Implementing A Merchandise Improvement Program
Utilizing the tools discussed previously in this section, store management could improve the profit you obtain from the lines you carry by:
- Mentally separating your merchandise into a few categories based on size and cost.
- For each category, selecting those items which you consider to be your best products; and determining the stock-turn for these.
- Selecting a few of what you consider to be your poorest products; calculate their stock-turns.
- Selecting a stock-turn figure that you could use as your goal for all merchandise in a given category, based on what you found the stock-turns. to be for both your best and your poorest products.
- Keeping the desired stock-turns. in mind as you purchase new merchandise in various categories, and gradually bringing your entire stock closer to the turns set for each category.
Obviously, stock-turns. are only general guidelines for store management. There are many reasons why, with respect to a specific item, you may not be able to adhere to them:
- You may have to purchase minimum quantities of an item so that you might not be able to reduce your average inventory enough to maintain the stock-turns. you have selected.
- You may have an opportunity to obtain quantity discounts on large volume purchases. In cases where it pays to take the discount, your stock-turns. would also probably be smaller than the stock-turns. you have set.
Stock-turns. alone are not enough of a guide upon which to evaluate your merchandise. In order to decide which merchandise may not be appropriate for your store and which should be replaced by more profitable merchandise, you should also look at the profit/ sq. ft. and profit on investment for the poorest items in each category, as discussed earlier in this section.
Before you decide to replace items from your merchandise lines which show poor performance in terms of profit/sq. ft. or profit on investment, you should assure yourself that your manner of merchandising them isn't the problem. In many instances, products can be promoted in order to improve their volume. With these items, you must try various advertising and promotion strategies as will later be discussed. At other times, it is obvious that little can be done with a product. Some items just do not lend themselves well to advertising or to promotion. In such cases gradual replacement is the best strategy.
Gradual Replacement of Undesirable Merchandise
Although it is possible to simply drop a low profit item from inventory, such a procedure narrows selection and may leave gaps of space within your store. It is generally better to first locate replacement merchandise before phasing out undesirable products. This is especially true where an entire merchandise line is involved, since simply dropping the line would create lower overall volume and less sales with which to carry your fixed costs.
Replacement of an undesirable product begins with a search for merchandise that might be useful in your store. Such a search can include steps used to initially decide on the merchandise lines to carry. You might:
- Look at what competitors in similar stores offer.
- Obtain suggestions from sales people.
- Carefully listen to customers about the kind of things they are looking for; talk to customers about what they like in other stores.
- Carefully read the trade literature.
- Look at the advertisements in chain stores and department stores.
By remaining alert and using these methods, you will gradually acquire new items to carry in your store and will be able to see whether these items improve your profitability. Sometimes entire lines of merchandise can be added this way.
Once you have introduced a new product or line, you must support it with:
- In-store promotions
- Advertising
- Sales efforts
Customers first must be aware that the line can be purchased in your store before it will become profitable for you. It is only after all sales and promotional efforts fail that it is probably best to mark dawn and sell remaining items and start again with a different item.
This is a gradual and difficult process, of course, but if you persevere, continue to identify those items that are least desirable, and slowly attempt to replace them, gradually the profitability of your store is certain to improve.
Checklist For Improving The Merchandise Mix In Your Store
This checklist is not designed to be exhaustive or to provide you with all the answers on how to improve merchandise selection and profitability of your store. It can, however, provide you with a starting point and a number of ideas which you may wish to consider for merchandise improvement.
- Classify your merchandise into categories based on size and cost.
- Determine which products appear to be the best and least desirable products in each category.
- Set reasonable stock-turns. for each category.
- Work gradually toward an inventory position which will bring equal turns on all merchandise items and lines within each category.
- Determine what profit/sq. ft. the poorest items of each category bring.
- Determine which of your least desirable items might be made more attractive through in-store promotion, and which items are less promising and need to be replaced or eliminated.
- Hold sales on all the items which should be eliminated.
- Advertise and promote those items that appear to have some promise in becoming more profitable.
- Experiment with new products which may be able to replace your least desirable merchandise.
- Evaluate the results of advertising and promotion to see whether the additional products should be replaced.
- Find new products to take their place.
- Try advertising and promoting those new products to see whether they are any better.
- Strive to gradually develop an improved line of merchandise.
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