FTV: Buying Strategy & Cash Flow Analysis for Retail Growth with Dan Jablons

Hey guys, I wanted to bring you back another one of my favorite episodes from early on here at Boutique Chat. Maybe you've heard all the episodes, maybe not. But I didn't want you to miss an awesome opportunity to learn, even if the podcast episode aired a while ago. So this week I wanted to share with you a buying strategy and cash flow analysis with my friend Dan Jablins, the founder of Retail Smart Guys. Dan is a member of the Boutique Hub and a part of the Management one community and the and I love our analysis of your financials inside of this episode. So let's hear it for this bonus episode here on Boutique Chat with Dan Jablins. Let's talk about your business strategy and the juicy details of what actually works from mainstream fashion to fashion on Main street and the entire ecosystem behind it. How do we scale your company and do it with the balance and the happiness that we all seek? Let's hear from those insiders, experts and strategists that actually make it happen. I'm your host Ashley Alderson from the Boutique Hub and I can't wait to chat. You guys are in for such a great treat this week as we visit with one of the smartest guys that I know in retail and someone who's also good for a laugh anytime you run into him. You may have seen our guest today as a featured speaker at WWD Magic in Las Vegas or at countless other venues and he's going to hit on a topic today that every single retailer and wholesaler needs to hear and that is inventory management and planning. This is one of the most common problems that we see with boutique owners today and that is not being able to properly manage their inventory either. Being underbought in some areas, overbought in others, and then trying to buy each month with no plan whatsoever. And as you know, retail is truly an art paired with a science. And today we're going to break down how to become a retail professional by using these time tested analysis for your business. So no more being overwhelmed or scared by the numbers which I know can happen. Dan is going to help shed some light through some examples of how to grow your business. So today's guest is my dear friend Dan Jabalins, the founder of Retail Smart Guys. Now a bit about Dan. Dan has worked in retail forever and then some back to attending the Ohio State University where he graduated with a Bachelor's degree in in Marketing and Production. He then worked with retailers such as Walmart, Target, JCPenney, American Apparel, Donna Karan, Jimmy Choo, Charles David, Diesel, Oakley and I could go on. He's worked for a clothing manufacturer also where he piloted vendor managed inventory programs with a leading point of sale provider, where he installed systems and also provided some merchandising help for retailers both large and small. And I have to add, in addition to his vast retail background, Dan also has a background in improv theory, theater. He's performed in numerous comedy troupes across the US and recently appeared on Curb youb Enthusiasm. Dan definitely combines his knowledge of retail and his comedy skills to be one of our industry's most sought after speakers. Hence the reason you may have seen him in Las Vegas and again multiple other shows. Today, without further ado, I am so excited to bring on our guest, Dan Jablins. Hey guys, welcome back to the podcast. And Dan, welcome. Thank you so much for joining us.

Thank you for letting me be here.

Yes. You know, I think you and I have been prepping this for a while, haven't we? We?

Sure.

The story about how we met, we were at it was the Management one annual meeting. Correct. In Tucson and we shared a panel together and it got a little heated, didn't it?

Yes. You and I had a very different point of view on, I think E commerce at the time. But I think that, you know, listen, there's nothing worse than being on a panel that there aren't people that are engaged. And so the fun part was that, you know, you have a very strong point of view about that, as do I. And so we got to go back and forth a little bit. And I think that was the best thing for the whole audience. That was there was they got to hear some real opinions and not just sort of some prepackaged fluff about business.

You know, no fluff. And I think it was like afternoon after lunch, the time when people are going to fall asleep anyway. So we kept them on the edge of their seat at least. Right?

Yeah, we went for it, Ashley. That was really. But you know what, that was fun. I had a great time time doing it and that was probably if that was probably the best way for me to meet you was to do that. So I'm actually excited about that.

Yes. Good things. Well, I'm so excited that you get to be with us as a member of the Boutique Hub and a guest on this podcast because you're someone who is so well respected in this industry. You've been a speaker at Magic, among a number of other events for many years and you have got such a diverse, interesting background. And if I can just list off a couple of the names, companies that I know that you've worked with, from Walmart, Target, American Apparel, Donna Karan, Jimmy Choo, Charles, David, Diesel, Oakley. And on top of that, what is all of this about improv and working with Curb youb Enthusiasm? You are a unique man. So you've got to tell us more about this background.

