Budgets? We don’t need no stinkin’ Budgets!
No one likes to hear that dreaded phrase: “Sure it would be great, but it’s not in the budget!” That one expression always seems to bog down progress, innovation, and the entrepreneurial spirit! But, as our friendly controller reminds us, “Without a budget, we can’t make profits; without profits you can’t get paid!” This often leads to heated discussions, and can even blossom into growing resentments within an organization between two factions that really are on the same team.
Let’s face it – there is truth to both sides. Gains don’t come without a risk. Yet risks require money, and the accumulation of money requires thrift. No pain, no gain. The stock market has its conservative Bears buying bonds, but enchants the market on the backs of Bulls buying high risk growth stocks. But the smart investor always diversifies, knowing that conservation of funds is what allows for speculative investments.
Yet it occurs to me that this age-old dichotomy, and more importantly the conflicts that arise, is flawed. I think this has more to do with the attitudes and approach of us players. While the constraint is always, “No, you can’t have or do ‘that'”, we seldom take the time to explain all the things we can do if “that” isn’t done.
Merchandise planning (Open to Buys) has always been presented with the same stigma: it will restrict the amount of merchandise a buyer can purchase and will impair sales. Not only that, higher sales growth is always expected! More sales on smaller inventories? I guess it’s no wonder that a buyer shies away from the planning process.
But retailing is indeed “speculation at best.” While the brass ring is an optimal turn rate, the Open to Buy process should be looked at by the merchant as an opportunity to free up some “fun” money. Dollars that can be used to buy new lines, expand selections, add new departments and even try something completely new! Every opportunity to slim down inventory commitments in low performing areas should be seen as an opportunity to move money into high performing areas that offer the surest opportunity for increased sales and, by the way, more money for buying!
As a matter of fact, so much of the negative connotation of the planning process is that we beat ourselves up over our mistakes instead of using it as a tool to decide where we have done well and how to keep doing it better. While most retailers are turning their total inventory much slower than they should or could, there are always hot spots. Believe it or not, there is such a thing as having too high of a turn rate. High turn rates represent lost sales and lost opportunity. Every merchandising decision, every day, should be based on, “Where can I take money from slow selling merchandise and where can I spend it?”
If we can change the attitude about the planning process, we can make it a fun and exciting endeavor. Sure, it is always a burden to plan merchandise or General Ledger budgets. There are always daily priorities on our plates. But our attitude going into the process really should be one of opportunity and encouragement, not of belt-tightening. In fact, you should have a positive, although realistic, attitude in forecasting because if you always forecast the worst, you risk the certainty of a self-fulfilling prophecy!
So next time you sit down with your Open to Buy, start with the fun classes! Think of all the opportunity you have for growth. Think carefuly about how much you need to realize higher sales, but don’t be afraid to take risks and innovate. For those merchants with retailing running through their veins this is an exciting time. By starting with the positives we will find it a lot easier to make the important cuts from poorly performing areas, even if it means taking markdowns on the chin.
Have you hugged your Open to Buy lately?
