Retail by the Numbers:
Financials A - Z
Imagine This
Imagine This…
What if Your Store
Draws repeat traffic
• Fills the needs and wants of your customers
• Avoids a drag on cash flow
• Allows you to respond to market changes
• Keeps your store fresh and unique against
competitors
• Maximizes space
• Doesn't tie up valuable space with long-held
inventory
It’s About
Retail Science
Retail Science Definition
Retail science is “the use of data (with or
without technology) to analyze who buys, what
is bought and why it is bought so that better
product buying, inventory control and space
planning are adjusted to generate more sales
and profits for a retailer.”
Paco Underhill – “Why We Buy: The Science of Shopping”
-- calls it the “Sherlock Holmes” approach to retail.
Using the Science
Balancing
Reacting
Monitoring
Strategizing
Taking Calculated Risk
Monitor to
Strategize
4 buckets
1.
2.
3.
4.
Tracking performance
Managing inventory
Incremental sales growth
Expected outcomes
Bucket #1
Tracking Performance
Group Activity #1
• What should we measure?
• Why should we measure?
• How often should we measure it?
Are You
Measuring?
Are You Measuring?
Daily traffic
Average ticket
Average number of items per transaction
Reimbursement categories generating the most
cash
• Daily sales goals
• Dollars per square foot
•
•
•
•
Are You Measuring?
•
•
•
•
•
Performing (good/bad) product categories
Top five products sold
Bottom five products sold
Margin by category
80/20 rule and layers in between
Dashboard
Review
Monitoring and Reacting
Daily, Weekly, Monthly, Quarterly, Annually
Set Goals
•
•
•
•
•
Daily revenue
Revenue category goals
Number of items per transaction
Average customer $ transaction
Special or seasonal items
Monitor Progress
•
•
•
•
•
Daily revenue
Revenue category goals
Number of items per transaction
Average customer $ transaction
Special or seasonal items
Communicate to the Team
•
•
•
•
•
Daily revenue
Revenue category goals
Number of items per transaction
Average customer $ transaction
Special or seasonal items
Monitor to Strategize
“Computers are useless. They
can give you only answers.”
Pablo Picasso
Monitor to Strategize
“Computers are useful. They can
give you answers. But only if you
monitor the data and use it to set
strategy.”
Bucket #2
Inventory Management
Inventory Management
Typical product turns:
•
•
•
•
•
24 sq. ft. fixture turns 6 times per year
250 sq. ft. space turns 4 times per year
500 sq. ft. space turns 3 times per year
750 sq. ft. space turns 2.5 times per year
Overall – space turns 4 times per year
Monitoring and Reacting
The Paretto Principle:
“80% of the outcomes come from 20% of the
causes.”
Monitoring and Reacting
The Paretto Principle –
In a Product Context:
“20% of your products will generate 80% of your
sales.”
Monitoring and Reacting
The Paretto Principle:
A typical breakdown: Three layers
• Layer 1 – Top sellers – 20% of products, 80% of revenue
• Layer 2 – Middle sellers – 30% of products, 15% of
revenue
• Layer 3 – Bottom sellers – 50% of products, 5% of
revenue
Monitoring and Reacting
Inventory Management for Your Top 20%
“Analyze your existing customer base to
figure out your best sellers.”
• What products/categories do you sell out of the quickest?
• What categories generate the most revenue for your
business?
• What disease states do the majority of your customers
suffer from?
Monitoring and Reacting
Inventory Management for Your Top 20%
Controlling inventory for your top 20%
• Tightly control inventory for top-selling products
• Know how much is in stock.
• Track current demands and forecast future
trends.
• Plan re-ordering strategically to never run out of
products or have too much in stock.
Bucket #3
Incremental Sales Growth
Incremental Sales
Added revenue gained from merchandising and
marketing activities that would not have otherwise been
generated through standard business efforts.
