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Welcome to our seminar on ‘open-to-buy’ planning: “How Much Should I Buy ?”

Welcome to our seminar on ‘open-to-buy’ planning: “How Much Should I Buy ?”. ROY. BUY ONLY WHAT YOUR OTB PLAN TELLS YOU!. BENES. Open-To-Buy benefits :. Buy the right quantities. Open-To-Buy benefits :. Buy the right quantities Improve your item selection. Open-To-Buy

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Welcome to our seminar on ‘open-to-buy’ planning: “How Much Should I Buy ?”

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  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 Surfboards 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. don’t 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! DIFF#2

  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. It’s 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

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