Do you have a plan for 2009? Have you adapted your inventory and sales plans to the new economic environment?

If not, now is the time to book a Blacks Strategy Session. For a limited time we are offering the ability to book hourly consultations with our Senior Consultant, Steve Pruitt. Steve has over 30 years of experience as an expert merchandise planner and retail consultant and works with some of the leaders in the retail world. Ask Steve to help you:

• Adjust sales and inventory plans for the coming year
• Align sales goals with overall financial goals
• Develop strategies to increase business in a down market
• Discuss specific topics related to your business
• Speak to a retail group on the changing sales climate

Call or email us to setup a session in January. We will ask for information ahead of time to perform an accurate analysis. All information is considered confidential.

Call (415) 377-3170 or email info@blksretail.com

Posted by Blacks at 03:53 AM   |   Comments (0)

Retailers often ask me how to improve sales and even out cash flow and one answer always leads the list – you have to plan out your flow of new goods. Gone are the days of seasonal buying, when retailers purchased a lump sum of goods to land sometime within the season. In the past, if we bought goods with a 4/30 completion date it wouldn't be uncommon for the goods to ship between 1/15 and 4/30, with most of it arriving in one big shipment at the beginning, end or mid-season – you never really knew!

Unfortunately customers don't shop seasonally anymore, and they rarely buy anything that they can't wear immediately. We are in a Buy Now, Wear Now world, so as a retailer you need to be able to fill customers' immediate desires. You can't do that if the majority of your product lands unpredictably throughout the season.

To participate in the Buy Now, Wear Now cycle, you need to have a regular flow of new goods to entice shoppers. This not only gives customers a reason to keep coming to your store (to see the new product) it also allows you to “plan” cash flow.

If you are not already acting in this cycle, here's how to start. First, you need a planning process in place that plans monthly open receipts, so you can determine which products you need to flow each month. Then you have to get yourself in an open-to-buy (OTB) position to be able to purchase those goods. (Again, a strong planning process is essential for planning flow and creating OTB).

When you go to market, find out from your vendors exactly when the goods are going to land, and work with them to schedule regularly spaced landing dates. You should be flowing new goods on a month-to-month basis, putting purchases in line with cash flow.

The good news is that vendors are more open to accommodating this new cycle. In fact, in menswear, there are a number of vendors offering stock programs that allow you to make at-once buys. Or, they allow you to buy three or four months in advance, but land the goods into a specific time frame.

If you are looking to increase sales and even out cash flow, work on flowing goods more regularly. And if you need help with you planning process, give us a call.

Posted by Blacks at 05:41 PM   |   Comments (0)

I have been talking to a lot of retailers over the past few weeks about how to deal with the sales slowdown caused by our country’s current economic crisis. This crisis is sure to affect business going forward, making it more important than ever to put retail best practices into place.

Here is what we are seeing: Sales have been off by 15% to 30% across men’s, women’s and jewelry as a result of decreased consumer demand. These reports have been confirmed by results at large retailers across the country.

We are advising our retailers to take several steps to adapt to decreasing revenue streams while maximizing their gross profit dollars. However, in the short run, we expect that the drop in revenues will outpace the drop in expenses. This means that the generation of gross profit dollars is the most significant issue on the table.

This strategy requires a continued flow of new fashion and on-target merchandise. The selection has to be better than ever and the flow has to be at least monthly, or even better, weekly. It will require you to make a realignment of inventory and receipt plans to meet these goals. This means cutting a portion of your current on-orders for Fall, Holiday and Spring/Summer ’09 so you can increase your amount of in-season open-to-buy. For most of our merchants 10% has been the standard level of in-season OTB; the new standard is 25%. By increasing turnovers and using your OTB to flow fresh, in-demand merchandise, you should be able to improve your cash flow.

Of course, you’re also going to have to curtail expenses, such as travel and marketing, and make sure that you do not increase your debt obligations to banks. This strategy also requires that you perform a more regular analysis of your business trends and performance.

We hope that most retailers have already initiated these steps. If you would like to talk to us directly about your business situation and the path you should take, please do not hesitate to contact us. Remember, even though times are challenging, there are still actions you can take to help your business perform at a higher level.

