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How to predict the level of stocks at the beginning of the season
25.02.2014 17277

How to predict the level of stocks at the beginning of the season

In order not to be in a situation of “late drinking Borjomi” with 60% residuals at the end of the season, it is necessary to regularly analyze the store’s turnover. But, as it turned out during business seminars, only 5 businessmen from 50 know how to do this. Maxim Gorshkov, an analyst at the Academy of Retail Technologies, explains how to use the turnover indicator to forecast balances and timely work with them.

# EXPERT #

In order not to be in a situation of “late drinking Borjomi” with 60% residuals at the end of the season, it is necessary to regularly analyze the store’s turnover. But, as it turned out during business seminars, only 5 businessmen from 50 know how to do this. Maxim Gorshkov, an analyst at the Academy of Retail Technologies, explains how to use the turnover indicator to forecast balances and timely work with them.

What is the point of accounting for turnover

All that is in our warehouses or located in the trading floor of the store is the current asset of the company, the goods that we purchased in order to sell later at the outlet, and the money that we invested in it. When there is a product, it’s good, but only until the moment when it becomes too little or too much. The problem of illiquid stock, or commodity residues, exists for the owner of any store. But in fairness it must be said that commodity residues always exist; another question is what is meant by their norm. Successful is the end of the season with stock in 15% of the order amount in cash units. Why exactly in cash? Because in one store goods can be presented for both 1000 and 10 000 rubles, and keeping records in commodity units can greatly distort the picture, because it is clear that cheap shoes diverge faster than more expensive ones.

Illiquid runoff occurs for several reasons. It may appear due to incorrect calculation during the purchase, management errors (incorrectly defined target audience, poorly selected location for the store), weather anomalies. All these factors lead to low turnover — a situation where the product does not sell as fast as expected. Yes, we all make mistakes, and weather quirks are impossible to predict, but this does not mean that you can do nothing to solve the problem of excessive residues. You can, and if you want to get out of a number of middling stores, you just have to keep a constant managerial record, in particular, a report on inventory turnover.

The inventory turnover report allows us to understand how quickly we can sell our inventory at a given turnover rate, or, in other words, with what level of residuals we will remain by the end of the season. By itself, this report did not make anyone a millionaire, but it at least allows you to keep your finger on the pulse of sales and competently manage your business. Representatives of small stores are often very skeptical of keeping records, explaining their position by the unpredictability of the weather. But the weather does not affect sales so much as to give up on keeping records by hand and go with the flow. Doing business without evaluating what is happening to it is like driving a car without a dashboard. Yes, you can drive to such a place where you need it, and its speed will not change due to this malfunction. But problems with the traffic police, lack of gasoline and “sudden” breakdowns in this case cannot be avoided.

How often to analyze turnover?

The inventory turnover report is effective only when it is carried out regularly - every day, week or month. I recommend compiling such a report on a weekly basis in order to respond as quickly as possible to changes in turnover and not to be exposed to informational “noise” arising on different days of the week. You need to fix the turnover throughout the season, and not only at the beginning, when sales are highest, or at the end, when it is too late to change anything.

What you need to take with you on the road to reducing balances

In order to understand how great the remnants of a particular category of shoes will be by the end of the season, you should know at least two things. First, you must have a clear classifier of all the shoes that are sold in your store. Sometimes the store managers themselves classify the product as God will put it to the soul, which ultimately causes confusion in the calculations. It is better to use a single classifier, the positions of which are not in doubt.

Secondly, you need to know your store’s turnover rate for each subgroup of products sold in your store. The turnover rate tells you how many days a product of one or another category should be sold. This indicator is exclusively individual for each store, and it makes no sense to focus on other people's businesses or even on your own stores in other cities. Why? Because weather conditions, delivery schedules, contracts with contractors, traffic, purchasing power and many other factors vary from store to store. To calculate your rate of turnover, take the date of arrival of a particular category of shoes from the supplier and the approximate date when the weather will no longer allow potential buyers to wear these shoes. The gap in days and will be your rate of turnover. Climatic conditions often do not correspond to the official seasonal framework (1 of September - 28 of February - for the Fall-Winter collections, 1 of March - 31 of August - for the Spring-Summer collections), but one must be guided precisely by the weather of the region in which the store is located . Our country is large, and summer moccasins with perforation can be perfectly sold in Krasnodar until October, while in Krasnoyarsk, the summer season in fact ends already in August. Accordingly, the turnover rate of summer moccasins in Krasnodar will be several times higher than in Krasnoyarsk.

