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Presented by:
Tracy Moffatt
K&K Consult ing
AGM Education Team
BUYING WITH A PLAN – PLANNING FOR THE
BUY
1
Topics Today
Take a good look around…Understanding your business
Preparing to Buy - Key NumbersAnalyze Current Business & Vendors
Developing a Buy Plan Planning the Merchandise Assortment
Take a Good Look Around
What is the personality of your facility? What type of facility? When is your store/club open?
Does your weather affect what you sell?
When is your selling season/when are goods delivered? What is your customers’ average age/income? What are your customers’ merchandise preferences?
Where else do your customers shop?
Who are your current vendors? Are they profitable?
Which are missing?
Which must stay?
2
Take a Good Look Around
What are the members saying? Survey the membership Survey the employees
What is your shop saying? First impression
Colors - fixtures - lighting Cluttered or crisp?
Visual merchandising Mannequins - displays
Floor layout What has what space Traffic pattern Counter location
Preparing to Buy - Key Numbers
For each Vendor Sales Profitability Turnover Markdowns Sell through
For each Department (and Category) Retail Sales Cost of Goods Sold / Gross Margin Inventory levels / Turnover
Dollar per Round Last several years
3
Analyzing Vendors
Finding the information: POS Reports
Vendor Analysis – Supplier Analysis
Margin Analysis – Sales Analysis
SKU Analysis
Sales by Vendor
Sales by Category
Clearance Rack
What to look at: Profitability
Sales - Sell through
Jonas Supplier Analysis Report
4
Vendor Analysis Example
Total Men’s Vendor A Vendor B Vendor C
Cost of Sales $ 25571 3273 2775 2039
Cost of Sales % 67.0% 57.0% 73.3% 68.0%
Gross Margin % 33.0% 43.0% 26.7% 32.0%
Turnover 4.7 6.7 3.4 24.3
Vendor A: Strong performer for this season - gross margin much higher than the department’s gross margin Turnover for vendor A was high which could indicate some business was missed Definitely a vendor to go forward with
Vendor Analysis Example
Total Men’s Vendor A Vendor B Vendor C
Cost of Sales $ 25571 3273 2775 2039
Cost of Sales % 67.0% 57.0% 73.3% 68.0%
Gross Margin % 33.0% 43.0% 26.7% 32.0%
Turnover 4.7 6.7 3.4 24.3
Vendor B: Did not perform well especially in turnover This vendor should be scaled back or eliminated from future buys.
5
Vendor Analysis Example
Total Men’s Vendor A Vendor B Vendor C
Cost of Sales $ 25571 3273 2775 2039
Cost of Sales % 67.0% 57.0% 73.3% 68.0%
Gross Margin % 33.0% 43.0% 26.7% 32.0%
Turnover 4.7 6.7 3.4 24.3
Vendor C: A new vendor this season - gross margin number below the department but extremely high turnover indicates the merchandise sold through very quicklyBusiness was missed with this vendor - definitely continue with vendor on next season’s plan
Analyzing Vendor Issues
Late Shipments
Partial Shipments
Canceled Shipments
Excessive Shipping Charges
Logo Issues
Customer Service Issues
Quality Issues
Return / Credit Issues
6
Analyzing Vendor Issues
Finding the information: On-order Log
Purchase Order System
Invoices PO Ship Date vs. Actual Ship Date
Freight Expense
General Ledger
Were discounts taken
Clearance rack
Ask the employees
Ask area merchandisers
Other Vendor Considerations
Value added services Discounts
Dating
Trunk Shows
Training
Rep service / response / attention
Off-price availability
Special Order availability
Logo charges
Shipping location
8
Retail Sales
The amount of revenue generated from the sale of merchandise
Where to find the numbers POS Reports
General Ledger - for total shop
Accountant
Ideally, analyze for each Department Categories if possible
Analyzing Retail Sales
What to look at: Trends over last several years - each Department
Events that had a major impact
New product launches
Major changes in the club environment Membership
Dues base
Economy
Housing
Unemployment
Hospitality industry
9
Improving Retail Sales
Sell More
Buy Better Provide products most in demand
You cannot be everything to every customer
Improve Markup Challenge each item - can I sell this for a bit more?