Posted by Blacks at 06:10 PM   |   Comments (0)

Recently I heard the story of a retailer who never took markdowns because she believed that taking markdowns was a sign of business failure. This surprised me because markdowns are a necessity for most retailers, allowing them to create cash flow and generate open-to-buy.

Of course, it’s important to know when and how to take markdowns if you want to optimize their effectiveness, so I thought we would explore that idea here. In determining when to take markdowns you need to gauge the lifecycle of the product in question. I realize that product lifecycle may be a new concept to some of you.

Basically, it’s a way of measuring how long a certain product will be in demand and when it should be liquidated from inventory. Most goods have a seasonal demand cycle, especially in apparel. So, a spring suit will typically have a lifecycle of five months, spanning the spring season. Other products, such as “basic” apparel like tee shirts, may have a much longer lifecycle, however.

Once you know the product’s lifecycle, you can then determine whether the product is likely to sell-thru before it is no longer in demand by looking at its past sell-thru rate. Let’s say you landed those spring suits I mentioned above and a month into their sales cycle you have a sell-thru rate of 10%. Because the suits only have a lifecycle of five months, you are unlikely to sell more than 50% of your inventory, leaving you with carryover product and tied up cash flow. What’s more, because your money is tied up in those suits, you are inhibited from purchasing newer, in-demand items.

To clear out those suits, you need to take a markdown. Retailers typically go through three markdown cycles known as first markdown, second markdown and clearance markdown. They usually follow the pattern of 30% off, then 50% off, then 70% to 80% off. Your first markdown is your most important markdown and typically a profitable markdown. It needs to be done when there is still some demand for the item, and it has to be deep enough to catch the shopper’s attention. Remember, a 10% markdown at the end of a product’s lifecycle probably won’t help you attain sell-thru. Think of the old adage: “The First Markdown is Always the Cheapest Markdown.”

A good rule of thumb for first markdowns is to begin taking them three-quarters the way through a product’s lifecycle, and then gauge the item’s performance week by week, taking additional markdowns if necessary.

Now, in this instance, I have been talking about permanent markdowns and not promotional markdowns, which are a different beast.
Promotional markdowns are planned markdowns that are used to kick start a season or just grab attention. In weak retail cycles like the one we’re in right now, retailers tend to use a lot of promotional markdowns to garner interest. Many of the big box retailers are already running Christmas promotions on new fall merchandise, for example. Promotional markdowns tend to be less steep and they are sometimes couched as “Buy One, Get One 50% Off”. They can be strong marketing tool and can certainly generate traffic.

So, markdowns are generally not a sign of business failure. They are powerful tools that can help retailers generate cash flow and increase profitability, if used correctly. In fact, we believe so much in the power of markdowns that we are creating a software tool that will allow retailers to better plan their markdowns. Stay tuned – this is some exciting stuff!

Posted by Blacks at 04:51 PM   |   Comments (0)

Vendors have been on a retail push in recent years, opening standalone stores and selling direct to consumers online. This has left specialty retailers in a difficult position as they try to manage competition from their own vendors.

So, what do you do when your key vendors start moving in on your turf? If you start seeing declining sales, you need to be prepared to drop them. This means lining up complementary lines to replace those vendors.

This can be a tough decision but sometimes it's necessary. Many specialty stores faced a similar situation a few years ago when Nordstrom and Saks started undergoing aggressive expansion with the Canali line. Suddenly, stores that carried the Canali brand faced competition from big box retailers who could afford to take steep markdowns. Several specialty retailers had to drop the line and replace it with a complementary Italian suit maker.

The same strategy applies to direct vendor competition. When you see your market eroding, it's time to move on. Now, this isn't always the case with vendor expansion. Sometimes vendors open multiple stores and their retailers still do well because of added brand recognition and marketing. This is a good situation to be in because your vendor is paying for the marketing.

A more complicated situation arises when your vendor starts selling online. Then it doesn't matter if they don't have a store in your town because they are available everywhere, at every computer. They have the opportunity to get to know your customers online and even email them directly with promotional information.

There's only one true solution when it comes to vendor competition - promote your own store and your own brand. You might have the same product as the vendors but you offer service and knowledge that sets you apart. You offer a certain atmosphere and a distinct shopping experience that your vendors can never compete with. Sure, you offer certain brands, but these brands can change and your brand - your store - has the power to navigate these changes and present the right product for your customers.