Build-a-bear Workshop
Turning
this…
•
•
•
•
Into this…
Start with a basic shell-unstuffed bear.
Add stuffing/voice box.
Select from a variety of fashions for your friend.
Choose from a plethora of accessories.
The Cost of Samantha
Bear
Hair bows
Bloomers
Skirt & shirt
Varsity jacket
Sunglasses
Sketchers shoes
Total
$16
$5
$3.50
$12.50
$10.50
$4.50
$9
$61
Sales increased by
$45
28%
8%
6%
20%
17%
7%
15%
74%
The Cost of Samantha
Per day increase
If one
Samantha
increased
sales by
$45...
10 Additional Samantha’s per day
x $45Sales increase
$900
Weekly
Sales
$450 Additional
Additional
daily sales
Per week increase
$450Daily sales
x 5Days
$2,250
Additional weekly sales
Continued for the year...
$2,250Additional weekly sales
x 52Weeks
$117,000
Additional yearly sales
HME Build-a-Bear
Hospital Bed
Hospital Bed Incremental Sales Products
• Bed sheets
• Mattress Pads
• Over the bed trays
• Pillows
• Reachers
Per Day Increase
10
Hospital Bed per Day
x $45
Incremental Products per Sale
$450
Additional Daily Sales
Per Week Increase
$450
Daily Sales
x5
Days
$2,250
Additional Weekly Sales
Continued for the year...
$900
Additional Weekly Sales
x 52
Weeks
$117,000
Additional Yearly Sales
WOUND CARE BUILD-A-BEAR
Wound Care Needs
Products
Core Products/Year
Estimated Price
Total Purchased/Year
Wound Care
Topical Pain Relief Creams
1
10.00
10.00
Cleansing & Moisturizing Products
2
10.00
20.00
Compression Stockings
2
20.00
40.00
Pneumatic Pumps
1
500.00
500.00
Reachers/ADLs
3
15.00
45.00
Walking Aids
1
40.00
40.00
Caladryl Lotion
1
10.00
10.00
Benadryl
1
15.00
15.00
Hydrocortisone cream
1
10.00
10.00
Aquaphor
1
13.00
13.00
Antibiotic Cream
1
10.00
10.00
Extra Dressings
4
7.00
28.00
Additional Dressings/Taping Supplies
6
15.00
90.00
Hot/Cold Packs
4
10.00
40.00
TED Socks/Support Hosiery
4
20.00
80.00
Lymphedema Sleeves/Bandages
12
60.00
720.00
Skin Rashes & Wounds
Post Surgery
Total Annual Potential Spending for One Customer
1671.00
Bucket #4
Expected Outcomes
Seasonal & Trend
Financial Details
4 sq. ft. of showroom space
32 sq. ft. of linear selling space
Annual revenue
Cost of products
Sell through %
Annual product turns
Fixtures & signage
$34,466
$18,611
60%
6
$998
Profit dollars
Profit %
$10,893
43.1%
Product Category
Financial Example
50 sq. ft. of showroom space
250 sq. ft. of linear selling space
Annual revenue
Cost of products
Sell through %
Annual product turns
Fixtures & signage
$178,533
$96,408
60%
4
$2,993
Profit dollars
Profit %
$79,133
44.3%
Department
Financial Example
125 sq. ft. of showroom space
500 sq. ft. of linear selling space
Annual revenue
Cost of products
Sell through %
Annual product turns
Fixtures & signage
$269,262
$145,402
60%
3
$9,062
Profit dollars
Profit %
$114,799
42.6%
Full Store
Financial Example
225 sq. ft. showroom space
750 sq. ft. linear selling space
Annual revenue
Cost of products
Sell through %
Annual product turns
Fixtures & signage
$337,500
$182,250
60%
2
$12,134
Profit dollars
Profit %
$194,385
42.4%
It’s Not About…
Trusting your gut
It’s About…
Reacting, balancing and taking calculated risks