Open-to-buy seminar

1
Welcome to our seminar on open-to-buy
planning How Much Should I Buy ?
ROY
2
BUY ONLY WHAT YOUR OTB PLAN TELLS YOU!
BENES
3
Open-To-Buy benefits

• Buy the right quantities

4
Open-To-Buy benefits

• Buy the right quantities
• Improve your item selection

5
Open-To-Buy benefits

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

6
Open-To-Buy benefits

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

7
Open-To-Buy benefits

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

MMM
8
you need an OTB !

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

POS
9
p.o.s. IS tracking o.t.b. IS forecasting
WHICH
10
p.o.s. IS a luxury o.t.b. IS a necessity
HANDOUTS RULES
11
Open-To-Buy Rules of the Game
1. In RETAIL Dollars
12
Open-To-Buy Rules of the Game
1. In RETAIL Dollars 2. By DEPARTMENT
13
Open-To-Buy Rules of the Game
1. In RETAIL Dollars 2. By DEPARTMENT 3. By
the MONTH
14
Open-To-Buy Rules of the Game
1. In RETAIL Dollars 2. By DEPARTMENT 3. 1st
of the MONTH
SETUP
15
The Open-To-Buy Process
Part 1 The Setup
Part 2 Monthly Figures
ORG
16
merchandise organization
Set up departments that reflect your product
mix.
17
activewear departments
T-Shirts Baggies Shorts Pants Shirts Skates Sur
fboards Sun Glasses Accessories
Womens Bikinis Shoes Wetsuits Body
Boards Sweats Boys Jackets Snowboards
SALES
18
forecast a sales plan for the next 12
months
HIST
19
Got History? Use the past 12 months No
History? Use percentages
PROJ
20
sales projections
1. Total Annual Sales 200,000
21
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
22
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
23
dont include special orders!
TURN
24
project turn rates
25
Turnover is the key to retail profitability!
the more you turn the more you make
INV 1
26
HOW TURNOVER WORKS
AVERAGE inventory
27
HOW TURNOVER WORKS
AVERAGE inventory TURN
1x
28
HOW TURNOVER WORKS
AVERAGE inventory TURN
1x
sales mdse cost overhead
PROFIT
1.00 0.50 0.40
0.10

29
HOW TURNOVER WORKS
AVERAGE inventory TURN
2x
sales mdse cost overhead
PROFIT
2.00 1.00 0.80
0.20

30
HOW TURNOVER WORKS
AVERAGE inventory TURN
6x
sales mdse cost overhead
PROFIT
6.00 3.00 2.40
0.60

31
HOW TURNOVER WORKS
sales mdse cost overhead
PROFIT
200,000 100,000 80,000 20,000

32
HOW TURNOVER WORKS
sales mdse cost overhead
PROFIT
200,000 100,000 80,000 20,000

TURN
6x
33
HOW TURNOVER WORKS
sales mdse cost overhead
PROFIT
200,000 100,000 80,000 20,000

TURN
6x
34,000
34
HOW TURNOVER WORKS
sales mdse cost overhead
PROFIT
200,000 100,000 80,000 20,000

TURN average inventory
2x
100,000
DIFF 1
35
difference 1 invested capital
100/34
36
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
37
100,000 (2x) -34,000 (6x)
66,000 what could you do
with 33,000?
33,000 cost
FILL SPACE
38
BUY TO SUPPORT SALES, NOT TO FILL SPACE!
DIFF2
39
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
40
difference 2 markdowns
34,000
41
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
42
Its YOUR MONEY going...
FACTORS
43
turnover projection
Annual Turn Rate Factors

