Q&A: Retail Consultant Dan Mann Discusses

Retailers say forecasting sales has become much more difficult in today’s uncertain economy, a condition that might not improve for many months. “Our crystal ball is shattered,” said one merchandizing executive. With that in mind, OIA WebNews asked The Mann Group’s Dan Mann to talk about what retailers can do to adjust to the uncertainty. Mann will deliver the last of a Webinar series on Financial Management for retailers this afternoon. Excerpts from the discussion are below:

Q: What is your outlook for specialty outdoor retail sales? A: There are some encouraging signs, but I don't think we in this industry can tell how good or bad it's going to be, because we are not in our season yet. You operate from the best information you have and I would hope the “staycation” trend will come. But right now, frankly, it's too hard to know and hope is not a strategy. If the crystal ball is broken we will have to do a little more work in order to gather the information we need to make buying decisions.

Q: What can retailers do if their forecasts are way off? A: Whether in good times or bad, they need to operate with some discipline. When times are tough like this, discipline is especially important for the retailer, who tends to go on fear or on gut. You have those who say, “We have open-to-buy money, but I don't care what the plan says – which is buy more – I'm not going to buy because of the economy.” Discipline requires a conversation between the open-to-buy team, who is hopefully working from some open-to-buy spreadsheet, and the sales floor. You can't do this from the back room anymore. You need to go to the floor and see where you need to fill in. Are your inventory numbers correct? Look at your displays. See what's moving rapidly and what items are not. Don't just retreat and say, “We are not buying anything now.” Combine your gut and the sales floor versus what your open-to-buy sheet is telling you to buy. The point is we can’t just buy from a spreadsheet anymore. We have to have a more thorough open dialog between the sales floor and the buying office – even if that’s the same person!

Q: What else is required? A: Diligence. Checking and double-checking the spreadsheet versus the shelves. You need to ask what does my display tell me is selling? If it’s rainwear and my spreadsheet tells me I have plenty, but it's raining this week and I have not sold a single one, then I need to go check the sales floor and back room and find out where it is.

Q: What key ratios should they focus on? A: Inventory-to-sale ratio. You have to ask yourself, if I sell at the current rate of turn, when will I be out of product. You will see in this economy some of these numbers will slow down and some will speed up. You may want to look at that daily and against what you have on hand. My concern is that so many people are not operating on clean data. A high percentage of the retailers we work with don't do an annual inventory. Just because my point-of-sale tells me I have it, does not mean that I do.