March 13, 2015
Why being "under budget" could be hazardous to the health of some businesses.
Certainly staying within budget, or even seriously “under budget” would, at first blush, appear to be a good thing.
On the rare occasions in which this phenomenon occurs in my personal life, I will admit to being pleased as punch and inordinately proud of myself. When it happens in my professional capacity of buyer, however, it is a bit more problematic.
As the cold 2014/2015 winter comes to an unbearably-slow end, I am finishing up fall/winter buying for 2015/2016 and am distressed to see that I literally have tens of thousands of additional dollars to spend and can’t seem to find anything to spend that money on?!!
I can almost hear the disdainful and cynical remarks being bandied about: “We should all have those kinds of problems”, or “THAT’s a problem?”
Well, actually it is.
Let me explain:
Inventory buying is a difficult and very precarious business. Due to the fact that retail store profit margins are notoriously slim, being off by 10 percent in either direction can literally put a business OUT of business.
That statement is not as incredulous as it first seems:
Let’s say a store typically spends 250,000 a year in inventory and does $500,000 in business a year; after inventory expenses, salaries, rent, taxes, merchant processing fees and the like, the business maybe makes 50K a year in profit. Now, if you buy 25,000 more than you should have (10 percent over your 225K open to buy) and business is down 10% (which could easily happen with, say a cold snowy winter), you suddenly have a MINUS 75,000 dollar swing and a 25,000 dollar loss.
Most small business owners I know do NOT have additional capital on hand to cover the lean times so can’t pay the bills and are often forced to go out of business. In fact, manufacturers at this year’s show were already talking about the imminent demise of many stores due to the unusually harsh winter experienced along the East coast from Boston to Atlanta.
Given the dangers inherent in overbuying, one might conclude it is better to actually be UNDER budget than over budget. A logical assumption to be sure, but not exactly an accurate one. The problem being, that, if you don’t have enough inventory, there is simply not enough merchandise for people to buy, so your gross sales automatically go down, while your operating expenses remain the same or increase, which puts you in a situation similar to the one detailed above.
You get my drift.
So, why can’t I spend the money it would be in my best interest to spend?
If the truth be told, I would have to admit that I am appalled, horrified and dismayed by the quality and styles of the vast majority of clothing available in the American children’s market.
It is cheap and overdone.
As a very highly respected children’s wear designer commented to me at the show yesterday: “People are putting their children in Halloween costumes all year round”. Well said.
I understand that comfort is key. What I don’t understand is the need to be comfortable in 6 different colors and 5 different patterns on one outfit. I don’t understand why comfortable clothes have to outlandish and tacky? Why do chevrons and polka dot combination outfits need to be further embellished with Minnie-mouse sized bows and sparkly trim? Why does tulle and sparkly fabric need to be accented with lace AND velvet. When is it all just too much?
I am dumbfounded at what people at the American shows are buying. What passes as “cute” in this country is seen as garish by not only me, but by most of the European contacts with whom I have spoken.
Jackie Kennedy worked hard to elevate American fashion on the global stage. I would love to have a similar ambassador for the children’s market, but sadly, I think there would be scant offerings to promote.
Clearly, it is a difference in taste. As my father would be quick to point out, “That is why they make chocolate and vanilla”. Certainly, my distaste for what seems to be an increasingly popular trend, is based on MY particular aesthetic.
While I don’t understand the looks people are buying, I reluctantly must admit that, based on supply and demand, they ARE working for most. Just not for me.
So, what is one to do? My clientele comes to my stores precisely for what I buy. So what to do when there is not enough of the types of styles I buy for me to actually buy?
Hmmmmm…..I’m guessing another transatlantic flight is in my very near future.
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June is the month for graduations. Certainly, college graduations and high school graduations quickly come to mind.