Improve presentation - signing - lighting
Improve “selling” Add on selling
Cost of Goods Sold / Gross Margin
COGS in Dollars is the dollar amount it costs to create sales revenue for any specified time periods or product
Gross Margin is the dollar amount of profit generated for a single item or specified time period for the entire shop Remaining balance of retail sales after COGS but before
expenses
Amount available to cover your expenses
Reciprocal of COGS
10
Calculations
Cost of Goods Sold Dollars:
Beginning of Month Inventory
+Inventory Received during Month
- End of Month Inventory
=Cost of Goods Sold in Dollars
Gross Margin Dollars:Retail Sales for the Month
- Cost of Goods Sold
=Gross Margin
Calculations
As a percent of Retail Sales:
COGS in Dollars
÷ Total Retail Sales
=COGS %
Gross Margin Dollars
÷ Total Retail Sales
=Gross Margin %
11
Cost of Goods Sold / Gross Margin
Finding the Numbers: Cost of Goods Sold
Point of Sale Reports
General Ledger
Accountant
Gross Margin Point of Sale Reports
Accountant
What to look at: Trends over the past several years
Analyze each Department
Analyze each Vendor
Analyzing Cost of Goods Sold
What affected COGS last year? Excessive inventory Fire Sale markdowns Inappropriate pricing – initial markup Poor buyingMember pricing Freight - Logo Charges Invoice Discounts ShrinkageWeather
12
Improving COGS & Gross Margin
Raise Retail Prices
Lower Wholesale Cost
Increase Turnover
Control Markdowns / Discounts
Control Shrinkage
Take advantage of Vendor Discounts Evaluate ALL Vendors
Visual Merchandising
Control Inventory!!!
Average Inventory & Turnover
Average Inventory is the “average” amount of inventory carried in your Golf Shop for a 12 month period
Turnover is the number of times your average inventory is sold in a specific time period, usually one year
Both have a direct impact of profit Lower Average Inventory = Higher Turnover
= Increased Gross Profit
13
Calculations
Average Inventory:
Sum of BOM Inventory Month 1-12
+ Month 12 EOM Inventory
÷ Divided by 13
= Average Inventory at Cost
Turnover:Cost of Good Sold for the year
÷ Average inventory at Cost
= Turnover
Average Inventory & Turnover
Finding the numbers: Inventory
General Ledger
Physical Count
Point of Sale Reports
Accountant
Turnover Manual calculation
Point of Sale Reports
What to look at: Trends - Total Shop and Departments
14
Analyzing Turnover & Average Inventory
Turning inventory too fast will result in missed retail sales due to insufficient inventory
Turning inventory too slow will cause your inventory levels to be too high and thus reduce your profitability
Inventory Needs: 2.0 turns = 180 days on hand
2.5 turns = 144 days on hand
3.0 turns = 120 days on hand
4.0 turns = 90 days on hand
Analyzing Turnover & Average Inventory
Turnover is a slow growing number
Increase of over .5 turns per year will have major impact on profit
Turnover should be planned by Department: Highest in clothing and re-orderable categories
Balls - gloves - socks
Lowest in equipment
Special Orders/Corporate Sales improve turnover
Seasonal Facilities: 2.0 ideal Work towards 3.0
15
Improving Turnover
Lower Average Inventory!!! Increase Retail Sales Cost of Goods Sold % remains same
Follow Monthly Open to Buy Plan Consistent planned flow of merchandise throughout
selling season Avoid “Frontloading” Inventory Stagger arrivals throughout the season Plan more frequent and smaller deliveries of
merchandise
Lowering Average Inventory
Markdown program v. end of season sale Clearance all year round leads to higher profitability and
lower inventory levels
Hold reserves Pre-plan to purchase off price merchandise
Lower cost reduces inventory value
Evaluate current inventory Purchase product which compliments existing inventory
Do not duplicate existing inventory
Evaluate the number of lines / vendors you are carrying Can you go deeper into existing line for price incentives?
