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Presented by: Tracy Moffatt K&K Consulting AGM Education Team BUYING WITH A PLAN – PLANNING FOR THE BUY

Buying With a Plan - pgaofalberta.com Sell through ... Retail Sales Cost of Goods Sold / Gross Margin Inventory levels / Turnover ... Shipping location. 7. 8 Retail Sales

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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

7

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

20

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

26

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

[email protected]

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.