ETD: 852 Inventory turns; Software for e-mail newsletter;
Final Results: Christmas was very good
E-Tailer's Digest
etd_post at gapent.com
Tue Jan 18 12:25:42 GMT 2005
E-Tailer's Digest --- Everything for the Retailer
Issue #0852 January 18, 2005
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 turns
[3] Software for e-mail newsletter
[4] Final Results: Christmas was very good
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[1] Greetings.
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Hi All:
We have some more information on inventory turns from a very qualified list
member - Frances Kwan who has first hand experience in this area.
And list management guru Janet Attard, offers more information on list
management software for newsletters.
The official Christmas selling season numbers are in and very impressive -
the best since 1999, the year of the burst bubble ;-)
So what's happening now with retailing? In the U.S., the weather is
playing a big role in shopping. While the NYC area has been fairly mild,
not so in other parts of the country. In Embarras, MN (Minneapolis area)
the temperature hit minus 54 yesterday. And California has been hit with
the "Pineapple Express" which has wreaked havoc on the state.
How is business in your part of the world?
Tell us about your business, which will remain for posterity at
our "Members: Who Are You?" site. This is a courtesy to our members who
contribute to our forum, and not merely a way to advertise for free.
Anything to do with the retail world, i.e., supplier, retailer, consulting,
etc. 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 turns
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I was just reading your latest edition and wanted to share my
understanding/practice of calculating turn based upon my experience at
various retailers and wholesalers during my career (Levi Strauss & Co.,
Clorox, Williams-Sonoma, Inc., Kmart, JCPenney). Turn KPI has always
included one additional period of inventory than the selling period you are
using - whether it is annualized turn or turn week, month, etc. For
example, here is the calc for annualized turn:
Annual Sales @ cost/Avg Annual Inv. @ cost
Annual sales @ cost = annual gross sales $ x the Gross Margin complement
before allowances (i.e. $1.350,000 gross sales @ 28.7% GM before allowances
= 71.3%x $1,350,000 = $962, 500 sales at cost)
Avg Annual Inv. @ cost = sum 53 weeks EOW inv @ cost/53. This accounts for
the beginning inventory needed to do your first weeks sales. I've also
calculated using sum 13 months EOM inv @ cost/13 when weekly isn't readily
available.
Just wanted to chime and let you know that you have another member of the
retail community who reads the digest!
Frances Kwan
+++ [Moderator's Comments] +++
Thanks Frances - both for your input and for reading ETD. ;-)
When calculating turn, you should always include as much real data as you
have available. Unfortunately, when analyzing financial statements for a
company, we don't have all the details, so we use what we have. There are
many who believe that turns are not correct unless you have actual periodic
data, which is true. Using financial statements are a way to get a simple
and fast calculation.
BTW, before computers many retail calculations were done at retail. In
fact retailers used the retail method of accounting for financials. Of
course those calculations changed the minute the first item was sold (or
purchased). The retail method calculated everything based on retail sales
amounts, i.e., when taking a physical inventory, the value of the
inventory is calculated using the retail tags on the goods. Of course, it
never takes into account markdowns, shrink, etc. Which is why we all say
thanks for computers.
George
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[3] Software for e-mail newsletter
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Another option for email newsletter lists are services like Constant
Contact (http://microurl.com/336874130) where you pay a monthly cost and
they provide you with the software that sends the email via html or text,
depending on what your customers can read. They provide templates for you,
so you just have to fill in plain text and don't have to know any software.
They also have relationships with the major ISPs that help get your mail
through.
There are a few services like that. Some, like Constant Contact, charge by
the number of names on your list, no matter how many emails you send to
that list each month. Others charge by the number of individual emails you
send per month. So, if you have 5000 email names on your list and send 4
newsletters a month, you'd be billed for 20,000 emails. You obviously need
to do the math to see what works best for you. We've got over 40,000
subscribers on our main mailing list and we publish an email newsletter
twice a week to let readers know about new articles on our site. So, for
us, Constant Contact's is the way to go. We don't have to hassle with
bounces. We don't' have to deal with ISPs to get our mailings whitelisted,
and the fee is very reasonable for the number of emails we send each month.
--Janet Attard
Business Know-How Small Business Resource Center
http://www.businessknowhow.com
Free newsletter: www.businessknowhow.com/subscribe.htm
+++ [Moderator's Comments] +++
Thanks Janet.
Folks, Janet is a list management guru. This is another
alternative. Check out the costs and capabilities as to how they will fit
your needs.
George
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[4] Final Results: Christmas was very good
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The Commerce Department reported December retail sales rose a hefty 8.7%
over the same month a year ago, marking a strong growth rate and one of the
strongest holiday sales gains since 1999.
But traditional mid-priced department stores missed out on the merriment:
Department stores eked out a tiny 1.3% gain in sales, the smallest of any
retail category. Their weak showing was the most visible fallout yet from a
profound shift in consumers' gift-shopping habits.
