{Need a good cornerman to coach you with your plan?  Contact me at Ritchie@write4retail.com}

I am guessing that heavyweight boxer Mike Tyson never saw himself as a business philosopher, but he certainly didn’t pull any punches with this quote.  The analogy between his quote and the trials and tribulations of the retail business is about as good as it gets.

Most retailers approach planning for the upcoming year by reviewing what happened the previous year, good or bad. Modifications are made taking into account the weather, the economy, the political landscape, merchandise trends, and current vendor relationships among other factors. Depending on the size and sophistication of the operation, the planning process can be as basic as an owner preparing a plan by himself, or as complex as soliciting input from a variety of sources including buyers, financial control folks, merchandise managers and even store operations staff.

Planning is most often done in the privacy of an office, surrounded by supporting spreadsheets and reports intended to backup or reinforce the outcome.  Well and good to this point. Assuming the plan is constructed accurately, taking into account trends in classification sales, margins, turnover rates, proper timing of deliveries, reasonable results could be expected.  However, much like a boxing match, the retail environment stands ready to deliver “punches to the mouth” sufficient enough to knock even the strongest of merchants down for the count if not prepared to go the distance.

Getting punched in the mouth is analogous to the unanticipated events that can have dramatic effects on a business plan.  Weather, like a boxing opponent, is unpredictable and capable of delivering a sucker punch to the best of plans.  Warm, dry winters can bruise an outerwear or glove season just like cold, wet springs hurt sandal sales.  If these two seasons occur back to back, you have a right, left combination that can land a retailer on the ropes.

Other “punches” retailers endure might include, late shipments for any variety of reasons, road construction in front of the store, your best salesperson leaves, the landlord raises the rent, the air conditioner goes out on the first hot day, fit issues, shoplifting, the POS system is obsolete, an on an on. Any of which can be a huge body blow to the business.

How you recover from the many varied body blows you are bound to receive during the course of a year speaks volumes to how well you have planned.  If the sales forecast is not trended properly, you run the risk of having either too much or too little inventory as this is the crucial starting point for any merchandise plan.  If the turnover rate for the particular classification being planned is incorrect, the result could be missed sales opportunities or too much stock.  Seasonal adjustments must be made to the planned inventory levels so as to have enough to meet customer demand, but not so much as to create a markdown problem.   Exit strategies must be planned for clearance of seasonal products to avoid excessive carryover.  Not having such a strategy can result in a blow below the belt, causing cash flow to be tight and in severe cases credit issues with vendors. This in turn can force a retailer to resort to alternative funding sources such as credit cards or tapping bank credit lines.

Since markdowns affect sales as well as ending inventory levels, they should be built into the plan profitably at this time.  Planned markdowns add to needed inventory. If sales and inventory projections are not met or were planned incorrectly, the business will experience yet another jab. Next is to plan the receiving flow at cost and retail. For this to be accurate, you will need to know the initial markup for each class.  Finally, the merchandise-on-order expected is added for each store and class and you have your merchandise plan.  One last kidney punch is possible however.  If all of the orders are not entered into the POS system, the open-to-buy will be wrong and you could end up buying too much.

Successful planning both on the merchandise side as well as the expense side is vital to any retail operation.  Without a solid plan in place, the chances of success are greatly diminished.  Creating a plan that relies on optimal business conditions or best-case scenarios is risky at best and potentially disastrous at worst. Remember, it’s not IF you are going to get punched in the mouth this year, it’s when, how many times, and how hard. With a solid plan, your business will be better prepared to go the distance. Those that choose not to plan, or don’t adhere to their plan, might just be the ones that end up throwing in the towel.

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