ETD: 684 Comparing Sales Across Your Chain; Inventory Turns
and Open to Buy; International Calling; P2P is OK; iTunes store: More
than 1 million sold
E-Tailer's Digest
etd_post@gapent.com
Thu, 08 May 2003 06:40:59 -0400
E-Tailer's Digest --- Everything for the Retailer
Issue #0684 May 8, 2003
George Matyjewicz, Moderator mailto:georgem@gapent.com
Published by: GAP Enterprises, Ltd. http://www.etailersdigest.com
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CONTENTS
[1] Greetings
[2] Comparing Sales Across Your Chain
[3] Inventory Turns and Open to Buy
----- ---- --- -- -> Important Offer <- -- --- ---- ---- --
[4] International Calling
[5] P2P is OK
[6] iTunes store: More than 1 million sold
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[1] Greetings.
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Hi All:
We have some excellent comments from list members on some of the requests
for assistance by others. I always say we have the greatest assembly of
retail/etail gurus on the planet!
And it's interesting to note that Apple has introduced a new service
selling music online. It's time the music industry gets on board and
capitalizes on the Internet.
If you think you have expenses with your business, read some of the issues
in Bermuda. Nice place to visit, but expensive to live. What's it like in
your part of the world?
Now, let's get to everything for the retailer.
Sincerely
Dr. George Matyjewicz
Chief Global Strategist, GAP Enterprises, Ltd.
mailto:georgem@gapent.com
http://www.etailersdigest.com
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[2] Comparing Sales Across Your Chain
===================================================================
Firstly, I just noticed the "Dr". Congratulations George, it must have been
some struggle, commitment and accomplishment knowing only a hint of your
schedule.
Secondly, the issue of comparing "best performing category" across
all stores - to me this means one of two things
1) to calculate the percentage of sales each category contributes to each
store- so that Xmas cards are responsible for 2% of store A's total sales
but only 1% of store B's..
2) to calculate the contribution each store makes for each category to
that categories total. So that store "A" sells 12% of all Xmas cards sold
by the whole chain.
Hope this helps.
Joe Dweck
+++ [Moderator's Comments] +++
Thanks Joe. The doctorate took a little over two years of concentrated
work, including the 50,000 word dissertation. But it's something that has
been rolling around in my head for many years. Now all I need find is a
sponsor to put the dissertation into action ;-). But one of our list
members did even better. He first set foot in college at age 44, then
defended his dissertation on his 57th birthday!
Your calculations will work. It's another way to bring sales down to a
common denominator, this time percentage of sales.
George
+++ [Next Post] +++
Sales per square foot is my first thought as well but there are other Key
performance indicators that I would want to see. Anyone can sell but do
you make money. Gross Margin per square foot should be reviewed as well.
I would also want to look at category contribution. If there are 7 stores
which stores represent the most sales in a given category of
product. There may be stores that are poor performing stores overall but
might have strong seasonal categories if they are by tourist areas or the
beach.
I would also want to take a look at Market basket information by
store. This would include average transaction size (how many items) and
value. What was the sale as well as the average price sold. Some stores
may sell a lot more units than others. This would change how you would
replenish those stores.
You might consider looking at sales by category as a percentage of total
sales, and then compare stores.
As a store manager you are always concerned with Average transaction
dollars and units.
--
David O. Thompson
Project Manager
LakeWest Group, Ltd.
Cleveland, Oh 44115
Office (216)-535-4020
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[3] Inventory Turns and Open to Buy
===================================================================
I don't think companies want to have too large an inventory. Goods that
remain in inventory too long tie up the firms assets in idle stock, often
incur carrying charges for the storage of the goods, and can become
obsolete while awaiting sale. This depends on the item.
Just-in-Time inventory methods try to make sure that firms obtain their
inventories no sooner than its required in order to support its sales
efforts. That is by no mean an easy task to do. By calculating the
inventory turnover rate firms can estimate how well they are approaching
the ideal.
The formula for the Inventory Turnover Ratio is:
Inventory Turn = Cost of Goods Sold / Average Inventory
The Average Inventory figure refers to the value of the inventory on any
given day during the period during which the Cost of Goods Sold is
calculated. The higher your inventory turnover rate, the more closely your
firm conforms to just-in-time procedures and ideals.