Posted by Steve Pruitt at 07:24 PM   |   Comments (0)

There's no doubt about it - the rising cost of better goods combined with a lack of new trends is taking its toll on better retailers. The price of European goods has risen 10% a season over the last few years and Chinese manufacturers are bumping up their costs as well.

The price hikes mean that as sales have slowed unit presentations have dropped off, further hurting sales lines. This problem is being agitated by the fact that there are no new trends on the horizon and retailers are playing it safe by investing in old standbys instead of fresh styles.

So, what should we do about it? First, we need to accept that this is a dilemma that is unlikely to change anytime soon. We need to take bold steps to correct the problem, and that may mean getting out of your comfort zone.

It's time to reevaluate your vendor structure and make some key changes. We need to replace the vendors that we can no longer afford to buy from with new vendors that offer a fresh style perspective. By doing this we not only increase our presentations (which are key in meeting customer demand), we also inject new trends into our mix.

These changes may require some rebranding since most stores are built around the images of their old brands. Marketing and merchandise go hand-in-hand so when you change your product you also need to change you message.

Ask yourself: "What kind of store do I want to become?" I know it's sometimes frightening to change the way we do things, but in this case it may just be necessary. After all, the kind of store you want to become is no doubt a profitable one.

Posted by Steve Pruitt at 10:28 PM   |   Comments (0)

There's no denying it - we're in a down market. But the first rule of a down market is that there's a guaranteed opportunity for growth in the future. When business is trending down it's pretty easy to see which categories are holding; these are the low-hanging fruit. A category that's not dropping as quickly may be an indicator of a future trend, especially if the category has been holding for a 90-day period.

One opportunity that we're seeing right now is in the men's knitwear business. This is an area that has been out of trend for a long time and now it's holding up. The traditional men's denim business is also faring relatively well. In women's, we're seeing strength in skirts, and the top business is sure to follow. Remember to take a look at how product mixes work together to produce trends.

If you see trends like these in your business the first thing you need to do is a market survey to see why the category is growing and if there is something behind the trend. Ask your customers and colleagues if they are seeing the same trend to make sure it's not a fluke. Then you want to look at your turnover and margin goals and ask yourself whether this is a product that you can buy in-season. Normally, what will lead you out of a down market is product that you can buy immediately, in season.

If the trend is something that you can respond to in season, you'll want to increase your planned turn and make sure you are not overbought in other areas. Getting out of down cycles is a chasing process. You need to find your opportunities and put yourself in a position where you are chasing inventory to improve cash flow and increase margins. It's all about gross profit dollars. You want to be in a position where you are chasing gross profit dollars rather than running from payables.

A down market brings with it other opportunities, particularly in real estate. If you are looking to expand, this is the time to negotiate lower rents on prime locations. It's also a good time to check out your competitors' staff. There's likely to be some unhappy employees who are great sellers but who aren't being given anything new to sell. This is your chance to approach these sellers. Tell them that you are chasing product and you need someone who's dedicated to growth. You may get them to come over to your team, and bring their big customer books with them.

It may be tempting to hunker down when things get rough but that's not how you survive in a down market. Take a look around at the opportunities within your own store and make some strategic decisions.

Posted by Steve Pruitt at 07:23 PM   |   Comments (0)

In economic downturns like the one we're currently experiencing it's important for retailers to not only focus on sales but also on their gross profit analysis. For example, one of my clients saw a 10% drop in their women's wear business last month, yet their gross profit was up by $30,000 because they had managed their inventories and didn't have to take excessive markdowns to clear out older seasonal merchandise.

I use a critical tool to help my clients stay in-line with their profit goals. I call it the Acid Test. The Acid Test measures the relationship between how much we buy and how much we sell. It compares your purchases at cost for a season or a year with your sales over the same period. You can also use the concept to project gross profit.

You can do an Acid Test on your business by taking your purchases at cost over a defined period of time (such as the last 12 months or year to date) and divide that number with your sales for the same period. Your goal is to get a factor that is the inverse or cost complement, of your planned margin. For example, if your planned margin is 55% you want your Acid Test to come out at 45%. If the factor is higher than the inverse complement, you are building inventory, turn rates are slowing and cash is being squeezed. If the inverse complement factor is lower, you are driving down your inventory and freeing cash.

