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3 Key Strategies to Increase Retail Revenue and Reduce Costs

AGM Survey Results 2008. 3 Key Retail Strategies. Agenda:Provide simple tips and solutions to implement now to increase retail sales while reducing costsRight Product/Merchandise selectionRight Price/Pricing StrategiesStaff Utilization. Right Product. Who is your customer?SurveyVisualWrittenPOS analysisData collectionResultsMerchandise selection relevant to customer?BrandPricingType.

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3 Key Strategies to Increase Retail Revenue and Reduce Costs

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    1. 3 Key Strategies to Increase Retail Revenue and Reduce Costs Presented by Lisa Langas Golf Retail Consultant GIS February 4, 2009

    2. AGM Survey Results 2008

    3. 3 Key Retail Strategies Agenda: Provide simple tips and solutions to implement now to increase retail sales while reducing costs Right Product/Merchandise selection Right Price/Pricing Strategies Staff Utilization

    4. Right Product Who is your customer? Survey Visual Written POS analysis Data collection Results Merchandise selection relevant to customer? Brand Pricing Type

    5. Right Product Control Merchandise Purchasing Open to buy plan Purchase Orders On Order logs Sourcing for Merchandise: Regional and National PGA shows Off-Price retail show Las Vegas Regional and local merchandise mart shows Internet offerings

    6. Right Product Merchandise Performance: Stock to Sales performance Vendor analysis Average retail selling price point Markdown analysis Make changes immediately

    7. Right Price Initial Markup High enough to meet profitability goals? What is eroding initial markup daily? Monitor via POS system How to increase without major impact on retail price

    8. What is Initial Markup? It is the difference between the wholesale cost and the original retail price. Retail Price $100 Wholesale Cost - $ 48 Initial Dollar Markup Up =$ 52 It needs to be large enough to cover operational expenses and discounts like markdowns and still provide a profit. Right Price

    9. Key factors you need to know to establish the correct amount of Markup: What is your net profit goal? Is this the same as your Gross Margin goal? What are your operating expenses as a percent to your retail income? Are shipping costs included in your golf shop expenses? What is your actual Markdown Rate? Do you pre-plan markdowns to take in season and use an estimated markdown percentage to calculate? Right Price

    10. Profit Goals The net profit goal is the amount of income as a percent to retail sales after paying all expenses for operating the business: Net Profit Goal $ 70,000 Retail Sales Goal ÷ $ 350,000 Net Profit % = 20% For this shop, the goal is to make $70,000 (before taxes) which is 20% of the total income derived from Retail Sales Right Price

    11. Operating Expenses Operating expenses like payroll, utilities, office supplies, etc. also need to be accounted for in your initial markup as a percent of the total retail income: Operating Expenses Budget $ 52,500 Retail Sales Goal ÷ $ 350,000 Operating Expenses % = 15% For this shop, the operating expense budget is $52,500 which is 15% of the total income derived from Retail Sales Right Price

    12. Markdown Goal Markdowns are a normal expense in conducting any retail business! Markdowns should be pre-planned and the total dollar amount is represented as a percent to total income. Markdown Budget $ 87,500 Retail Sales Goal ÷ $350,000 Markdown Rate % = 25% For this shop, the markdown budget is $87,500 which is 25% of the total income derived from Retail Sales Right Price

    13. Golf Shop 2009 Retail Goals for $350,000 in Net Retail Sales: Dollars % Net Profit $ 70,000 20% Operating Expenses $ 52,500 15% Markdown Rate $ 87,500 25% Right Price

    14. Profit +Expenses+ Reductions = Initial Markup% Retail Sales + Reductions % method: 20% + 15 + 25% = 60% = 48.0% 100% + 25% 125% $ method: $70,000 + $52,500 + $87,500 = $210,000 = 48.0% $350,000 + $87,500 $437,500 Right Price

    15. Putting it all together: Net Profit $70,000 + 20% Operational Expenses +$52,500 + 15% Markdown/Reductions +$87,500 + 25% = $210,000 = 60% Cost of Inventory + $140,000 + 40% Total retail sales = $350,000 = 100% Right Price

