What is the real impact of Multi Sales?

What Retailer doesn’t love a Multi Sale!

Do you know the real power Multi Sales have on your margin?

The real Net Profit you make on the first item you sell would typically be under 10%, after paying for all expenses.

So if you sell an item for $150.00, your typical Net Profit would be under 10% or $15.00, that’s if you are doing extremely well! Most retailers would be more like 6% or around $8.00.

Let me explain by example:

If the 1^st Item is $150.00 less gst = $136.36
Less COGS, the Gross Profit would be around 55% or $75.00.
EXPENSES = discounts 10%, occupancy 15%, wages 12%, admin 5%, marketing 2% and other costs 5%, would be around 49% or $67.00.
NET PROFIT = $75.00 less $67.00 = $8.00.

Compare this to the 2^nd Item at the same RRP of $150.00 less gst = $136.36
Less COGS, the Gross Profit would be around 55% or $75.00.
EXPENSES = discounts 10%, occupancy 0%, wages 0%, admin 0%, marketing 0% and other costs 0%, would be around 10% or $13.60.
NET PROFIT = $75.00 less $13.60 = $61.40

You see you have already paid for all other expenses, (apart from any discounts), in the 1^st item, so the 2^nd item is where you make the real profit!

If you don’t have a focus on selling multi sales in your business, or measure what percent of your sales are multi sales, you are really missing out on some great profit opportunities!

This and other strategies that can positively impact, Sales, Profit and Cash Flow.

If you are interested in taking a deep dive into your retail business, simply shoot me an email merrill@merrillallen.com.au or give me a buzz on 0409 495 776 and we can arrange our Free Strategy Session.
Would love to talk about the opportunities your retail buisness!
Merrill
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How well do you know your Aged Inventory position?

And how this is impacting your Sales, Profit and Cash Flow!

The age of the stock can have a substantial impact on your Sales, Profit and Cash Flow!

The more current your stock is, the more likely you are to sell it, resulting in Increased Sales.

The older your stock, the less value it holds and the more likely you will need to mark it down, resulting in Profit Loss!

The longer it sits on the shelf before it turns into cash, the more it will Impact Cash Flow!

So there are many reasons to keep track of your aged inventory!A common way for retailers to look at aged inventory is by categorising the inventory into age buckets 0-3 months, 3-6 months, 6-12 months and 12+ months.

This may be possible via your POS system and if so, a great idea to run and regularly look at this report.

You can’t manage what you don’t measure!
The age of your inventory is also a very good indication of the health of your inventory, and in turn the financial health of your business.
Ideally, the more you have in the 0-3 months and the less in the 12+ months the better financial position your business is in.

This and other Inventory strategies can positively impact, Sales, Profit and Cash Flow.

If you are interested in taking a deep dive into your inventrory, simply shoot me an email or give me a buzz (contact details below) and we can arrange our Free Strategy Session. Look forward to hearing from you.
Merrill
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The Ability to confidently allocate Open-To-Buy:
Who has ever popped into the grocery store for a couple of things and walked out with a full trolley?

If you haven’t formed a plan to create a list of exactly what you need to achieve the required sales, you will inevitably buy more or buy inappropriately to the needs of your business.

Just like popping into the grocery store, this is exactly what can happen when there are no Inventory Planning processes in your business. You have all good intensions to only purchase a small amount from a supplier but end up with more than you actually need!

Open-To-Buy planning is all part of Inventory Planning, and with a Sales Budget in place along with the knowledge of what inventory is on hand, a correct Open-To-Buy amount can be determined. Then you can confidently meet suppliers with a specific list and only purchase in-line with the actual needs of your business.

Correct Stock Levels by Product Category:
Have the correct amount of Inventory for your business is one step; however ensuring it is the correct assortment mix to maximize sales is somewhat more challenging. This is very difficult to achieve without an accurate Inventory Planning process.

Carefully analyzing each category is a critical part of Inventory Planning. You may have adequate stock levels to meet your sales budget; however, neglecting to manage the category mix will negatively impact the sales potential and ultimately increase markdowns. Sometimes what we think is, isn’t also what actually is !

If you need any help in this area, please don’t hesitate to shoot me an email or give me a buzz and we can arrange a free strategy session to chat about your busines.
Merrill

In any retail business, the inventory is the largest investment you will make and accounts for a large part of your assets. The way in which this investment is planned prior to purchasing is crucial to the long term success of your business.

The health and value of your business is also largely measured by the inventory ROI, ensuring this is competently managed is also a key benefit.

However this is not always the easiest process to master, and is often the most challenging, however if successfully done, the rewards are your key to a successful Retail Business.

Stock Turn is a key measure to show the efficiency of the inventory. By definition, stock turn ratio is a measure of the number of times inventory is sold in a time period. Put simply, the stock turn will let us know if our inventory level is relevant to the sales we are achieving over a period of a year.

If stock turn is too low it can indicate we are carrying to too much stock for the sales we are achieving. A higher stock turn is generally an indication of a healthy business and the inventory is being put to work efficiently and showing that we are investing wisely in our inventory purchases. However there is a balance, if stock turn ratio is too high, it could be telling us we are missing sales opportunities.

It is easy to sell a lot when you have a lot, however it’s also a way to put unnecessary pressure on cash flow and tie up cash that could be put to better use. With the correct amount of inventory, you could be achieving the same sales with less outlay on stock.

The most successful Retail Businesses aim to maximise sales on the lest amount of inventory, whilst capitalising on all sales opportunities. This makes them not only profitable, but also helps them to be scalable and saleable! 

Firstly you need to totally understand Cash Flow………… Positive cash flow means you can successfully run and grow your business, whilst negative cash flow is the opposite of that !

Knowing everything that impacts the inflow of cash and everything that impacts the outflow 
is a huge advantage. Of course some things are obvious like sales, impact inflow and expenses effect outflow.

What about Inventory ? Have you thought about how the amount, the flow and the management of your inventory impacts your cash flow ? Inventory is the single largest ongoing investment in your retail business and as such, the way you manage this area will have a critical impact on your cash flow and profit. 

The sales from this inventory, is also the only source of income. Hence the importance of ensuring it is managed in a way that will maximise opportunities and minimise risk.
Basically like any other investment you want to establish a process that will put that investment to work, to achieve the best return (ROI).

After all, when you are buying and selling product, turning it back into cash is the only way to make a profit and enable you to fund expenses and future purchases. The more effective this process is, the more profitable and cash flow positive your business will be.

The ability to generate maximum sales, on the smallest inventory investment as possible, whilst maintaining sufficient stock to maximise the sales potential, is the best way to achieve the highest inventory ROI and therefore the highest Gross Profit and the best Cash Flow results for your business.