Comparing the classifier of product categories and the rate of turnover for each category, you will receive a complete list of “Category - Rate of turnover”, with which you can consult during the season. For example, by looking at how much men's demi-season boots should be sold, and calculating their turnover rate for a given week (about the coefficient below), you will understand whether these boots need discounts or have every chance of being sold at full price.

How to find out if you are in short supply or surplus

To understand how long you have enough inventory for a particular category of shoes for a given sales dynamics for a week (day or month), focus on the turnover ratio. To calculate it, you need to have three parameters: average inventory for the period; the number of days in the period for which the coefficient is calculated; turnover for this period. You can use both monetary and real quantities at the same time: by comparing the results in rubles and pairs, you will get a more accurate picture.

First, we give the formula for calculating the turnover ratio: To about. = (Average commodity stock * number of days) / turnover

And now let’s take a closer look at the parameters that are needed to calculate the turnover ratio. The average inventory is the arithmetic average between the inventory in units or rubles at the beginning of the week and the inventory in units or rubles at the end of the week (we recall that the arithmetic average is considered as (A + B) / 2). For example, if on Monday the stock of the same summer moccasins in our hypothetical store was 1310 units, and on Sunday - 1243 units, then the average stock of moccasins this week is 1276 units. The number of days in the period for which the coefficient is calculated, in our case, is 7 days, because we consider the turnover for the week, but in general it can be considered both 1 day, and 31, 30 or 28 days when calculating the coefficient for the month. Turnover - the number of pairs sold or revenue that the store received for this period of time. Let in our example, the turnover of moccasins per week be 105 units, or 263 542 rubles.

Let's try to calculate the turnover ratio for our sample store in units per week: To about. = (1243 * 7) / 105 = 85,1. It turns out that in order to sell moccasins at the pace at which they are sold now, we need 85 days. If the norm for this category of shoes that we set for the store is less than 85, then we get out of the sales schedule, and the moccasins need sales promotion. How exactly is a separate topic, but in brief I can say that sales can be stimulated not only with discount shares, which are actually a last resort, but with contests between sellers and merchandising facilities.

Why is it so important to "keep abreast"

Regularly calculating the turnover rate for all categories of shoes sold in your store will help prevent excessive residues. Many sellers neglect calculations and as a result, by the end of the season they sometimes have up to 60% of surplus goods. “Suddenly” having received such a result, they begin to panic and look for answers to the eternal question “What to do with the leftovers?”. The bottom line is that when there are already large leftovers, you can’t do anything good with them. As they say, it’s too late to drink Borjomi when the kidneys have refused. Any attempts to recapture at least some money do not guarantee a result at all and obviously will not bring profit, and it is precisely this that is the meaning of the business. Therefore, constant monitoring is simply necessary if you want to avoid unpleasant surprises and really want toto govern their business.

However, the calculation of the turnover ratio is useful not only in the fight against illiquid assets. This coefficient can also be used to determine clearly successful and failed brands in your assortment: just compare the coefficients for one category of shoes, but different brands. You can also build a matrix “Turnover - Margin”, with the help of which you will learn which models are not profitable and take up space. In this matrix, all models will be distributed in four squares depending on their turnover ratio and margin. Those models that fall into the “Low Turnover - Low Margin” box should not be in the store’s assortment. The exception to this rule is, perhaps, only new, fashion or component products. All others, if they are not sold with a good mark-up and have been on shelves for too long, are subject to exclusion from the assortment. If you still can’t get rid of them, then you should think about how to increase their turnover or margin.

In order not to be in a situation of “late drinking Borjomi” with 60% residuals at the end of the season, it is necessary to regularly analyze the store’s turnover. But, as it turned out during the business seminars, about ...
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