The figures for cost of goods sold and average inventory are
normally taken directly from the Income Statement's cost of sales and the
Balance Sheet's inventory levels. If you know only the beginning and ending
inventory-for example, at the beginning and the ending of a period-you
would use the average of the two levels. That's how you get the term
average inventory.
An acceptable inventory turnover rate can be determined only by knowledge
of your business sector. If you are in the business of wholesaling
perishable produce you would probably require an annual turnover rate in
the 40s to 50s. A much lower rate would mean that you were losing too much
inventory to spoilage. But if you sell durable goods such as computing
equipment or other high tech items, you could probably afford an annual
turnover rate of around 4 or 5, because hardware does not spoil. The rate
of obsolescence does not render it technologically obsolete so quickly.
Your industry average is usually a good guide as to how you are performing.
Open - to- Buy
Open to buy spreadsheets are normally incorporated in those expensive POS
Software. Most small retailers or e-tailors cannot afford them. The basic
formulae for the plan purchases can be used for the open to buy figure or
position for the period under consideration. In other words the planned
purchases and the open - to buy can be the same when the season or month
being planned is not underway. Once its underway the situation changes .
Buyers like to be able to calculate the open -to - buy figure anytime
during the month or season. Purchases made and goods already on order can
affect the open - to -buy calculation.
Planned Purchases formulae
Planned sales
+ Planned reduction - spoilage, shrinkage, discounts etc
+ Planned ending inventory (EOM)
- Beginning Inventory
= Planned purchases
To calculate the OTB during the season you will need to input other factors
such as actual sales, actual reductions, merchandise purchased and
delivered and not delivered and planned remaining sales. All these factors
will be needed to complete the calculation.
This is where the spreadsheet makes life easier. To go through this on this
forum is tedious. In my search I found a neat spreadsheet - CBA Open To Buy
system. Its not very elaborate, however it contains all the inputs to
create a plan purchases and open to buy calculations. It was developed for
small retailers - books, gifts, music etc. with limited product category.
The contact is
CBA Member Services
1-800-252-1950
Fax 719-272-3510
info@cbaonline.org
www.cbaonline.org
Mike Hocket will explain the spreadsheet.
I hope this help to put some light on the topic.
Derrick W Robinson
DRobinson@email.uophx.edu
Fax: 208-979-0426
"The time is always right, to do right"
+++ [Next Post] +++
Open To Buy Calculation is rather simple, however you need to create some
sort of seasonal plans prior to completing an open to buy (The same buckets
that are below in the example OTB should be planned for as well as Gross
Margin Dollars and Inventory Turns ) - OTB is usually looked at on a
monthly basis.
You project out the next three month versus your seasonal plans. First you
need to decide if you will have plans at a lower level than company. If you
do than you will want to monitor open to buy at the lower levels. After
the seasonal plans are completed you can forecast your open to
buy. Usually you use your plans as a guideline but changes in business
will dictate that you update your plans and have a new forecasted open to
buy.
An example of the OTB is below. Don't fall into the buyers trap of not
including the receipts that did not come in the previous month (that is
listed as carry over in the example below). This example is based on the
retail method. If you are using the Cost method of accounting you will not
use markdowns in your equation as you value your inventory at cost.. You
will also complete the Open to Buy at cost for sales and receipts.
May 1
Actual inventory on hand 2,000
Projected Receipts + 350
Sales - 400
Markdowns - 50
Shrink - 5
Projected ending on hand - 1895
June 1
projected inventory on hand 1895
Projected Receipts + 400
Carryover +150
Sales - 400
Markdowns - 100
Shrink - 5
Projected ending on hand +1940
July 1
projected Beg inv on hand 1940
Projected Receipts + 300
Carryover +100
Sales - 455
Markdowns - 100
Shrink - 5
Projected Ending on hand 1780
--
David O. Thompson
Project Manager
LakeWest Group, Ltd.
Cleveland, Oh 44115
Office (216)-535-4020
==================================================================
----- ---- --- -- -> Important Offer <- -- --- ---- ---- --
IMPROVE YOUR CLOSING RATIO
If you sell a service or an intangible product, we will
improve your sales closing ratio. GUARANTEED!
See results within three months.
http://www.gapent.com/services/sales_strategy.htm
----- ---- --- -- -> Important Offer <- -- --- ---- ---- --
===================================================================
[4] International Calling
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Our moderator asked...
> Does this work for you in Bermuda? How are telephone charges
> there? What other costs do you incur that we may not see in
> other countries?
