Here is the seventh entry of the Twelve Components You Need in Your Merchandising Plan titled:. Proactively Managing Mark Downs.
Someone once said you have to mark it up to mark it down. What this means is that discounts must be anticipated and managed in order to meet projected profits. Total contribution to sales is a concept that this blog has been stressing as a key strategy for inventory management. Strategies that consider both profit margins and total product turns are necessary to maximize revenue opportunities. Temporary reductions in an item’s selling price can stimulate its demand and can redirect shoppers from a competitor. How does your company identify the right items to promote and decide the right times to promote specific jewelry items?
Promotional strategies are best developed on a seasonal basis. Understanding when to place a permanent markdown on products should be considered on a seasonal basis and based on aged inventory. How does your company identify aged inventory? How long should products in each category be present before they are considered for a price reduction? What per cent of the initial selling price should be discounted and when? Knowing how the demand for products can be positively influenced through promotion is the key. Promotional mark downs should be supplemented with advertising to insure that customers are attracted to the store. Offering discounts to customers who may purchase full price products is a huge challenge for all retail jewelry stores.
Understanding and accepting that discounts will be necessary and how best to keep sales associates from offering more discounts than necessary is the responsibility of sales management. Sales managers that empower sales associates to offer discounts need to be sure that sales associates do not get into a habit of routinely offering discounts. Constantly offering sales contests on rotating items is a good exercise to keep sales associates focused and properly directed. Often a commission that allows sales associates to participate in the savings of reduced discounts can prove to be very productive. What sort of incentive do you offer your sales associates to move aged inventory? How much aged inventory do you have in each category in your current inventory? What are you currently doing to enhance your cash flow through the sale of aged inventory?
How often does your store conduct a physical inventory? Stores with UPC pricing tags and scanners find the task to be much less challenging. What does your store do when you come across the same aged inventory? Without a discount plan the danger is that the merchandise will be left in the display case. The dollars tied up in unsellable inventory is one of the main reasons why jewelry stores fail.
Set a timeline to identify aged inventory products by category. Develop a list of optional promotions to move aged inventory. Try not to create a dog pound approach by putting mismatched pieces of aged inventory in the same display case. Find like product characteristics of good selling merchandise and display aged inventory with those items. That will allow your aged inventory to be merchandised in the most favorable visual manner. Some jewelers are using the internet as a separate sales channel to move aged inventory. Some do not use their store name or brand when they are forced to heavily discount aged inventory. Consider how selling discounted aged inventory to customers who may buy full priced merchandise reduces profits for the store. Finding the right customers to buy the right product offerings at the right prices is a function of good sales management. Consider setting sales objectives for limits of aged inventory by category.
Proactively addressing aged inventory means planning promotional activities based on the age of the inventoried item with the objective of selling the merchandise through multiple strategies until the item sells. There should be a sequence of activities that take place that are time sensitive and increase buyer motivation. These are not the times to be waiting for the right customers to someday come in and demand those aged and unsellable items. Make aged inventory more sellable through a proactive approach to promoting the sale of these items. Develop a discount plan to identify aged inventory and aggressively turn those products over so you can reinvest in more profitable merchandise.