    16. How do I use my initial markup percent to determine the correct retail selling price? Divide the known cost price of the merchandise by the cost complement of the markup goal. 100% Markup Goal - 52%* Cost Complement = 48% *Soft goods markup after reviewing business Right Price

    17. Correct way to use initial markup percent: Calculation using our quick tip: Wholesale Price $33.00 Cost Compliment ¸ .48 Original Retail Price = $68.75 Round this figure up to an even $69.00 or $70.00 for pricing purposes. Right Price

    18. Incorrect way to use initial markup percent: Why can’t I simply take the wholesale price and multiply times 1.52? (100 plus the markup?) Wholesale Price $33.00 100 plus markup x 1.52 Original Retail Price =$50.16 Round this figure up to an even $51.00 for pricing purposes. Right Price

    19. Retail Markup – By using the compliment of your markup you are determining the dollar amount of markup needed based upon the retail price $69.00 - $33.00 = $36.00 markup $36.00 ÷ $69.00 = 52% markup as a percentage of the retail price Cost Markup – When you use the markup plus 100, this is determining the dollar amount of markup needed based upon the wholesale cost. $50.00 – $33.00 = $17.00 markup $17.00 ÷ $33.00 = 52% markup as a percentage of the cost Right Price

    20. Right Price Pricing Programs Multiple tiered pricing Low Mid High MSRP Value pricing Loss leaders Impluse products

    21. Pre-plan your Markdowns! Establish a markdown budget per month as discussed in our initial markup section! Can spend each month as necessary to move slow sellers, or “save” to use for larger sales. Controls the amount of dollars you spend on markdowns and helps you to implement your markdown strategy. Right Price

    22. What does a markdown strategy or plan look like? Step 1. First start with frequent/smaller deliveries of inventory! If the golf shop doesn’t get overstocked by controlling flow of goods into the store, you don’t have to take as many markdowns. Work deliveries for softgoods back to previous months color stories or basics so that you can continue to sell product at your retail price. If purchasing off price goods, factor into your sales promotions to help pay for markdowns on inventory with less markup. Right Price

    23. Markdown Strategy cont: Step 2. Develop plan to I.D. slow selling merchandise. This is done by determining how much product you want to sell in a given time period and than determining your plan of action to make it sell: Time: 4.0 turnover goal = 90 days selling model Amount sold: Plan to sell 50% of inventory in 45 days. Action: Merchandise not meeting this goal subject to markdown immediately. Right Price

    24. Markdown Strategy cont: Step 3. Set markdown plan of action: a. Rotate/Focus/Signage = 50% sell thru b. 1st markdown soft sale most profitable c. 2nd markdown more aggressive d. 3rd markdown final clearance Right Price

    25. Calculating your Markdown Rate: Wholesale cost $34.75 Our Retail price $73.00 Sold for price $54.75 Original Retail Sale Price Markdown Dollars $18.25 $18.25 Retail Price ÷ $73.00 ÷ $54.75 Markdown % = 25% = 33% Right Price

    26. Staff Utilization Is everybody on the same page? Top down approach to operation Are you investing in them? AGM/PGA programs Do they know/understand the retail business? Utilizing pos system to improve sales via staffing Are they empowered to generate sales Rewards and incentives Team atmosphere Staff Utilization

    27. Staff Utilization Training programs Sales training Customer service standards Product knowledge Visual merchandising standards Daily/weekly/monthly Creative displays Rotating merchandise housekeeping Mini face lift every year Paint Stain Clean carpets Replace fixtures

    28. Resources Lisa Langas Golf Retail Consultant www.lisalangas.com lisa@lisalangas.com 303-470-3406 Association of Golf Merchandisers – AGM Desane Blaney Executive Director www.agmgolf.org Tom Hoch Designs Tomhoch@tomhoch.com 405-524-0505 www.tomhoch.com Off Price show Las Vegas February/August www.offpriceshow.com Magic apparel show www.magic.com National Retail Federation Smartbrief daily e-mails Retail trends and information www.nrf.com

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