Sarah from the Boutique Hub explains open to buy planning, the systematic way to decide how much inventory to stock. You need a POS system that tracks sales, markdowns, current inventory, received inventory, and on-order items. The formula: planned sales plus planned markdowns plus ending inventory minus beginning inventory, applied by product category like sweaters or denim.
Questions this episode answers
Sales; discounts/markdowns; current inventory on hand; inventory received; on-order/committed inventory.
Hey guys, it's Sarah with the Boutique Hub. And I'm here today to talk to you about another one of the questions that were asked all the time here at the Hub and it's how much inventory should I have on hand or how much inventory should I be buying? Well, the truth is there's no easy button there. There's so many things that go into account when we're trying to figure out how much inventory should a store have on hand. Just a few of the players in this question are what time of year is it? What is the demand of your customers? How much inventory do you currently have in stock? Right. What's happening in the community? What's happening in the world? Is it holiday time? Is it summertime? What are the demands? So many different things. There's no cookie cutter example. There's no cookie cutter answer for that. So there lies the science of the investing in your business and retail Bootcamp and our other courses here at the Hub, I always talk about how when you go to market, you're not the buyer, you're the investor. Well, there's a science on how much to buy from, who to buy it, when to have it delivered, and at what price point. Right. That's called open to buy planning. And basically what that is is it's a real fancy way to say, how much do you go and invest? What is the difference of what you need to have on hand, what you already have on hand? And it gets even further than that. It's not for your overall store guys, it's for your individual inventory classifications. You sell denim, you sell tops, graphic tops, casual tops, career tops, outerwear. You sell sweaters, you sell sandals, you sell accessories. All these things are their own unique individual platform or category in your store and they need to be analyzed accordingly. So we get way deep dive into this in our other courses and things like that. But today I just wanted to come and talk to you a little bit about the fact that there's something out there called an open to buy plan. And this is something that is very important for all retailers that want to grow in their business to establish. But there's a few things that you need to have in place in order to generate the information necessary to develop, implement and use an open buy plan. One, I think every retailer's very best friend is a good quality point of sale system. What is a point of sale system? Well, it's more than your cash register. It's a reporting system that can give you these five reports that you have to be able to generate in order to implement an open to buy plan. Actually, even though forecast where you're at in your store, the health of your store and what classifications are really winning and what classifications aren't. Right? Because when we go and invest our money, we want to invest it wisely, we want to invest it in products that are going to turn quickly and generate cash for us so we can be the most profitable we possibly can. So let me give you those five reports that you're going to need. Now again, remember, this is not just overall for your store. When you really dive into an open to buy plan, you want to run these five reports for, for each individual classification that we're going to analyze. So let's just talk sweaters. For example, you would want to run sales. What have I sold in sweaters this month? What did I discount? How much did I discount those sweaters? That's number two. Sales number one. Discounts number two. What do I currently have on hand in inventory? What is already living that I've paid for on my sales floor? What did I receive that month? How much of that inventory is new? That's a big one. We want to know how much is new and then what do I already have committed? What is my on ordered? So that's my five sales discounts. Inventory, current inventory on hand, inventory that and received what I just received. And my last one is what I have on order, potentially maybe even six, eight months out. What have I already contracted and committed to? So, so those are my five reports. So with that we're going to run this formula, right? We're going to generate or gather this information. We can run this formula. This is your basic open to buy plan. This is your plan sales plus your plan markdowns plus your ending inventory, the inventory at the end of the month, minus your beginning inventory from the month, right? Those numbers that you're going to gather each classification can give you an open to buy plan for each individual classification. There's a whole lot more information right down here in this link below. We deep dive into this in our other courses and we have more trainings about this in the hub in our training library. But for the most part, guys, I wanted to come to you today to just tell you there is no easy button. There's no quick answer of exactly how much any store should have in store at any given time or go to market and purchase. There's a science to being a good buyer. There's a science to being profitable in your business. It doesn't just happen. I'm a big believer in a good quality reporting system like a point of sale system to get you there to give you the tools that you need to be making the best decisions for your store possible. I'm a big believer in hiring out and open a buy planner, right? You've all heard me say I like that unemotional set of eyes on my inventory that's not emotionally connected to all that inventory that I have there or to my customers. They just see numbers and they can make you so much money and help you be very profitable. We have contacts for that as well. Happy to help you there. But guys, like I said, to be profitable in this business, you can't overspend and you can't underspend. As a business owner, when it's time for you to go out and purchase new supplies, pay expenses, you can only do that with cash. You can't do that with the inventory hanging in your store. So it's really important that you're investing in the right inventory at the right time and have it delivered for your customer when they need it, right at the right price point. Open to buy, planning, forecasting, these are all things that help you get there. Nobody wants to invest in something in January and not see the money back for it until June or July, right? Nobody wants to make those investing mistakes. So click the link below for more information on that. Open to buy plan or for point of sale systems. We have a ton of information available for you and vetted resources that we like to work with. Until then, let me know what you think. Go ahead and ask other questions and I'll come back to you with answers to our frequently asked questions in our next video. Thanks guys.
That's it for five Minute Friday you guys. I hope you found some quick, actionable steps you can put into play in your business right away. As always, if you're not yet a member of the Boutique Hub, I would love to personally invite you to join us. It's where all of the daily conversations happen. The up to date what is working now in the industry conversations, the latest trainings, training, trend reports, discounts, resources and of course access to thousands of wholesale brands that you also know and love. So please take a minute, follow the link in the show notes and we would love to invite you to join us inside of the Boutique Hub.
