Strategic Inventory Management: How to Avoid Being the Boiling Frog in Shoe Retailing

12 TODAY NOV-DEC 23

Do you know what would happen if a frog were to jump in a pot of boiling water? He would jump out – and fast! But if that same frog was put in mildly warm water that gradually got warmer until it was almost boiling he wouldn’t realize what was happening to him until it was too late and would end up cooked – literally!

So what does the frog story have to do with shoe retailing you ask? Everything and here’s why. Retailers have an innate tendency to repeat the same behavior time and time again expecting different results. And according to the old saying we all know what that’s a sign of right?

Here’s a classic example of what I am talking about.

If you want to grow your business you must look for opportunities. However according to my colleague Paul Erickson retailers often look in the wrong places (see video at https://www.youtube.com/watch?v=rf1RgycjU-Ww). A retailer’s historical data can provide a “treasure trove of opportunity” if you understand what to look for.

Narrow and Deep

You hear this term often in retail circles but what exactly does it mean? Take for example the three-store operation described in the YouTube link above. The flagship store in this three-store operation does 60% of the company volume yet only has 35% of the inventory. The result is that the main store is constantly sold out of key items and misses business.

In this case the owner is trying to prop up the smaller branch stores by over-inventorying them to increase sales. This is a flawed approach as the real opportunity to grow sales is in the flagship store. Let the data guide your decisions. Make sure you have enough inventory in the locations that are doing the business to grow. Equity does NOT and should not apply to inventory decisions.

The classification level is another area where the narrow and deep concept can be employed. There are three criteria to review in your historical data when…

Searching for Opportunities

Unusual sales gains stock turns that are way above normal and extremely low cost of purchases (not cost of goods sold these are two completely different metrics). Once all three are met Bingo! There’s your potential opportunity.

I have a client that recently did just this. They had been tracking recovery sandals (the brand happened to be OOFOS but there are others) as part of a sandal category. What they discovered was that the sales were very strong and the turn was much faster than the overall class. The store knew they could do more business in recovery sandals so they decided to break out the class on the merchandise plan so that it could be monitored on its own. The sales plan was increased as was the planned turnover. In other words we began flowing merchandise in more often.

You may end up buying more but the sales increase will more than offset the outlay of cash for the additional purchases. This can also be done in any area of similar merchandise. You will end up buying more but that doesn’t necessarily mean carrying more. It does mean moving quicker on slow movers.

This can be done through employee sales incentives (spiffs) vendor stock balancing and/or marking down. Whichever method you choose the right one is the one that moves the slow sellers quickly. You do not wait for your twice-a-year sale. You get rid of slow merchandise when it’s slow merchandise! Mistakes made in retail rarely turn into positives. Accept it and deal with it and you will be better off in the long run.

Frontloading and Carrying Over

The biggest problem I see with seasonal front-loading of inventory is that some stores are willing to commit too much of their seasonal Open-To-Buy (OTB) to upfront deliveries. Stores that continually fall victim to this buying method do not appreciate or understand the power of new merchandise. If they did they would change their buy-

Let Data Guide Buying Decisions

Ritchie Sayner

Published in the November/December 2023 issue of Shoe Retailing Today Copyright © 2023 National Shoe Retailers Association Tucson AZ www.nsra.org. All rights reserved.

Their hope is that they will get early sales have a longer selling season and take advantage of dating terms that won’t require the merchandise to be paid for until a future date. That sounds good at face value but the reality is that the entire assortment doesn’t always sell quickly resulting in an overstocked category up front. Since it’s overstocked all the open-to-buy is tied up in the preseason goods and the stock-to-sales ratios are out of line. Over time the turnover ends up being less than it should be.

Reorders and Challenges

Now come the reorders. Certain styles and sizes begin selling right away. Why? Because customers like fresh new merchandise. So reorders are sent in to fill in the missing sizes. That’s fine but oftentimes the styles that are slow selling do not get addressed at the same rate of speed that the hot sellers do. This causes markdowns that could potentially erode the margin if not careful.

To compound the matter let’s address seasonal carryover. This practice reduces turn even further not to mention the negative effect on cash flow. The financial inability to land more new merchandise to drive additional full price sales is another issue altogether. This happens primarily in seasonal classes like sandals and boots for a variety of reasons typically the weather didn’t cooperate or the category became overbought. Whatever the case the results are the same – old products slow turnover poor cash flow.

