Identifying How Specific Vendors Are Performing In Your Store

As an indie retailer, how do you know for certain how a specific vendor is performing?

It is easier than you think to measure vendor performance.  You can think you know how a vendor is doing, but until you see the numbers you don’t know for certain.

• To get started, review a vendor’s performance by dollars, not by units.  Look at sell-through by style or item —  You will need to see how much was received at retail and what it was sold at.  For example, if you received $1000 at retail and after 4 months sold $200 and still own $800 – that represents a 20% sell-through (200/1000).  For most stores, we are aiming to sell 100% through in 4 months – so this scenario is bad! So what do this mean for you?

i.      This will tell you what worked and what did not

ii.      This may be a negotiating lever to use with the vendor next time you talk to them

Next, identify if you made money with them. Did you? At the end of a season, take the amount sold less the cost and then divide that number by the amount sold and finally multiply that by 100.   That calculates the maintained mark up (MMU) for the vendor.

{(Sales – Cost)/Sales}x 100 = MMU

For most stores, we want this number to over 50%. In order to do this, there are few other things to consider.

1. How is your inventory paid for (Credit Card, C.O.D, Terms)?  You want to stay in control of your cash flow and so you want to get Net 30 terms at least.  ALWAYS ask strongly for longer terms of payment.  I instruct my clients to do this and they often get it.
2. Is the initial markup dictated or discretionary?  This is crucial in determining profitability.
3. Are there areas of weaknesses and strengths in the line?  It is easy to be sitting there with a rep and just order the entire line or an entire collection.  Be sure to take the time to evaluate the vendor by class of inventory.  Most all are stronger in some classes than others.  Buy into the vendors strengths!  Most buyers don’t do this and lose money because of that.

The bottom line is that you need to know what works for your store and what does not.  Then use that knowledge and get help from the vendor.  Don’t let yourself be pressured by the vendor or sales rep.  EVER.  Usually, they recognize that the best relationship with a store is to partner together for mutual success.  Use this information to make sure that you are successful with your vendors!

Contributed by Cathy Donovan Wagner, the founder of RETAILMavens, which is devoted to getting indie retailers more profit and better results for more fun and better sleep. Learn more about Wagner and her Retail Mavens Academy (RMA) by visiting www.retailmavensacademy.com. 

PLUS! Join Cathy Wagner April 2, 2013 for a LIVE VIRTUAL WORKSHOP that will identify “3 Steps to Increase Sales & Decrease Stress”. Sign up to attend here!