Balance 18,000

-------------------------------------------------------------------------------------------------------------

SEPTEMBEROPEN-TO-BUY 0 - 2,000

-------------------------------------------------------------------------------------------------------------

October Beginning Inventory 18,000

BENE 3

slide75

Benefit #3

accurate buying FIGURES

COMPARE

slide76

compare your

outstanding orders

Find out where

you are

over-bought

or

under-bought.

BENE 4

slide77

Benefit #4

revise OPEN orders

RESULT

slide78

Results:

extra

inventory

excess

invoices

no

no

BENE 5

slide79

Benefit #5

FEWER MARK- DOWNs

BENE 6

slide80

Benefit #6

IMPROVED CASH FLOW

SEASON

slide83

look at

everything

before

you buy

anything!

FORM

slide88

RATE YOUR

FAVORITES

1 = A Winner

slide89

RATE YOUR

FAVORITES

1 = A Winner

2 = Good Seller

slide90

RATE YOUR

FAVORITES

1 = A Winner

2 = Good Seller

3 = Not Sure

?

BENE 7

slide91

Benefit #7

Select Better Items

ORDER FORM

slide92

write on your own

order form

Professionalism

Consistency

Protection

DANGER

slide93

more reasons

  • for OTB:
  • Discounts
  • dating
  • minimums

DON’T

slide94

track

receipts

SALES

slide95

track

SALES

ANALYZE

slide96

analyze monthly

performance

Sales

Inventory

Turnover

BENE 8

slide97

Benefit #8

See trends develop

REVISE

slide98

revise your

projections

Sales

&

Turnover

slide99

revise your

FUTURE SALES

UP

OR

DOWN

slide100

revise your

turn rates

Only

UP

CYCLE

slide101

RECALCULATE

YOUR

open-to-buy

PLAN

BENE 9

slide102

Benefit #9

Compete with the big guys

BENEFITS

slide103

nothing but benefits!

  • Leaner Inventory
  • Balanced Inventory
  • Improved Item Selection
  • Faster Turnover
  • Reduced Markdowns
  • Higher Margins
  • Improved Cash Flow

MMM

slide104
Thank you

Board Retailers Association