Sure. Well, okay, so first off, on the retail side, I kind of cut my teeth with kind of both ends of the marketplace at the same time. Right out of college, I went to work for a clothing manufacturer, and my job was to talk to the retailers that I spent some of my day working with. Some of the bigger names that you listed off there, Ashley. And then I also ran what they considered their specialty store division. So I also worked with independent retailers. And I have to say, I had more fun working with the independent retailers, the bigger box guys, only because there was more creativity there, there was more fun there, there was more challenges there, and there was lots of great wins that we had there, you know, so interesting balance between that marketplace and at the same time, through a friend, I one time went to saw an improv show when I was living in New York, and I thought, boy, that looks like fun. I think I could do that. And then while I was working with retail, I also became the. I studied improv for a long time with the. With folks who had been doing it for a long, long time. And I became the executive director of the National Improv Theater in New York City. And we built a theater school from nothing, honestly. So I continued to do improv through the years, and then I got cast to be Larry David's lawyer on Curb youb Enthusiasm.

I love it.

I spend most of my time in the world of retail consulting, but every once in a while, you'll see me sneaking a commercial for Little Caesar's Pizza or Gotomeeting. I just shot one, actually in Spain for bbva, which is the biggest bank in Europe. The improv stuff keeps my business skills active and really, you know, improv is really good for creative thinking and communication and that sort of thing. And at the same time, you know, what I learn in business is very applicable to whatever acting I do. So there you go.

It probably doesn't hurt much that numbers and finances tend to scare and overwhelm some retailers. So I'm assuming that this improv side of things and some humor can lighten the mood and help people digest some of the numbers that you're able to turn into a story along the way.

Absolutely. And, you know, one of the Things that improv has done for me, retail people are typically visual people. And so I like, I pride myself on saying I'm the king of the analogy. So a lot of times when we're going through numbers and preparing people for, you know, making sure that their cash flow is right and understanding what they're going to sell and what they're going to, what they need to buy when they go to markets like Magic or Surf Expo or Super Zoo or depending on what they're, their, their retail store is. Right. We help them prepare for that so they know what to buy, when to get it there. And you know, the idea is that we try to help them do more full price selling with a slightly lower inventory investment that enables them to get more cash flow and, and more profitability and keeps them, especially in this day and age, keeps them nimble so that when new opportunities show up in the marketplace, they have the cash and the wherewithal to be able to attack those opportunities and maximize their profitability that way.

Absolutely. So you do this all with retail smart guys, which is your company. Tell us more about your transition from working with point of sale and that side of big box retail and designer names into retail smart guys and the way that you work with independent retailers now and not only in the United States, but around the world.

Right, and we do, we work with retailers in 15 countries today. Actually through, through one of the point of sale providers, I was actually able to go into a conference in Dubai a little while ago. And so there I was with people in all of these Middle Eastern countries. And even though the product is somewhat different, their challenges are the same. They would all come up to me and say, God, I have too much inventory and how do I know what I should be buying? And that kind of stuff. And so even though it's, it's, you know, different, completely different product sets and that kind of stuff, it's still the same challenges. Inventory is inventory to some degree. When I graduated college, the first job I got was for working for this kids clothing manufacturer. That was a, they did a lot of licensed products. So they did Disney, G.I. joe, Muppets, Simpsons, Sesame street, like that kind of stuff. Although they were one company, they produced goods for every type of retail there was. They made them for the, the Kmarts and the Walmarts of the world and that shipped under one label. They made it for Sears and Penny and that was under a different label. And then they sold stuff under department store labels that was a different label and specialty stores was a different label. So it was still all, interestingly enough, Mickey Mouse T shirts, but they would have different treatments. And so my job in, in that arena was to talk to the retailers, but also as things got more sophisticated and we got things like Just in Time systems and EDI where orders were sent in electronically as opposed to by fax or by mail. And how do we make all that work and how do we integrate our systems, our manufacturing systems with the retail systems? I got very involved in that because I was the youngest guy there and the least afraid of computers. That's a true story. That's a true story. At one point I was there and the person of the company said to me, look, this box just came. It's a computer and the rest of us are scared of it. So you're in. Figure it out.

