by Abe Sherman – CEO, BIG – Buyers Intelligence Group

July 22, 2020

Working in a topsy-turvy world in which you have less control over the things that heretofore you were able to count on; such as an expectation about what sales will be in the coming months, is having a disquieting effect on those who plan sales and inventory months in advance.

Unknowns, such as whether your state or city will be shut down due to increasing COVID cases, staff who may decide to quit, or who may get sick mid-December – these things should be on everyone’s mind and while they need to be a part of your thought process, we still have to deal with what we can plan for:

  • Inventory Budgeting
  • Best Sellers
  • Reordering
  • Lead times

If there is one obvious omission from this list, it’s Sales. I left if off since it’s not only going to be difficult to predict, but because I’d like to set it aside for today – I’d like to ignore Sales. My thinking for this is to take a different approach due to current events.

Under normal circumstances, planning for the 4th quarter is pretty routine. There are look-backs to see how the past year or two performed in Q4 while measuring results for marketing, events, sales, vendor performance, category performance and staff. However, nothing is normal this year and we struggle to get our arms around these issues – we struggle to plan.

I remain cautiously optimistic, but when every single aspect of your business has the opportunity to be disrupted, planning becomes much more of a guessing game than our usual planning exercise. Of course, if you are not one who worries about planning, than this is business as usual for you and while certain things may be annoying, you won’t be as anxious about them as those who plan everything. Planners and Inventory Managers are the ones calling us with questions.

Inventory Budgeting

Go to war with the Army you have, not the Army you want. This axiom is applicable in this situation more than ever – I would encourage you to use the inventory you own to fill in the category/price point holes that exist. With gold’s recent jump, your inventory may get marked up in as many cases as items get marked down. We call this re-merchandising and it is extremely effective. Here is a link to a five-minute video we did on re-merchandising https://vimeo.com/143749297.

Go Narrow – Go Deep

Best sellers need to be backed up – soon. If you typically stock 1 or 2 of a number of your fast-sellers, review the number of times you sold those items in Q4 and order that quantity for stock. Most stores find that a relatively small number of items make up those never-outs, and these will (and should) take up a significant chunk of your budget this fall – it’s okay to be investing in your best-selling items. Order them now, and if you can’t get fall dating on all of it, have your vendors split the shipping dates, but you want to make sure those goods are available to you when you’ll need them.

Reordering

We don’t know what the supply of goods is going to look like four months from now. There are disruptions all along the manufacturing pipeline and those disruptions remain uneven in different countries and cities. Indian and Chinese manufacturing capacity vary widely, but we have been hearing only 25% or less of production is available as of today (mid-July 2020) in some parts of the world. You will not be able to rely on your typical reordering process – so don’t. Use what you own to re-merchandise and sell down aged inventory.

Lead Times

I would also start thinking of lead time in months, not weeks. With diminished production capabilities, those factories that are open will be running as hard as they can, but you may not be able to get your last-minute replenishments after the first or second shipment. Imagine all of those retailers who are not backing up their best-sellers – they’ll all be reordering at the same time – too late to get merchandise.

Margin

You have an opportunity this year to improve your gross profit. Yep, that’s right, improve your gross profit. Your inventory is more valuable today than it was a year ago. It’s not just the price of gold, but the fact that you already have it in stock! This is the army you’re going to war with in 4 short months, so treat it well. This is the year for you to be building cash anyway, so get lean, maintain margin and control your expenses.

Conclusion

This year, the planning process is definitely going to be different, so don’t stress about the things you have no control over. But that’s okay, since there are plenty of things you can and should be working on. Planning in a Blender is about how to attack those things. Call me if you need help.