How to determine the amount of shoe purchases for the next season?
At the beginning of the season of buying a new collection, buyers face a difficult task: they need to take responsibility and decide how many shoes to buy so that they are enough to meet the sales target, and at the end of the season to reach the established stock rate. There is always the question of how to determine the exact number of pairs to sell in retail stores? We are looking for an answer with SR expert Evgeny Danchev, who shares a case from his consulting practice and gives examples of competent sales plan calculations.
Evgeny Danchev -
business coach, consultant, expert in increasing sales of the fashion market. Author of the book "A Practical Guide to Increasing Sales of Shoes and Accessories". Author of sales scripts "60 responses to customer objections in a retail shoe store" and "Standards for retail shoe sales." Creator of an online school for fashion market leaders.
@evgenydanchev,
https://onlineschool.wconsulting.su/
The classic scheme, which most buyers work on, is not distinguished by a trivial strategy. They buy based on last season's sales and add or reduce an order based on current sales results and market demand dynamics. Yes, such a simple strategy works, but only in growing markets. As soon as the markets start to fall, this buying strategy stops working. You can’t constantly buy less and less goods, because sooner or later this will lead to losses in the company.
The purchase of goods is a kind of equation with several unknowns. Before determining the purchase amount, I always recommend that my clients in consulting projects answer a few questions.
Questions for the preparation of procurement planning:
1. What is the company's break-even point for the year and separately for each sales season? It must be borne in mind that, taking into account rising costs and inflation, the break-even point for the last season, as a rule, is not equal to the break-even point for the next season. Therefore, when calculating it for the next period, it is important to include a correction factor that makes the forecast more realistic.
2. In what phase of the life cycle is each shopping center and your retail store located on its territory? You need to understand that if the shopping center is in the growth phase (new renovation, all trading places are filled, growing or stable customer traffic), then of course we can plan sales growth. If the shopping center is in a recession phase (empty trading places, no repairs have been made for more than 10 years, falling traffic of buyers), then it is necessary to plan measures to stabilize sales. If your stores are not located in shopping centers and work for the flow of people from the street, then do a life cycle analysis of each store.
3. Do you plan to open/close retail stores during the next sales season? The opening of a new store cannot be a spontaneous event, everything must be planned in advance. You need to clearly know your store format, taking into account the required retail space, opening costs and the amount of goods needed for full-fledged work from the first month of rent.
The practical part of the formation of the procurement plan
Based on the break-even point, analysis of the life cycle of stores and development plans, it is necessary to draw up a sales plan for each month for the next season. When the plan is fulfilled by 100%, the company on paper should receive the profit that the business owner expects. I hope you will agree with me that any retail business is opened for profit, which must be planned. The option of doing business “Let's start, and then we'll see what happens” has already buried thousands of businesses in Russia. According to statistics, by the end of the first year of existence of new businesses, 80% of them are closed. By the end of the fifth year, only 3-5% remain on the market.
It is important that when approaching the preparation of a sales plan, we are guided by future goals, and not just look at what was in the past. We need to understand what we want to get, and not think only about problems and limitations. Of course, this approach requires the use of additional resources to fulfill the sales plan. This includes control over the work of sellers, and the correct material and non-material motivation of employees, and competent marketing campaigns.
Based on the sales plan, it is necessary to draw up a financial plan that will reflect all the expenses of the company. In it, we must take into account one very important factor that affects the profit of the company. I mean trade markup.
Case from business practice
One of the leaders of a shoe company asked me why there was an acute shortage of goods in his stores at the end of the sales season, although, in his opinion, enough pairs were purchased for the season.
After looking at the sales report, together we quickly found the cause. Yes, we bought enough goods, only the sales and marketing department got too carried away with discounts and brought down the trade margin on shoes. As a result, in terms of sales revenue, the result was good at the beginning of the season, but the profit decreased and did not reach the required indicators. By the end of the season, not only did the size ranges end, but the total number of models dropped sharply. The new collection had not yet arrived by that time, and it was already difficult to trade the current one. The results of such a detailed analysis were confirmed by sales assistants in stores.
The key idea when planning the purchase of goods is the correct chain of sequence of actions, namely:
1. We determine the sales plan for the season.
2. We determine the average level of the trade margin for the season.
3. We set the rate of residues by the end of the sales season.
4. We take into account the planned balance of goods by the beginning of the new sales season.
5. We predict the average cost of one pair of shoes.
6. We translate the purchase amount into pairs.
Example:
Suppose we calculated the break-even point for the company for the spring-summer season (from March to August) - 10 rubles with an average markup for the season of 000%. That is, with such a combination of numbers, you will not earn anything, but you will not lose anything either.
If your goal is to earn 1 net profit per season, then with a sales plan of 000 rubles and a 000% mark-up, the profit will be exactly 12 rubles (provided that expenses do not increase).
But in practice, the costs will in any case be greater, since the payroll of sellers will increase. Of course, you can make the exact figure for increasing expenses and adjusting net profit yourself, taking into account the specifics of your business.
Let's say you set your end-of-season stockpile rate at 20%.
Suppose the forecast for the balance of the current collection is 2 rubles in retail prices.
Payment:
12 + 000% balances = 000 rubles
Subtract the balances of the current collection 14 - 400 = 000 rubles.
We translate the amount into the cost of goods (markup 100%) 11: 900 = 000 rubles
Suppose the average retail check is 3 rubles, which means that the average purchase price of 000 pair, including delivery, is 1 rubles.
5 950 000: 1 500 = 3 966 pairs of shoes are calculated according to the purchase amount and according to
param.
If you buy one part of the goods in advance, and the second part during the sales season, then plan the purchase, as described above, only for the part that you buy in advance.
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