ETD: 792 Inventory levels; Ireland and Outsourcing; Are you a butterfly?

[E-Tailer's Digest]

  E-Tailer's Digest --- Everything for the  Retailer
  Issue #0792                    June 8, 2004
  George Matyjewicz, Moderator         mailto:georgem at gapent.com
  Published by:  GAP Enterprises, Ltd.  http://www.etailersdigest.com
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   CONTENTS

  [1]  Greetings
  [2]  Inventory levels
  [3]  Ireland Works to Stay in the Outsourcing Game
  [4]  Are you a butterfly?

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  [1]  Greetings.
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Hi All:

I remember when Ireland was a major force in outsourcing - before 
Asia.  They hit a slump, but now seem to be coming back.  I'll be in 
Ireland next week (business and pleasure), so an article today is 
timely.  For those who are outsourcing, perhaps you may want to look at 
Ireland once again.  I'll report more when I return.

One of our list members requested information on retail costs, most of 
which center around inventory (levels, shrink and markdowns).  We have some 
help in those areas.  What do you think?

Pam Danziger reports on butterflies - a segment of the luxury 
market.  Interesting stuff.

An administrivia note.  I will be in Ireland  the week of June 13-20 and 
will not be publishing E-Tailer's Digest.

Tell us about your business which will remain  for posterity at 
our  "Members: Who Are You?" 
site.   http://etailersdigest.com/resources/members/index.htm And we have a 
form there for you to tell us about you.  As I said when I first proposed 
this idea, we have "known" each other for a long time, yet we often don't 
know anything about each other.   So, tell us who you are and what you do.

Now, let's get to everything for the retailer.

Sincerely


George Matyjewicz, PhD
Chief Global Strategist, GAP Enterprises, Ltd.
mailto:georgem at gapent.com
http://www.etailersdigest.com

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  [2]  Inventory levels
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Carol Israel asked...
 > Articles on financial aspects of retail stores, i.e. number of turns, 
inventory levels,
 > commission vs. salary for staff.

There are a lot of articles on how to calculate inventory turns, which 
basically tells you the number of times you sell ("turn") inventory.  The 
quicker you turn inventory the more profitable you are.

Two other factors used in retail are markdowns and shrink.  Let's say you 
are doing $1 million in sales, you turn inventory 3 times, your markdowns 
are 19% and shrink is 3 1/2%.  By improving these three areas you can 
increase your profits as follows:

1.  Improve turns from 3 to 4 times - $8,333
2.  Reduce markdowns from 19% to 18% - $10,000
3.  Reduce shrink from 3 1/2% to 3% - $5,000

That puts $23,333 in you pocket!

There is a fine line between inventory levels and lost sales.  Experience 
is the best teacher.  Also, technology is critical.  With retailers for 
whom I have ever consulted (and all of the majors like WalMart) their 
success is always with monitoring the business using technology.  With 
inventory, you need to know how quickly you can get merchandise, then watch 
sales and order in a timely manner to keep merchandise in stock.  And you 
have to watch trends, i.e., is something happening that causes a spike in 
sales?

I am always amazed at the successful retailers who have their own methods 
of monitoring the business.  The common thread is that each of them get a 
daily snapshot of the business.  Most spend a couple of hours analyzing and 
monitoring ordering.

George

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  [3]  Ireland Works to Stay in the Outsourcing Game
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The shift is subtle but in line with the times. Ireland no longer touts low 
costs not only because they are lower elsewhere but also because a work 
force's productivity and skill level are becoming more important to 
companies like Dell, which employs about 4,000 people in Ireland and has 
operated a manufacturing plant in Limerick since 1990.

Intel, one of the biggest foreign investors in Ireland, halted construction 
of a big new chip plant near Dublin called Fab 24 in mid-2001, it was seen 
as one more symptom of a wider problem not just with the semiconductor 
business but with doing business in Ireland.

Through the 1990s, when a global company was seeking to outsource, it often 
turned to Ireland, known for its low taxes and skilled labor. The influx 
fueled an annual growth rate of 8 percent to 9 percent in the decade and 
earned the country the nickname "Celtic Tiger," after the booming "tiger" 
economies of Asia.

But over the past three years, the attractively low wages found in China, 
India and Eastern Europe have eclipsed Ireland's financial advantages, 
spurring many global companies to switch allegiances and scale back or 
cancel their plans for Irish operations.

Now Ireland is clawing back to reclaim its status as a major outsourcing 
destination by emphasizing its work force's brainpower and flexibility, 
instead of lower costs. A new government-sponsored marketing campaign touts 
the Irish labor force's ability to work at all levels of the business 
process, from factory floor to executive suite.

The financial advantages are still there. Jeremy Leonard, an economic 
consultant for the Manufacturers Alliance/MAPI, an executive education and 
research organization in Arlington, Virginia, noted Ireland's reduction of 
its top corporate tax rate in 2003 to 12.5 percent from 16 percent, placing 
it well below the European Union average of 30 percent and the U.S. rate of 
35 percent. As is often the case with revivals in business climates, 
government has played a role, not just with tax cuts but with funding. 
Dublin's 2004 budget includes a new 20 percent tax credit for qualifying 
investment in research and development.


Details at...
http://www.ecommercetimes.com/story/34269.html

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  [4]  The Metamorphosis of the New Luxury Retail Customer
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“The history of consumer shopping is defined in terms of decades,” Pam 
Danziger, president of Unity Marketing and author of Why People Buy Things 
They Don’t Need, said in a keynote speech at LUXURY by JCK conference, held 
last Thursday in Las Vegas.  “The 80s was the decade of the shopping 
mall.  The 90s was the decade of the discounters.  And this first decade of 
the 21st century is the decade of luxury.”

“Today we are experiencing an unprecedented boom in the luxury market.  The 
76 million baby boom generation, aged 40 to 58 years old, is now in or 
shortly will enter the empty-nesting life stage when the desire for luxury 
and the ability to pay for it peaks,” Danziger says.  In her speech, 
sponsored by the Robb Report® and Worth Magazine, Danziger explores the 
demographic shifts that are giving rise to the luxury boom.

“Demographically the luxury consumer market is homogenous, with households 
made up of middle-aged, upper income individuals who own a home, are 
married with children, and have high educational attainment.

“But while the luxury market is similar demographically, they are different 
psychographically. There are four different luxury personalities who value 
different aspects of luxury and so spend differently on luxury,”  Danziger 
said.

In her speech, the attendees met the four types of luxury consumers:

o X-Fluents (Extreme Affluents) who exalt in their luxury lifestyle and 
spend the most lavishly on home, personal and experiential luxuries;

o Luxury Cocooners, who remained wrapped up in their luxury ‘cocoons’ and 
spend most of their luxury budgets on home;

o Luxury Aspirers, who have not yet reached the level of luxury to which 
they aspire and who spend less on all kinds of luxuries; and

o Butterflies, who comprise the largest share of the luxury 
market.  Butterflies are the most evolved luxury consumers.  While they are 
the least materialistic of all the segments, they spend almost as much as 
X-Fluents on luxury.  They are driven by a passion to connect, rather than 
‘cocoon,’ and so place the highest value on the experience of luxury and 
spend less on home and more on personal and experiential luxuries.

For luxury jewelry marketers the X-Fluents and the Butterflies represent 
the strongest target market for the future.  For a copy of Danziger’s full 
presentation at LUXURY by JCK, go here 
http://www.whypeoplebuy.com/topics/meet_the_butterfliesA.pdf

www.unitymarketingonline.com

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