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Putting A Retail Open-To-Buy To Work

Copyright (c) 2012 Ted Hurlbut

With a retail Open-to-Buy, you’ll gain better insight — and better revenues — into how much inventory you need to acquire and sell each month.

Published by Inc.com

The situation we were confronted with wasn’t very rosy. My client, a highly seasonal small retailer, was just coming out of their busiest season, hadn’t made their sales numbers, was sitting on far too much inventory, and were projecting to be short on cash within the next few months.

Not good.

A unique scenario? Hardly. It’s very easy for a small retailer to find themselves in this situation. Start with a soft selling season, mix in a buying pattern that has too much inventory coming in too early, and in an instant it’s easy to suddenly be cash poor. And for some small retailers, it’s a chronic pattern that repeats itself year after year.

What small retailers who find themselves in this situation are lacking is a plan. They’re lacking a quantitative plan that tells them how much inventory they need and when to bring it in, and then tells them how they’re doing once they get into the selling season. In retailing, such a plan is called an Open-To-Buy.

A retail Open-To-Buy is a merchandise budget, usually stated in retail dollars, frequently broken out by key departments or categories. It is particularly appropriate for fashion and seasonal merchandise, where the specific items may change, but the departments, classifications and sub-classifications remain relatively stable, and inventories are brought in at the beginning of the selling season, and need to be managed down to pre-determined ending level by the end of the selling season.

So how do we begin to put a retail Open-To-Buy to work? We have to build out a plan.

* A retail Open-To-Buy begins with a sales plan, which for most small retailers is broken out by the month. The question to ask is a very basic one: “For each month, what is the most likely level of sales from stock (excluding special orders)?”

* Once a sales plan has been developed, ending inventories need to be planned. The question to ask is this: “How much inventory do I need at the end of each month to support the next month’s sales (in some cases the ending inventory may need to support more than just one month of future sales), as well as maintain effective merchandise displays?”

* Once sales and inventory has been planned, an inventory receipt plan can be arrived at. For any given month, the planned inventory receipts answers the question, “How much inventory do I need to bring in to cover my sales, markdowns and adjustments, given my planned beginning

* The open-to-buy within any given month is the planned receipts for that month less the current purchase commitments. For future months, especially for future seasons, it quantifies any remaining available open-to-buy for that specific month.

A well thought out plan establishes the critical benchmarks for evaluating exactly where you are once you get into the season. It’s after the season gets underway that an Open-To-Buy really gets put to work.

* A well structured retail Open-To-Buy presents both the plan and actual results, and allows management to track progress as the season goes along. Actual sales can be compared to planned sales, actual receipts to planned receipts, actual ending inventories to planned ending inventories, future open purchase order quantities to planned receipts for each month.

* Like any good budget, a retail Open-To-Buy has a future orientation. The open-to-buy through any given month is the planned ending inventory less the projected actual ending inventory. For future months, it identifies through any given month whether additional inventory is needed or whether too much inventory has already been committed to.

* Within a season, a retail Open-To-Buy gives a small retailer the information necessary to make critical decisions regarding what to reorder, what to back off on, and how to allocate any remaining Open-To-Buy dollars. If a department is exceeding its sales plans, ending inventories will likely come in below plan, creating more open-to-buy. The Open-To-Buy quantifies how much additional inventory is necessary.

* A retail Open-To-Buy gives a small retailer the information necessary to assure that ending inventory levels don’t exceed plan, and tie up valuable cash. If sales are coming in below plan, ending inventories will likely come in above plan, shrinking any open-to-buy, or even creating an overbought situation. The Open-To-Buy quantifies how much any future purchase orders need to be reduced to get the inventory back in line.

Like any management tool, a retail Open-To-Buy is merely a tool to help a small retailer better manage their inventory. It requires an initial investment in time and attention to build out a realistic plan, and diligence to maintain it as you go through a season. But it can yield dramatic results quickly in most situations, from increased sales to leaner inventories and reduced markdowns and overstocks. It’s a tool that in the hands of a fully committed small retailer can profoundly improve financial performance.

Retail Jobs: What Can Help You Determine If Retail Work Is For You Or Not

Retail jobs can be very rewarding if you are truly serious about the kind of work that retail jobs entail. When you are looking for retail job opportunities you want to find ways to explain what your long-term career goals are as well as what your short-term goals are. Being in retail doesn’t require you to settle for an unfulfilling career. If having a job in retail is something you feel would be for filling, then you will surely have ways of measuring what you want now and in the future. If your goal is to grow with the company, then make sure you explain this when applying for an opportunity.

Explain what your short-term goals are in order to help a particular company understand how you will help them right now. All of these things are important, and you can begin looking for various retail job opportunities, which will meet those short-term and long-term goals right now. You can register with employment911.com/jobs/job-listings-expired.aspx?k=Retail. Here you will be able to find all types of jobs, which will help you to meet those long-term, and short-term career goals.

When you are looking for retail job postings you want to know what aspects are most important for you in a particular job. Are you interested in working in a retail job where you will not be directly involved in the sales process? Many people want to get into retail because they enjoy the hands on approach and they enjoy telling people about products and/or services. Then you have other types of retail jobs, which will not put you into much direct contact with the public. It is very important for you to think about which aspect you feel would be best suited for you, and then apply only to those retail job postings that fit.

Even though retail jobs can be rewarding for those who are truly serious about it, there will still be difficult aspects you will have to deal with from time to time. There will be several times in retail where you will become frustrated or have bad days. You can help yourself now by determining what difficult aspects of retail you have a hard time dealing with. Do not see it as a bad thing to explain these things when you’re applying for this type of work. Maybe the prospective employer can help you find ways to cope with these difficult aspects. Often times various people in the company may experience some of the same frustrations as you do.

In retail finding ways to constantly keep yourself motivated in order to get through the difficult times is extremely important. Certain types of retail jobs will be way more demanding than others. You must remember that the retail industry is a very competitive industry. When you decide to use employment911.com/jobs/job-listings-expired.aspx?k=Retail to look for postings you may want to take note of what type of companies you might be working for. If you feel as if the job would be too demanding you can always decide to go for a company that will not put too many expectations on you too soon.