Trials are fire.

Exactly right. So, okay, well, we'll go to work on this. And then from there I went to work with Retail Pro, which is one of the leading point of sale manufacturer software companies in the, in the world. And they actually are today in over 101 countries. I think they have something like 70,000 installations and they're written in 21 different languages. That's not, I may be a little bit off on that, but I'm going to be close. Because of my merchandising background. I wasn't just sort of a techie guy there. I enabled them to figure out how to use their point of sale data to merchandise their stores more effectively and to get better reporting out of it. And I also to this day work with, with them to help them devise better reporting out of their system. But after I'd done that for a little while, I kind of branched over into the world of Management one because I realized that point of sale systems are great spinal cords of the retail business. You know, they tell you when you've been slapped and they tell you when you've been kissed, but what they don't tell you is where to go to get kissed again. In other words, there's no planning, there's no forecasting, there's no way to make all that, you know, to look forward into all of that. So what I got excited about with Management One was that they have an amazing forecasting system that's based on a lot of intense computer algorithms that, you know, if you're, if your listeners are really into the pure geeky numbers and how that all works, I'm happy to share that with them. But for most of the, most retailers, it's like, I just want to know that the Forecasting works. And last year, across all of our customers in 15 countries, our average customer saw a forecasting accuracy rating of 94%. We're very proud of that number because it's not just, well, let's go last year, plus 5%. We're looking at lots of trends in lots of different ways, trends within a particular industry. So let's just say you've got a kid's store. What's the trending like in the kids store, what's the retail trending like in that part of the country, and what's that individual retailer's trends look like? And all of those things get combined along with some really great industry insights and constant study knowledge to come up with what a really, a tremendously viable forecast is. And Management one right now is implementing all of these artificial intelligence algorithms on top of the ones that were there already. So we think our forecasting accuracy is even going to get better than 94%. We're thinking of naming it as close to 98%. If you can tell someone with 98% certainty what they're going to sell, then knowing what to buy after that becomes a little easier.

Absolutely. We're going to get into that even more a little bit later in the podcast, because I want to make sure if someone's listening and they aren't familiar with what merchandise planning is, what Management One does, and what the difference is between that and, say, basic open to buy, which they're trying to calculate on their own, I want to make sure we come back and make that distinction, because there's a huge difference there.

So let me give you a really good definition for that. Okay? A merchandise plan starts with a great sales forecast by classification of merchandise. So if it's a, if a, if it's a women's apparel store, you know, women, we give a separate forecast based on T shirts, based on knit tops, woven tops, blouses, jackets, sweaters, dresses, skirts, et cetera. Right. So the forecast, the sales forecast is the first really important piece of it. The second piece of it is an inventory plan or a merchandise plan that enables you to hit that forecast without under buying and missing sales or over buying and tying up cash unnecessarily. Okay. And an effective merchandise plan is a little bit like taking an X ray of your business. And we can see everything at that moment in time. Right? We can see where you're trending, we can see what's working, what's not working, and it helps us figure out where we should play offense and where we should play defense. It helps us diagnose the store and help the retailer figure out how they get the most full price selling with the least markdowns and end the season. And this is the key point, that they end the season with the least amount of inventory possible. So they've cashed out of those goods and have cash to buy into next season. Right. So overall, it's a really strong sales forecast combined with a. An inventory plan to hit that forecast that enables retailers to have the most fresh inventory, the most full price selling, the least amount of markdowns, and the most cash flow.

Absolutely. And cash is king. At the end of the day, this is how does the retailer put more money in their pocket, the whole point of their operation. Right.

