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3 Key Strategies to Increase
Retail Revenue and ReduceCosts
Presented byLisa Langas
Golf Retail Consultant
GIS February 4, 2009
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AGM Survey Results 2008
Private Public Resort Off-Course
# of round played 30,606 42,631 50,329 N/A
Shop Sq Footage 1,239 1,293 1,766 5,036
Gross Merch Sales (000) $484 $487 $1,207 $2,875Dollar Per Round 15.82$ 11.43$ 23.98$ N/A
Dollar Per Sq Foot 390.90$ 376.77$ 683.50$ 580.95$
Gross Profit % 30.9% 34.2% 45.4% 38.9%
Cost of Sales % 69.1% 65.8% 54.6% 61.1%Turnover Soft Goods 2.5 2.4 3 3
Turnover Hard Goods 2.2 2.2 2.6 2.7
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3 Key Retail Strategies
Agenda:
Provide simple tips and solutions toimplement now to increase retail sales while
reducing costs Right Product/Merchandise selection
Right Price/Pricing Strategies
Staff Utilization
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Right Product
Who is your customer? Survey
Visual
Written
POS analysis
Data collection
Results Merchandise selection relevant to customer?
Brand
Pricing
Type
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Right Product
Control Merchandise Purchasing Open to buy plan
Purchase Orders
On Order logs
Sourcing for Merchandise: Regional and National PGA shows
Off-Price retail show Las Vegas Regional and local merchandise mart shows
Internet offerings
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Right Product
Merchandise Performance:
Stock to Sales performance
Vendor analysis
Average retail selling price point
Markdown analysis
Make changes immediately
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Right Price
Initial Markup
High enough to meet profitability goals?
What is eroding initial markup daily?
Monitor via POS system
How to increase without major impact on retailprice
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What is Initial Markup? It is the difference between the wholesale cost and
the original retail price.
Retail Price $100
Wholesale Cost - $ 48
Initial Dollar Markup Up =$ 52
It needs to be large enough to cover operationalexpenses and discounts like markdowns and stillprovide a profit.
Right Price
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Key factors you need to know to establishthe correct amount of Markup: What is your net profit goal? Is this the same as
your Gross Margin goal?
What are your operating expenses as a percent toyour retail income? Are shipping costs included inyour golf shop expenses?
What is your actual Markdown Rate? Do you pre-plan markdowns to take in season and use anestimated markdown percentage to calculate?
Right Price
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Profit Goals The net profit goal is the amount of income as a
percent to retail sales after paying all expenses for
operating the business:Net Profit Goal $ 70,000
Retail Sales Goal $ 350,000
Net Profit % = 20%
For this shop, the goal is to make $70,000 (beforetaxes) which is 20% of the total income derivedfrom Retail Sales
Right Price
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Operating Expenses Operating expenses like payroll, utilities, office
supplies, etc. also need to be accounted for in your
initial markup as a percent of the total retail income:Operating Expenses Budget $ 52,500
Retail Sales Goal $ 350,000
Operating Expenses % = 15%
For this shop, the operating expense budget is $52,500which is 15% of the total income derived from RetailSales
Right Price
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Markdown Goal Markdowns are a normal expense in conducting
any retail business! Markdowns should be pre-
planned and the total dollar amount is representedas a percent to total income.
Markdown Budget $ 87,500
Retail Sales Goal $350,000
Markdown Rate % = 25%
For this shop, the markdown budget is $87,500which is 25% of the total income derived from
Retail Sales
Right Price
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Golf Shop 2009 Retail Goals for$350,000 in Net Retail Sales:
Dollars %
Net Profit $ 70,000 20%
Operating Expenses $ 52,500 15%
Markdown Rate $ 87,500 25%
Right Price
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Profit +Expenses+ Reductions = Initial Markup%Retail Sales + Reductions
% method: 20% + 15 + 25% = 60% = 48.0%
100% + 25% 125%
$ method: $70,000 + $52,500 + $87,500 = $210,000 = 48.0%$350,000 + $87,500 $437,500
Right Price
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Putting it all together:
Net Profit $70,000 + 20%Operational Expenses +$52,500 + 15%
Markdown/Reductions +$87,500 + 25%
= $210,000 = 60%Cost of Inventory + $140,000 + 40%
Total retail sales = $350,000 = 100%
Right Price
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How do I use my initial markup percent todetermine the correct retail selling price?Divide the known cost price of themerchandise by the costcomplementofthe markup goal.
