%20are%20going%20to%20come%20in%20or%20not.%20While%20few%20have%20been%20expecting%20any%20significant%20upside%20surprises,%20many%20were%20hoping%20that%20the%20reality%20would%20exceed%20their%20very%20modest%20expectations.%20Aggressive%20by%20nature,%20many%20independent%20retailers%20are...){kind=link}
The Last Buy
It's Cyber Monday, we're now beyond Black Friday
, and most independent retailers are beginning to get a sense of whether their sales plans for December (and thus, for the holiday selling season) are going to come in or not. While few have been expecting any significant upside surprises, many were hoping that the reality would exceed their very modest expectations.Aggressive by nature, many independent retailers are reviewing their weekend business, looking for items and categories that out-performed and other opportunities that might pop their business in the next few weeks. Even with a flat sales plans for December, they're not willing to passively concede that a 5% or 10% increase can't be wangled. With one last buy of the right things, they reason, that 5% or 10% might be there for the taking.
That last buy, in fact, is usually the least profitable buy of the year. The problem is not generally in what's bought, the problem is in the quantities bought. Invariably, the last buy has not been planned for, it's placed on the spur of the moment, and represents an aggressive merchant's unwillingness to stand pat with the assortments and quantities already on hand. What starts out as a highly surgical buy of several key items almost always turns into an additional layer of merchandise across several key categories.
The key metric to consider is the final sell-thru's on those quantities that were brought in with the last buy, before the first round of clearance markdowns is taken. Invariably, a large percentage of the last buy ends up on clearance racks, bringing the overall profitability of the last sale down significantly, and lowering the profitability on the balance of clearance inventory as discounts need to be ramped up across the board to push through greater-than-planned-for ending inventory.
In my experience, the last buy rarely impacts sales, one way or another. The one exception is when a single item is driving business, and would sell out without the last buy. Absent that, all that the last buy does is add to ending inventory. In situations where sales break out and exceed plan, the bump usually can be directly attributed to a jump in traffic, with most departments and categories participating. In that case, a simple analysis almost always shows that without the last buy that ending inventories would end lower than planned (with less to clear out!) rather than with significant out-of-stocks.
In the current environment, the last buy is even harder to justify. Few retailers are working off of a positive sales trend, which shifts the risk/reward equation even further in the wrong direction. Independent retailers should avoid the last buy, except in those rare cases where a single item is driving business and is in danger of selling out. Rather than focusing solely on December sales, independent retailers should also be looking at December and January together, and considering how to maximize profitability across both of these crucial months.
Copyright (c) 2012 Ted Hurlbut
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