For retailers, this number is one of the most powerful indicators we can use to assess the profitability of a business. Give the Acid Test a try and if the numbers don't line up, give Blacks a call. With a little analysis an optimum factor can be determined for your company.

Posted by Steve Pruitt at 06:28 PM   |   Comments (0)

Trends come and go and sometimes it's hard to get a handle on how they apply to your business. You may feel disconnected from general market changes as you concentrate on day-to-day operations.

What you may not realize is that trends are at the very heart of your business. The trend cycles you see in your company are directly related to trends in your industry and in the overall market.

You can take advantage of these trends if you know how to interpret them. When you spot a major market trend, you need to determine how that trend will play out in the segment of the market that you live in. Then you look at your own business to see if and how you can benefit from the trend.

Let's look at an example in the apparel sector. Last year, men's wear vendors told us that shorts were going to be huge this year. That's an overall market trend. If you owned a better men's wear store, you might ask yourself, "How will the shorts trend affect my segment of the industry?"

Since the better men's wear market is primed to pick up on high-priced shorts, you may determine that this is an opportunity for you. But first you need to look at your particular situation, including your position in the trend cycles. If you have a fashion store, you'd probably do well by picking up on the shorts trend. If it's a more traditional store with older clientele, you may choose to sit this one out.

Information is King
Entrepreneurs often use intuition to detect and interpret trends. Most successful businesspeople have good intuition about what's going on in their market. However, at a certain point, businesses grow beyond the capabilities of intuition. As the company gets larger and more complex, you need information and guidance to validate and support your natural instincts.

In trending, information is king. You need as much information as you can assimilate to make smart choices. You need highly refined data and data analysis to tell you exactly what's going on in your business from month to month, and a system for accumulating information on external market trends.

Once you have pools of knowledge on external and internal trends, you can leverage this information to increase sales and improve margins. Intuition is still at play, but now it's supported by a validation mechanism. And it's easier to fund your intuition because you've acquired data that backs up what you 'feel' will happen in the market.

Knowing When You Need Help
It can be easy to feel overwhelmed by trending if you don't have the right information at your disposal. If profits aren't in line with expectations, you know you need help. It's time to invest in resources that will help you track and interpret the trends. This could mean investment in a data system to allow you to extract and analyze information and the help of a trending expert who knows how to read the data.

First, you need a system that will structure your data in a way that mirrors how the market looks at information. In apparel, for example, the data should be structured by category so trends happening in womens' knits match what's going on in your own knit category. Once you have the data, you can look at trends that happened last year as well as this season. From that information you can begin to predict what will happen in the next 60 to 90 days and even further out.

Unless you are really market- and numbers-savvy, this may require the help of an expert data analyst who is trained to read the cycles. Your analyst should be able to interpret the trends from the overall market level down to your specific situation. With the right data analysis, profits should begin to align with expectations.

Every business is affected by trend cycles. One of the greatest mistakes we can make as businesspeople is not seizing the opportunities that trends offer us. It takes information, intuition and diligence to keep on top of the trends, but that's part of what makes business fun.

Posted by Steve Pruitt at 06:27 PM   |   Comments (0)

After 30 years of working with luxury apparel and jewelry retailers I've learned how to step back and see the larger trends and cycles that affect our business. I've also learned how to spot the micro trends that play a big part in growing your bottom line.

Keeping on top of this ever-changing business is a challenge, but a fun one. Over the years I've developed some reliable tools for measuring inventory and sales trends and a sixth sense for identifying new business opportunities and overcoming challenges, whether they be external or internal.

At Blacks we are constantly working to improve our analytical tools (which we think are best of class) and to expand our knowledge and expertise in different aspects of retail business such as e-commerce, leadership development and mergers and acquisitions.

Everything we do is aimed at helping our clients succeed in their own unique businesses. There are no cookie cutter solutions. We look at each aspect of our clients' businesses – from finance to fashion, to management, competition and sales strategies – to identify growth opportunities and fine tune profits.

I am excited about the work we are doing and the results we are achieving for our clients. This blog is about sharing my experiences with the public and creating an open dialogue on how to improve our skills as retailers. So, stick around because it should be an interesting ride. And remember, always Be In The Black.

-Steve Pruitt, Senior Consultant at Blacks

Posted by Steve Pruitt at 06:25 PM   |   Comments (0)