100%Markup Goal - 52%*Cost Complement = 48%
*Soft goods markup after reviewing business
Right Price
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Correct way to use initial markup percent: Calculation using our quick tip:
Wholesale Price $33.00
Cost Compliment .48Original Retail Price = $68.75
Round this figure up to an even $69.00 or $70.00 for
pricing purposes.
Right Price
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Incorrect way to use initial markuppercent:
Why cant I simply take the wholesale price and
multiply times 1.52? (100 plus the markup?)
Wholesale Price $33.00
100 plus markup x 1.52
Original Retail Price =$50.16Round this figure up to an even $51.00 for pricingpurposes.
Right Price
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Retail MarkupBy using the compliment of yourmarkup you are determining the dollar amount of markupneeded based upon the retail price
$69.00 - $33.00 = $36.00 markup
$36.00 $69.00 = 52% markup as a percentage of theretail price
Cost MarkupWhen you use the markup plus 100,
this is determining the dollar amount of markup neededbased upon the wholesale cost.
$50.00 $33.00 = $17.00 markup
$17.00 $33.00 = 52% markup as a percentage of the cost
Right Price
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Right Price
Pricing Programs
Multiple tiered pricing
Low
Mid
High
MSRP
Value pricing Loss leaders
Impluse products
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Pre-plan your Markdowns! Establish a markdown budget per month as discussed
in our initial markup section!
Can spend each month as necessary to move slow
sellers, or save to use for larger sales. Controls the amount of dollars you spend on
markdowns and helps you to implement yourmarkdown strategy.
Right Price
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What does a markdown strategy or plan looklike?Step 1. First start with frequent/smaller deliveries of
inventory! If the golf shop doesnt get overstocked bycontrolling flow of goods into the store, you donthave to take as many markdowns.
Work deliveries for softgoods back to previous
months color stories or basics so that you cancontinue to sell product at your retail price.
If purchasing off price goods, factor into your salespromotions to help pay for markdowns oninventory with less markup.
Right Price
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Markdown Strategy cont:Step 2. Develop plan to I.D. slow selling
merchandise. This is done by determining howmuch product you want to sell in a given time periodand than determining your plan of action to make itsell:
Time: 4.0 turnover goal = 90 days selling model
Amount sold: Plan to sell 50% of inventory in 45
days. Action: Merchandise not meeting this goal subject
to markdown immediately.
Right Price
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Markdown Strategy cont:Step 3. Set markdown plan of action:
a. Rotate/Focus/Signage = 50% sell thrub. 1st markdown soft sale most profitable
c. 2nd markdown more aggressive
d. 3rd markdown final clearance
Right Price
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Calculating your Markdown Rate:Wholesale cost $34.75
Our Retail price $73.00
Sold for price $54.75
Original Retail Sale Price
Markdown Dollars $18.25 $18.25
Retail Price $73.00 $54.75
Markdown % = 25% = 33%
Right Price
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Staff Utilization Is everybody on the same page?
Top down approach to operation
Are you investing in them? AGM/PGA programs
Do they know/understand the retail business? Utilizing pos system to improve sales via staffing
Are they empowered to generate sales
Rewards and incentives Team atmosphere
Staff Utilization
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Staff Utilization
Training programs Sales training Customer service standards Product knowledge
Visual merchandising standards Daily/weekly/monthly
Creative displays Rotating merchandise housekeeping
Mini face lift every year
Paint Stain Clean carpets Replace fixtures
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Resources
Lisa LangasGolf Retail Consultant
www.lisalangas.com
303-470-3406
Association of GolfMerchandisers AGM
Desane Blaney ExecutiveDirector
www.agmgolf.org
Tom Hoch [email protected]
405-524-0505
www.tomhoch.com
Off Price show Las VegasFebruary/August
www.offpriceshow.com
Magic apparel show
www.magic.com
National Retail Federation
Smartbrief daily e-mails
Retail trends and informationwww.nrf.com
http://www.lisalangas.com/mailto:[email protected]://www.agmgolf.org/mailto:[email protected]://www.tomhoch.com/http://www.offpriceshow.com/http://www.magic.com/http://www.nrf.com/http://www.nrf.com/http://www.magic.com/http://www.offpriceshow.com/http://www.tomhoch.com/mailto:[email protected]://www.agmgolf.org/mailto:[email protected]://www.lisalangas.com/