16
Dollar per Round
The amount of revenue generated in retail sales as compared with the amount of rounds played
Dollar per Round represents what EACH PERSONplaying golf at your facility spent – or needs to spend
Or – what we need to SELL to each person playing golf at our facility
Calculating Dollar per Round
Calculation:
Retail Sales
÷ Number of Rounds
= Dollar Per Round
Calculate Monthly at minimum Can be tracked daily - weekly
Calculate Annually to compare to National Benchmarks
17
Analyzing Dollar per Round
What to look at: Analyze where rounds were different
Member rounds
Guest rounds
Event rounds
Trends Year to Year Will they continue?
Compare to area clubs
Plan a gradual / realistic improvementOver $1.00 per round improvement per year is not
realistic
Improving Dollar per Round
Increase Sales Improve “selling” Daily item that meets Dollar per Round goal
Decrease RoundsChallenge Golf Shop floor planEncourage ALL players to come into your
Golf ShopInvolve Entire Staff Contests
18
Developing a Buy Plan – with existing OTB
Update the Open to Buy Adjust to current trends at your facility
Plan Dollars by Department for Season
Breakdown Dollars as you will buy the merchandise By Classification - By Vendor
Look to orders placed in prior years for sizing, quantity, and delivery timing help Check markdown rack for sizing and coloration help
HOLD RESERVES
It is just a PLAN!!!
Developing a Buy Plan – with no OTB
If no OTB exists:Were inventory levels acceptable?
Use for planning next year
Were quantities of orders acceptable?
Look at orders placed last yearGuideline for dollars and quantities
Guideline for delivery dates
Guideline for sizing
Plan conservatively
Plan to start using an OTB!!!
19
Developing a Buy Plan – no OTB
Forecast Retail Sales Using Dollar per round - or -
Based on last years numbers
Forecast Cost of Sales
Forecast Turnover Average Inventory will be calculated
Plan Beginning of Month Inventory levels OTB will be calculated for you
Calculate OTB by Department
Develop Buy Plan for each Department
21
Forecast Retail Sales – Using Dollar per Round
Calculate Last Year’s Dollar per Round
Forecast Next Year’s Golf Rounds & Dollar per Round
Project Next Year’s Annual Retail Sales Plan
Spread Annual Retail Sales Plan by month Develop Department Plan
Calculate Last Years Dollar per Round
Calculation:Retail Sales ÷ Rounds = Dollar per Round
Total Sales for Last Year $ 473,611
÷ Number of Rounds 32,211
= Dollar Per Round $ 14.70
Enter Monthly Retail Sales and Rounds on spreadsheet (green and orange rows) Calculations will be made for % to Total Year
22
Review for any months that seem unusually high or low Adjust for in plans going forward
Forecast Next Year
Forecast Rounds for Next Year:Rounds: 32,600 Last Year 32,211
Increase of 389 rounds
Dollar per Round: $15.00Last Year $14.70
Increase of 30 ¢
23
Project Annual Retail Sales Plan
Calculation:Rounds x Dollar per Round = Annual Sales
Rounds Plan 32,600
x Dollar per Round Plan $15.00
= Annual Sales Plan $489,000
Annual Sales Plan $489,000 3.2% increase over last year
Monthly Retail Sales Plan
Enter Dollar per Round Plan and Rounds Plan on the spreadsheet (blue boxes)
Spreadsheet will breakdown based on same % to total as last year Retail Sales
Golf Rounds
Retail Sales and Rounds need to be looked at by month for needed adjustments Total must remain the same
Move these plan numbers to Planning worksheet to continue developing buy plan
24
Make adjustments to sales and rounds as needed
Forecast Next Year using Last Year’s Numbers
Enter Last Years numbers:Retail Sales
Cost of Sales
Spreadsheet will calculate Gross Profit for you
Rounds of Golf
Beginning of Month Inventory for 13 monthsSpreadsheet will calculate average inventory and
turnover
25