No, unfortunately it does not work in Bermuda. Mainly because the local
phone company manages to block out a lot of access dialing when it wants
to. For example, I used to use a callback company from here and the Telco
blocked all calls to the callback number. Callbacks are now illegal in
Bermuda with the possibility of a $50,000 fine or 2 years in jail for
violators!!
To give you an idea of telephone charges.
Local calls have a $26 per month connection charge which includes 50 calls.
Overcalls are 20¢ each for up to 1 hour and then 20¢ per hour or part
thereof. This covers calls in a country of 21 square miles.
For international calls (long distance does not exist), the lowest rate
possible is 16¢ for VOIP through a local ISP on evenings and weekends.
Regular calls cost 60¢ to US, Canada & UK at daytime rates.
Cellular calls (on Island) are between 25 & 50¢ per min. depending on your
plan.
There are no special deals of free phones when you sign up or any other
such luxury. We also pay a Government tax of $2 per month for having the
service.
I am sure you found similar prices and problems when you lived in B.V.I.
Having said all the above, service is generally very good and there is not
a lot of small print in agreements. Also, we are not being constantly
bombarded by phone marketing (yet).
BTW The price of gas is now US$1.38 per litre or approx $5.22 per US gallon!
Sorry if this went on a bit, I could write plenty more about Bermuda not
being a 'tax haven' - but will leave that until another time!!
Best regards
Richard Woolnough
Bespoke Solutions Ltd
www.BespokeSolutionsLtd.com
+1(441)295 0951
We can tailor your business
+++ [Moderator's Comments] +++
Thanks Richard. It's the simple things that companies forget when setting
up a business offshore. I assume your Telco is Cable & Wireless, who has a
bad habit of blocking those callback numbers. Each time we used a new one,
it got blocked quickly.
Telephone charges will kill you. With the plan we now have we pay 5 cents
a minute to call UK or Canada; France & Germany 7 cents a minute; China 11
cents; Japan 10 cents; Bermuda 15 cents; BVI 20 cents. Our rates in the
BVI were similar to what you have, and our customers were in 110 countries
worldwide. When we first setup there, our founders cell bill was $4,000
the first month!
I am curious about why Bermuda is not a tax haven, especially when
companies like Stanley Tools moved there to save taxes (they did return to
CT however).
George
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[5] P2P is OK
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Wayne Cunningham, Senior Editor at CNET Download.com reports...
Last week, a federal judge threw out a lawsuit by the RIAA and MPAA against
Grokster and Morpheus for copyright infringement. The judge concluded that
though the technologies could be used for copyright infringement, they are
legally neutral because they can also be used for legal file trading. So
nobody is going to break down your door just for having a P2P client
installed on your computer. However, according to news reports, the major
labels might have other tricks up their sleeves, including Trojan horses
that may shut down your computer, slow down your Internet connection, or
cause other damage. File sharers, beware.
Details at...
http://news.com.com/2100-1027-998363.html
http://news.com.com/2100-1027_3-999612.html
+++ [Moderator's Comments] +++
Seems like a victory for those who do trade songs. It's about time the
RIAA and MPAA get's on the train not under it. Rather than fight the
trading of music, they need to figure a way to make songs available to the
public via the Internet. Looks like Apple figured it out with iTunes (see
below). If they can sell 1 million songs in a week and only to MAC owners,
can you imagine what happens when they open it up to the rest of the world?
George
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[6] iTunes store: More than 1 million sold
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Apple Computer's new online music service sold more than 1 million songs
during its first week of operation, the company said Monday.
The early sales success suggests that people will pay for music downloads
if given the chance, analysts say. "It clearly shows there was some pent-up
demand in the Mac community for a legal way to buy and download digital
music," Jupiter Research analyst Michael Gartenberg said.
On Tuesday, Apple plans to add 3,200 new tracks to the music store,
including Michelle Branch's album "The Spirit Room" and the catalog of
music from Alanis Morissette.
The first version of the iTunes Music Store, which is available only for
Macs, offers a vast catalog of music from the five major record labels.
Singles sell for 99 cents each, and many albums go for $9.99.
Apple noted that half the songs were purchased as part of albums. Record
labels have long raised concerns that online sales of single tracks would
further sap already sagging album sales.
Details at...
http://news.com.com/2100-1027-999701.html
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