One of my early mentors drilled it into my head that, “You don’t bank percent; you bank dollars.” In a previous blog I wrote about Just in Time supply as a competitive advantage. Just in Time Supply can have a tremendous impact on gross margin dollars, while potentially making the retail door more competitive on price, at the same time. A recent article posted in April 2017, by Bryan Pearson, in Forbes Magazine stated, “Mass-merchandise items, meanwhile, sell faster at discount, especially when marked down by less. Women’s wear products sold 11 days faster when first discounted from 30-40%, rather than 40-50%.” The axiom that the first markdown is the best markdown is still true today.
So the question becomes, how does the buyer gain the most Gross Margin Dollars Return on Investment? The secret lies in Just in Time and Degree of Exclusivity. With Just in Time supply the buyer can bring a small test onto the floor, in a forward position, test the sell through at a given selected margin percent, and then reorder in quantities that will hit an inventory turns maximal objective. By keeping inventories low, and turn over high, the buyer’s investment, and therefore risk exposure, is kept at a minimum, while potential returns remain high. If the buyer factors in a lower initial margin, to offer a greater initial retail value to the customer over competing retailers, sales volume and turns can offer the buyer both a sales as well as a profit advantage over his competition. Because of its unique manufacturing and planning capabilities, Air Waves has helped its retail customers achieve higher returns with lower investment of inventory.
In my next blog post I will talk about effective exclusivity.