Historical Context

For over 100 years shoe stores have been locked into a turnover that hovers around two times annually give or take. By utilizing the planning techniques outlined above and studying the historical data available through any point-of-

Sale System Improvements

Turnover can be improved sales can be increased and cash flow can become stronger. As I see it you have two choices. You can jump out of the proverbial water and try a different approach like the first frog or keep doing things as you always have and stay in the water until you’re cooked. You decide!
I wish all of you a Happy Healthy and Prosperous Holiday Season!

Ritchie Sayner is with Advanced Retail Strategies LLC an affiliate of Management One. Sayner’s book Retail Revelations: Strategies for Improving Sales Margins and Turnover (2nd Ed.) is available on Amazon. Ritchie can be reached at advancedretailstrategies.com.

6. Decide and No Need to Let Me Know

The pinnacle of delegation. They now have full autonomy in their role making decisions without needing constant check-ins. This might be apt for seasoned office managers handling routine tasks like accounts payable.

Practical Implementation in Your Shoe Store

For instance you’ve decided that the office manager should handle vendor payments. Here’s how the combined approach can be applied:

• Assess: Determine the significance of timely vendor payments potential challenges and the resources required.
• Assess Address: Clearly communicate the importance of maintaining strong vendor ties and ensuring timely payments.
• Assess Align: Based on the assessment decide on the delegation level. Managing regular vendor payments might be at Level 5 (Decide and No Need to Let Me Know After You Do It) while renegotiating payment terms might be at Level 4 (Decide and Let Me Know Before You Do It).
• Assess Assign: With alignment achieved delegate the responsibility of handling vendor payments to the office manager ensuring they understand the expectations and desired outcomes.

It’s all about accountability. With this level of clarity there is confidence and understanding.
The journey from being mired in the details to enjoying the…

Simplicity of Looking at a Dashboard

The path is paved with trust clarity and empowerment. The Six Levels of Delegation combined with the 4 As of Accountability will provide you with a robust strategy to navigate this path. These tools when applied effectively can transform your store’s dynamics ensuring every team member is a stakeholder in its vision and success.

Empowerment in Retail

In the world of retail where every detail matters having a team that’s empowered and accountable is invaluable. It’s time to watch your shoe store thrive without you making every decision!

If you’d like a downloadable worksheet to help you better align and assign just go to www.simplifyingentrepreneurship.com/4as and I’ll email you a copy.

■ Pete Mohr owns two Shoetopia locations in Canada and spends most of his time coaching business owners to move from operators to owners in their businesses. His podcast Business Owner Breakthrough focuses on quick episodes with actionable steps to move your business forward. Pete can be reached at www.mohr.coach.

Coach’s Corner

Continued from page 11

Article Summary

The article discusses the importance of strategic inventory management in shoe retailing using the metaphor of a frog in boiling water to illustrate the dangers of complacency. It emphasizes leveraging historical data to identify growth opportunities and cautions against overstocking advocating for a focus on fast-moving items and flexible buying strategies. The author encourages retailers to adapt and empower their teams for improved sales and turnover.

“Turnover can be improved sales can be increased and cash flow can become stronger. As I see it you have two choices. You can jump out of the proverbial water and try a different approach like the first frog or keep doing things as you always have and stay in the water until you’re cooked.”

Real-World Examples of Retail Strategies

Here are a few real-world examples that illustrate the principles discussed in the article particularly focusing on inventory management and strategic decision-making in retail.

• A local clothing boutique used historical sales data to identify that a particular line of sustainable fashion was turning over much faster than other inventory. By focusing on this line they increased their orders and promoted it more heavily resulting in a significant sales boost and improved inventory turnover.
• A bookstore noticed that their children’s section was consistently selling out of popular series while the adult fiction section had many slow-moving titles. By reallocating inventory budget towards the children’s section and implementing a markdown strategy for the slower titles they improved cash flow and increased overall sales.
• An electronics retailer used data analytics to discover that certain tech gadgets were selling rapidly during the holiday season. By strategically frontloading these items and reducing less popular stock they maximized sales and minimized end-of-season markdowns.

Discover Proven Retail Strategies!

Explore expert insights and actionable advice in
Ritchie Sayner’s renowned book:
Retail Revelations – Strategies for Improving Sales Margins and Turnover 2nd Edition.

This must-read guide is perfect for retail professionals looking to
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