Forecast Next Year using Last Year’s Numbers
Forecast Next Years numbers:Retail Sales
Cost of Sales
Spreadsheet will calculate Gross Profit for you
Rounds of Golf
TurnoverSpreadsheet will calculate average inventory needs
for you
27
Develop Monthly Inventory Plan
Project Inventory Plan based on last years inventory levels Adjust as needed for months with too much or too little
inventory
Open to Buy will be calculated for you based on Cost of Sales and Inventory Plan
OTB = Current Months Cost of Sales
+ Next Months Beginning of month Inventory
- Current Months Beginning of Month Inventory
28
Develop Monthly Inventory Plan
Inventory plan from one month to next CANNOT be reduced by more than COST of Sales for that monthCost of Sales represents amount of inventory
Sold in each month
No negative numbers can exist in monthly Open to Buy plan
29
Develop Department Open to Buy Plan
Enter last years Retail Sales by Department (Pink Boxes) Spreadsheet will calculate % each was to your total sales
Special Orders & Corporate Sales Leave out if they are tracked separately If lumped in with Department Sales:
Estimate amount and hold that money in Buy plan
Plan % of Sales for each Department for next year (Yellow Boxes) Spreadsheet will breakdown Open to Buy
For each Department For each Month
30
Buying with a Plan
You now have OTB for each Department to use for placing future orders Using Vendor Analysis, plan will be developed for upcoming
seasonal buys
31
Buying with a Plan
For each Department on Vendor Analysis: Add Dollars for season you are buying for
Hold 10-15% reserves Weather – Stock Market – Whatever might happen!
Plan % for each current vendor
Plan for new vendors
Don’t forget the accessories – socks, hats, etc.
Hold dollars to cover: Special orders if not tracked separately
Corporate sales if not tracked separately
32
Making the Buy
Review Industry Trends Fabrics – colors – styles
Look to industry publications
Shop the competition
Going Green?
Review Customer / Shop Profile Survey Membership
Know acceptable price ranges
Review Pricing Strategies Markup method used
Initial Markup needed
Making the Buy
Review Needs for your shop Re-orders you need to place
Member requests
Fast moving categories of merchandise
Trends at your facility
Identify timing for deliveries Know your facility’s selling cycle
First delivery needed – last delivery accepted
Plan some new arrivals for off season
Smaller groups more often
33
Making the Buy
Choosing Product Lines - Vendors Customer demand
Profitability
Compatibility
Brand Name
Competition
Fashionable Nature
Shelf Life
Supply
Making the Buy – On-Order Log
Add Open to Buy Dollars from Department Open to Buy Plan (Yellow Line)
Add reserves being held (Pink Line) Include Special Orders and Corporate if not being tracked
separately
Available Dollars for each month are calculated (Green Line)
Record orders as they are placed – OTB will be reduced
Stagger Shipping dates as OTB Dollars indicate for each month
Record comments for next year
34
Create an on-order log for each Department
Great tool for planning season & tracking orders
Buying with a Plan – Planning for the Buy
Understand your business and customers
Prepare to buy: Review Key Metrics
Analyze ALL Vendors annually
Plan your buy dollars using Dollar per Round or last year’s numbers Develop an Inventory and Open to Buy Plan
Use an On-Order Log to track purchases
Remember – it is just a plan!!
35
Presented by:
Tracy Moffatt
K&K Consulting
AGM Education Team
239-848-7274
Association of Golf Merchandisers
“The Educational Voice in Golf Merchandising”
602-604-8250www.agmgolf.org
All AGM educational materials are protected by U.S. Copyright and cannot be reprinted or used without the expressed
written consent of the Association of Golf Merchandisers.