• Delivery Time
• Shelf Life
• Item Quantity

CALC
44
turnover projection
Annual Turn Rate Calculation
Annual Sales Turn Rate Average
Monthly Beginning
Inventory
45
turnover projection
Our Example
Sales 200,000
4 Inventory 50,000
ADJ
46
turnover projection
Adjusted Monthly Turn Rates
(the formula is in the handout)
YOUR
47
your
Annual Turn rate
annual sales
average inventory
IDEAL
48
the ideal turn rate
INV
49
project inventory levels
FACTOR
50
calculate ideal beginning inventories
Inventory Factor
12 Turn Rate
51
calculate ideal beginning inventories
Inventory Factor
12 3 4
SALES
52
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
53
calculate ideal beginning inventories
Beginning Inventory Calculations
Inv. Proj.
Beginning Month Factor x Sales
Inventory Aug 3 x
6,000 18,000 Sep
3 x 10,000 30,000
Oct 3 x 8,000
24,000
ACTU
54
determine your current inventory
P.O.S. Physical Guess
OVER?
55
determine your actual inventory
Find out where you are over-stocked
or under-stocked.
BENE 1
56
Benefit 1
analyze current inventory
TAKE ACTION
57
take action to correct your inventory
1. Good Sellers
58
take action to correct your inventory
1. Good Sellers 2. Slow Sellers
59
take action to correct your inventory
1. Good Sellers 2. Slow Sellers 3. Non
Sellers
BENE 2
60
Benefit 2
correct YOUR inventory problems
END 1
61
The Open-To-Buy Process
Part 1 The Setup
Part 2 Monthly Figures
CARD
62
open-to-buy calculations
63
Open-To-Buy calculations
August Beginning Inventory 18,000 August
Projected Sales - 6,000 Inventory
Balance 12,000
64
Open-To-Buy calculations
August Beginning Inventory 22,000 August
Projected Sales - 6,000 Inventory
Balance 16,000
65
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
66
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
67
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
68
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
69
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
70
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
71
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 18,000 October Projected
Sales - 6,000
72
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
73
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 30,000 September Projected
Sales - 10,000 Inventory
Balance 20,000 ------------------------------
--------------------------------------------------
----------------------------- SEPTEMBER
OPEN-TO-BUY 0 - 2,000 ----------------------
--------------------------------------------------
------------------------------------- October
Beginning Inventory 18,000
74
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 ------------------------------
--------------------------------------------------
----------------------------- SEPTEMBER
OPEN-TO-BUY 0 - 2,000 ----------------------
--------------------------------------------------
------------------------------------- October
Beginning Inventory 18,000
BENE 3
75
Benefit 3
accurate buying FIGURES
COMPARE
76
compare your outstanding orders
Find out where you are over-bought
or under-bought.
BENE 4
77
Benefit 4
revise OPEN orders
RESULT
78
Results
extra inventory excess invoices
no
no
BENE 5
79
Benefit 5
FEWER MARK- DOWNs
BENE 6
80
Benefit 6
IMPROVED CASH FLOW
SEASON
81
seasonal?
QUIZ
82
a quiz!
83
look at everything before you buy anything!
FORM
84
(No Transcript)
85
Description
86
Retail Cost
87
Rating
88
RATE YOUR FAVORITES
1 A Winner
89
RATE YOUR FAVORITES
1 A Winner 2 Good Seller
90
RATE YOUR FAVORITES
1 A Winner 2 Good Seller 3 Not Sure
? BENE 7
91
Benefit 7
Select Better Items
ORDER FORM
92
write on your own order form
Professionalism Consistency Protection
DANGER
93

• more reasons
• for OTB
• Discounts
• dating
• minimums

DONT
94
track receipts
SALES
95
track SALES
ANALYZE
96
analyze monthly performance
Sales Inventory Turnover
BENE 8
97
Benefit 8
See trends develop
REVISE
98
revise your projections
Sales Turnover
99
revise your FUTURE SALES
UP OR DOWN
100
revise your turn rates
Only UP
CYCLE
101
RECALCULATE YOUR open-to-buy PLAN
BENE 9
102
Benefit 9
Compete with the big guys
BENEFITS
103
nothing but benefits!

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

MMM
104

• Thank you
• Board Retailers Association

105
(No Transcript)