PERSPECTIVES

From The Co-Founders

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Tips, Tactics & Strategic Insights and Commentary
from The ROI Co-Founders, Pat Johnson and Dick Outcalt
Outcalt & Johnson: Retail Strategists LLC; Retail Turnaround Experts

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Smart Buying in the Covid Age

That's a sign of the times, isn't it?

While retailers are more accustomed than most folks to cope with change, 2020's unrelenting flexibility tests have been a challenge. Forget about five years. Retailers have to be ready for the next five months! It's back-to-school and then Holiday.

The only certainty about the next five months is that they will probably feel like the past five months. Yet you still must run a retail business. And that means you still must buy and sell merchandise. 

The opportunities – and the pressures – are mounting.

Your vendors are more eager than ever to meet their own sales goals. And emerging online wholesale marketplaces touting "guaranteed sales" and 60 day terms and small minimum orders seem to be multiplying, thanks to deep-pocketed investors.

Not only is there the traditional pressure from the vendors to "buy more, save more,"  there now are the online sales techniques: "Retailers who bought this also bought this..." 

How best for retailers to take advantage of these new resources...and still have any cash?

It's all in having a plan, a buying budget. And having the confidence to stick to it.

Amidst all of the uncertainty of 2020, there is a way for retailers to do just that. 

It starts with making some savvy assumptions about expected sales. Then, at The ROI, your sales assumptions can be turned into an inventory buying plan – in nanoseconds. All on your own.

A game plan, a path forward. Some semblance of clarity. What could be better?
 

Step 1: Make Your Sales Assumptions

First, make your assumptions about the sales you anticipate for back to school and the Holiday season. Given the on-going uncertainty of the virus, few specialty retailers will meet or exceed last year's results. 

So, start by looking at last year's back-to-school and Holiday results, and dial them back for this year. 60% of 2019? 75%? Be as realistic as you can. 
 

Step 2: Merchandise Mix of those Sales

Next, a critical step: nail down your assumptions about the MERCHANDISE MIX you will need. (For more about this, see New Dynamics of Merchandise Mix and Post-Covid-19: Five Stages of Inventory Management.) Don't be shy about your assumptions.

  • Purchases of "Basic" merchandise will prevail. Perhaps as much as 50% to 65% of your total sales.
  • The remaining 35%-50% of sales will be predominantly "expanded basic." 
  • Expect just a small portion of your sales to be dedicated to "discretionary" items. 


Step 3: Convert to Buying Decisions

Now, turn all this into something you can use to make some decisions. Put these sales assumptions into The ROI's online Multi-Department Open-to-Buy Planner. It's easy and fast for retailers. 

  • For this first draft, call one department Basics, and enter the expected sales. Do the same for the next two "departments," Expanded Basics and Discretionary. 
     
  • Enter your best guesstimates of expected margins and turns for each category (and an estimate of how much of your inventory @cost is in each category to start.)

And that's it. Immediately, for each of these categories, you have a monthly inventory buying budget. And it happened "auto-magically!"

These OTB plans become the guardrails for you and your buyers. Within those budget parameters, you then apply your best judgment of which vendors to purchase from, and what items to select. You also will have a ready answer when a "special buy" pops up: do we have any Open-to-Buy?


This unique online "calculator" is a tool developed specially for owners. It enables you to quickly develop a game plan for your store, all on your own. Auto-magically!

And, you can update this game plan as the game unfolds. Adjust and tweak it whenever needed. All on your own. 24/7. No additional cost. 
 
This is its time. Take advantage and make this your time too!
 

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    Answers to Those Top Two Buying Questions

    There is much enthusiasm coming out of the buying trade shows, and why not? 

    Attendance levels have been near to or better than 2019. Energy levels are high, and very contagious. A sense of urgency persists, due to past supply chain issues, emboldening the pressures from the vendors to "Buy now!" 

    Especially in today's environment, FOMO - the Fear Of Missing Out – can be a compelling sales pitch.

    How to deal with this pressure, especially given all the headlines about a coming recession, or drops in consumer spending, or cautions about the need to control expenses, improve profits, maintain cash?

    Here are two tactics to help you manage this. One helps monitor and control "How much to buy?" The other helps decide "What to buy?"

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    Is Being First Smart?

    A few years ago, during a planning session in our office, we drew a quick diagram on a whiteboard. It showed three shapes. 

    • The large rectangle at the top was labeled "What we COULD do" Lots of good ideas deserved a place in this box!
    • The much smaller rectangle below it was labeled "What  we SHOULD do" Ahh yes, those pesky obligations. 
    • And finally, at the bottom, was a tiny little square: "What we WILL do!" 

    Out of all of the potential things we could do, which ones truly warrant our time, energy, and resources?

    That picture keeps coming to mind as the COVID-19 shutdown orders on retailers of "non-essential" goods are starting to be lifted. 

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    Post COVID-19: Five Stages of Inventory Management

    Customers have become very tentative and “prone to thrift”, as the economists say. As the economy reopens, the lowered sales demand drastically reduced inventory levels. 
    • However, as the inventory quantity is reduced, the new imperative is the mix of merchandise. 
    • Discretionary spending will lag; retailers must expand and feature the basics, the “never-outs,” like never before. ​
    Here are our BIG PICTURE thoughts on the stages that might unfold.
    • Total inventory levels must be reduced, especially at first, and then grow over time as sales levels return.
    • Importantly, the MIX of merchandise must change. Significantly!
       

  • Responding to COVID-19: Apply Your Best Judgment

    Alas, there is really no way to avoid discussing COVID-19, the coronavirus that began in China last month, and now continues to spread throughout the world.

    No matter whether or when it is officially declared a "pandemic," the uncertainty and angst that it is generating have troubling implications for retailers.

  • Who's Buying What's Selling, And Where?!

    It's a given that your sales volume is a very big deal. Granted, you are analyzing it every day. But here's a slightly different approach which you may find very revealing.

    Let's start with a couple truisms. The definition of retailing is “selling to the ultimate consumer.” 

    Retailing also is having "the right product at the right price at the right place at the right time for the right customer."

    But, as retailers ponder how best to manage sales in the current consumer environment, does it really matter whether their "right customers" buy from them in-store or online? 

    Actually, it might! And here’s a simple, free "pilot project" to find out a little more.

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    Enough already with the "Covid Fatigue"

    Have you noticed? "Covid fatigue" has been spreading lately. It seems to be almost as contagious as the virus itself. Ugh!

    And small wonder. Even as parts of the economy strive to re-open, they only remind us of how different everything is.
    • Major League Baseball played in stadiums of cardboard cutouts of fans. The U.S. Open Golf Tournament with no spectators. Professional basketball teams in "the bubble" at Disney World. 
    • And some colleges preparing to resume fall classes have been described as "a cross between a seminary and a minimum-security prison."
    Meanwhile, the U.S. Congress cannot agree on what should be done next. A nasty election campaign season looms. Protests are still happening in many locations. 

    Remember this: all these things that contribute to our Covid fatigue, what we have called the "Pandemic Trifecta of 2020" – the virus, the economic meltdown, the national protests – all of these are uncontrollables. We all are victims of all three pandemics. 

    But, you CAN control what you choose to do with your business going forward. Will you choose Door A, Door B or Door C? 


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