As this year is coming to a close, I have been thinking about what retailers need to focus on to wrap up 2020 and be set up for success in 2021. For the 27 years that my husband and I ran our family retail stores, here is what we focused on the last week of December and the first week of January.
Taking a Physical Inventory, Recapping the Year, and Setting Goals for the New Year.
Our stores always closed for two days to take a physical inventory of the store. These were fun days that we all looked forward to. Everyone got to dress very casually; there were no customers in the store. We could play Rock and Roll music and eat pizza out on the floor while we counted and had fun. After a stressful season, these two days were like a party, and we got a lot done. These were also spring cleaning days when we vacuumed up all of the glitter, got all of the dust bunnies out of the corners, and re-merchandised the store. If my stores were open today, we would be closed on Jan 4th and 5th for our inventory. The week after Christmas is always busier than expected, with customers using gift cards they received as gifts, returns, and exchanges. So, we never closed that week, and we did not close on the weekends.
Here are 4 things you need to focus on now
First – Schedule your day(s) to take a physical inventory of your store.
Pick your day(s) and get it on the calendar and plan your staffing. Ideally, it is more manageable to count when there are no customers in the store. Consider scheduling your count for after business hours, on a day you are regularly closed or plan if you are going to close down a day or two for the inventory. Be sure to give your customers plenty of notice if you are closing on a regular business day.
You do not have to do inventory in early January, but you need to figure out when is the right time. The best time to do a physical count of your store is when your SKU count is at its lowest of the year. We always did our most significant buying in January, and we wanted to have the most accurate information before heading out to market.
Second – Start preparing for your inventory now – Get Organized.
- Sell down as much stock as you can so you do not have to count it. Bundle items, mark items down, move them around in the store, use great signage – Do what you have to do to sell as much as you can to get your inventory clean before you count it!
- Work now to make sure that every item has a tag on it. If you use barcodes and use scanners for the inventory count, it will go much smoother if you do not have to stop and ticket items to count them. Instruct your staff to check items in the store as they display them and dust shelves to ensure everything is ticketed and ready for inventory.
- Clean and organize your stockroom and closets. Be sure you can find and get to all of your inventory that needs to be counted.
- Have your Inventory Plan in place. Create your floor plan map for counting and assign your staff their jobs for that day(s). Don’t give the task of counting to just anyone; make sure they are a detail-oriented person
- If you own the WhizBang! Training Retail Mastery System there are step-by-step detailed instructions on how to take a Physical Inventory. Look in the Inventory Management Section, and you will find the instructions to Take a WhizBang! Physical Inventory. If you do not own this program, you can check it out by Clicking Here.
Third– Take the inventory and update your POS system for accurate information.
Now that you have an accurate count of all of the merchandise in your store, you must turn that data into useful information. (Well, I use accurate loosely as with human error, it is never 100% accurate, but I am sure it is closer than you were before you did it!)
This will look different for each company, depending on the POS system you are using and how you track your inventory. Once you have the new inventory counts updated, you need to take the time to look for discrepancies. Look for the biggest changes in count numbers and dollars. For example, entering 120 items instead of 12 items can significantly affect your inventory results.
If taking a full store physical inventory is too much for you, or if you have some massive departments that you want to keep tighter control of, consider cyclical inventory counting in your store. You can set up a schedule for taking inventory of different products each month. By the end of the year, you will have counted everything, and you can start over again.
We did “Cycle Counts” each week of small categories of our two biggest vendors (Pandora and Brighton). This kept our inventory as accurate as possible and enabled us to keep track of our “shrink” and see where any problems may arise and reorder the correct items, leading to business increases.
It is essential that you physically count your merchandise at least once a year, whether it be by cycle counting all year long or doing inventory all at one time. This reconciliation will help you identify units missing from your inventory, also known as “shrink.” The most common causes for this loss is damage, theft, admin errors, and stock movement errors. Without accurate, up-to-date inventory information, you cannot make informed buying decisions and will be missing sales. If you have an e-commerce store connected to your POS inventory count, you must have an accurate inventory count.
While a physical count can be burdensome, it is one of the most important things you can do to ensure your profitability and success.
Fourth – Run reports to analyze your year.
Once the counting is done, it is time to analyze your year and plan for the next year. This was always one of my most favorite things to do in business. It was like a game. I would see how close I came to the sales goals I had set for the year, vendors, and departments. I loved ranking my vendors and departments to see what moved up and what dropped down and compare that to what I thought would happen. However, this year all of that will be thrown out the window because nobody could predict everything that happened in 2020.
Look at your sales by vendor, department, and class and see how they have been trending. Then, with that data and your buyer’s intuition, set sales goals for the next year. I would always set my monthly goals for the entire year, but this was a living document that I would update throughout the year as trends change and new products emerge.
Calculate your Average Dollar Sale (ADS) for the year and compare it to last year. Your ADS is the sum of your Total Sales divided by the Number of Transactions. Now stop and think about how COVID-19 and lockdowns may have affected your ADS. Did it go up because people were shopping fewer times and bought more at each visit? Will that continue next year?
Calculate your Items per Transaction (IPT) for the year and compare it to last year. Your IPT is the sum of your Total Items Sold divided by the Number of Transactions. Again think about how this number might have been affected this year. Some of my clients have been selling so many masks and hand sanitizer this year that their IPT is way up. Will this continue next year?
I suggest looking at 2019 numbers and 2020 numbers very closely when planning for 2021. You may use your 2020 trends as you plan for the first quarter and then rely on your 2019 numbers to plan for the months that you were closed in 2020.
Also, compare your Gross Margin percentage for the year to last year and set a goal for 2021. Your Gross Margin percentage is the sum of your Total Revenu minus your Cost of Goods Sold divided by your Total Revenue times 100.
You need to have a Sales Plan set for 2021 before you go to a market or begin buying in January. This Sales Plan for the store and hopefully by department or category is needed to set your Open to Buy amounts for the upcoming quarter. You also have to know the correct amount of inventory you have in stock right now and what you have on order.
With this knowledge and plan, you will be Set up for Success in 2021!
Retail Clarity has an Open To Buy Planning Spreadsheet that will help you create your Sales Plan for the year. If you would like more information about this, please reach out to me at firstname.lastname@example.org to set up a time to discuss it.