Overall, though, holiday sales were stronger than almost anyone predicted
as recently as three weeks ago. Even pessimistic retailers had to concede
victory over their own expectations that 2004 holiday sales would come up
short. The National Retail Federation announced a 5.7% rise in holiday
sales in 2004, beating both its own forecast of 4.5% growth and the 5.1%
rise in 2003.
How did government and the retail industry arrive at such different
pictures of holiday retail spending? For one thing, the Commerce Department
numbers include sales at gas stations, which rose 21.8%, a category the NRF
doesn't consider. Even so, the three percentage points separating the
Commerce Department's view from that of the retail industry is an economic
chasm that speaks volumes about the different interests behind each number
as well as the high-speed evolution in how U.S. consumers spend their
money: They are buying less apparel and personal merchandise and more home
goods and intangible experiences.
The NRF, which began as an association of department stores, counts mainly
shopping-mall stores such as department stores and specialty chains, many
discounters, furniture and home-furnishings stores, electronics and
appliances stores, and sporting-goods, hobby, book and music stores. It
misses some of the major kinds of stores where people like to buy things:
Supermarkets. Home-improvement stores. Drugstores. It also misses a portion
of gift card sales, tallying them not at the time of purchase, but when
they are redeemed. And it doesn't capture all online sales.
In contrast, the Commerce Department's monthly retail report is based on a
survey of 12,000 public and private retail businesses selected to represent
the entire U.S. retail sector. In addition to general merchandise stores,
its data include building-supply stores, gas stations, car dealers,
drugstores, restaurants, supermarkets and even mail-order houses and
Internet sellers.
The result is that the trade group's sales numbers are increasingly out of
step with government data and the full picture of consumer spending.
Economists pay less attention to chain-store sales figures than they used
to. "It's too weak a link to the true retail sales" trends that occur in
the overall economy, says Charles Steindel, senior vice president at the
Federal Reserve Bank of New York.
Starting with its January sales report, the National Retail Federation
plans to plug some of the holes in its current methods by including for the
first time home-improvement chains like Home Depot Inc., grocery stores,
drugstores, florists and gift shops. It will continue to exclude
restaurants, gas stations and autos.
The adjustment highlights the shift under way in the kinds of gifts
consumers are giving. "People, instead of giving the sweater or the scarf,
are looking for something different," says Tracy Mullin, president of the
NRF. "In some cases, they're giving ... sporting tickets, trips or theater
tickets." Traditional retailers, she says, "probably need to figure out a
way to either sell unusual traditional goods -- things that are
one-of-a-kind -- or to make the shopping experience so enjoyable that
there's a reason for the consumer to go into the store."
The Commerce Department numbers also are clearly buoyed by the inclusion of
wild cards like gasoline and auto sales, both of which had outsized growth
rates in December. But the Commerce data let economists track the ebb and
flow of spending among different categories and sectors: Last year, 5% of
Americans' spending was at drugstores compared with 3.4% 10 years ago. But
spending at general-merchandise stores, including traditional department
stores, inched up to 12% of all spending last year, compared with 11.9% ten
years ago. Within the category, department stores have been declining while
other mass merchants have risen.
"Consumers are shopping at furniture stores, home improvement stores and
buying gifts at these places which is why it is important to look at
overall retail sales," says Gina Martin, an economist at Wachovia Bank in
Charlotte, N.C. "These are things that the general merchandise category
misses."
One thing that none of the data illuminates well is the decline in prices
of consumer electronics and other durable goods in the past few years. For
example, the Consumer Electronics Association says the price of a 27-inch
liquid crystal display TV set has fallen to $1,000 last year, from $1,500
in 2003. So even though the number of sets sold rose sharply, the sales in
dollars didn't rise as fast because average prices were lower.
Why do retailers' Christmas sales matter so much? Nigel Gault, an economist
at Global Insight, a Lexington, Mass., economic-consulting firm, says an
increase in retail sales of more than 6% is considered strong enough to
generate new jobs in both the retail sector and sectors producing the goods
retailers sell. And a strong increase means consumer income is growing and
people have the confidence to spend.
Economists obsess over consumer spending because it is the fuel that powers
the nearly $12 trillion U.S. economy. Each percentage point of the U.S.
retail market amounts to about $40 billion in sales.
Nearly 20% of annual retail sales occur in November and December, says
David Resler, chief economist at Nomura Securities in New York. If sales
are weak, merchants are left with unsold inventories and may begin paring
down orders for next year, a trend that could reduce employment levels and
depress GDP. If holiday sales rise at a strong pace, then the season will
contribute to economic growth. "If retailers succeed in hitting a sales
target by aggressive promotions and price cuts, unit sales will be strong,
translating into faster growth in real consumer spending and GDP," he says.
URL for this article:
http://online.wsj.com/article/0,,SB110566258633625944,00.html
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