So, like, one of my customers who is very good at following the plan and very good at, like, really watching what that happens with what you know is very good at accumulating some cash. And so, you know, those, like, little fidget spinners that are out now that they've been out for a little while now. Right. Well, he was one of. He was one of the first to actually see it and go, I want that. Right? Or I think that would be great for my store because he had a lot of guys in that age range. And, you know, you know, you've got a hit when the product that you're selling is banned at the schools. You know, that's. Now you've hit a home run, right? Because now it's like, oh, my God, that's the thing everybody wants. So he was able to actually buy into that early enough into the demand curve where he was one of the first into it. And he was also one of the first that got out of it, because now you can go to, you know, you stop for gas and you can get those things. Right. So the thrill is a little bit gone there. But he was able to capitalize on that, get the most full price selling out of that. And when it started to phase out, when it started to wane a little bit, he got out of it. And then now he's cashed out of that and on to the next thing. And that's what makes great retailing. That's the difference between good retailing and great retailing. Right. You know, good retailing is like, I kind of buy and I go to the shows and I do okay, and I pay my bills as best I can and that kind of stuff. But great retailing is really attacking the business and figuring out where do I have those advantages that can make a difference Right now there's so much talk about, you know, last year there was a lot of like articles about retail Armageddon. Remember those? Right?

Absolutely.

As if the world was coming to an end. As if, like no one was going to buy anything ever again. You know, a lot of our customers never faced that and frankly kind of laughed about those articles because they were referring to retailers that were not cutting edge, that we're not looking and seeing what the new customer experience needs to be. And we're not properly keeping themselves nimble by keeping their inventory clean and effective and fresh. And so listen, you know, Radio Shack is closing stores. Of course they are. Because they're Radio Shack. Do we need Typewriter Shack too? I mean, you know, why do we even have that store? Right? So I think the future is going to be Amazon and independent retail. And the independent retailers that are nimble, that really curate and manicure their inventory effectively and create a great in store experience, are the ones that are going to survive. More than survive, they're going to thrive as time goes on.

Absolutely. So let's kind of, let's use our time together today to really look at this from a funnel perspective. Let's start wide and talk about the big picture of what's happening here, things that you've demonstrated and illustrated so well, and then go through some specific steps of if someone is new to this process and they're hearing you and they're like, man, I know this is an issue, I know I'm overbought, but where do I even start? Let's start at the beginning and then work down to the specifics of this business, specific metrics they should be looking at and then where the future of retail is going.

Okay.

Where does. Let's say someone's listening right now and she's a boutique owner, she's maybe been in business for one to two years. She's serious about this business, she's online, she has a brick and mortar and she says, I got started, I ran with it, but I didn't know what I didn't know. And now I'm ready. Where do I start analyzing my numbers and making this work for me?

Okay, so this would be good because this almost ties into our first fight, Ashley.

It does. Let's relive it.

Exactly. So the first thing is they've got to have an effective point of sale system. Okay. One that not only gives them selling and inventory reports, but also enables them to see what they've received and what they have on order. Okay. And my problem with some of the, the what people are using as point of sale systems out there that's not really effective right now is that they don't allow them to actually write purchase orders for the goods that they're buying and they don't allow them to receive the goods. So you can't actually watch the flow of inventory. And the flow of inventory is everything. Inventory is your, is your most. I would say to this retailer, you spend more on, on inventory than anything else. It's true of all retail stores, inventory is their biggest expense. It's also their most. We like to say it's a high risk asset because it's the thing you're buying the most of. And if you buy it well, you know you're in the money. If you buy it badly, you've got some real problems there. Right.

Specifically about that point of sale system, I want to just touch on that. They need a point of sale system so that they have access to great data. A common question that we get inside of the boutique hub and I don't want to use this conversation as negative connotation toward this company, but a lot of people are in E commerce and they get on Shopify and Shopify is hands down probably our favorite E commerce solution. I mean they do so many things right. But if you add on Shopify, they're, they're what they call point of sale system. It's missing a lot of the pieces that you're illustrating.

That is correct.

What you're saying there's another type of point of sale they should add on and connect to Shopify.

Correct. So many point of sale systems can connect to Shopify and actually you can get a data. If you've been on Shopify, that's all you've been on. You can actually get a data dump of your inventory and I think your customers and that can then get added to a point of sale system like Retail Pro, like Retail Edge, Springboard, Retail Counterpoint. I mean there's God knows, you know, there's amazing numbers of point of sale programs out there, right. And so you can import all that stuff there, right. And then you can be live on both. But at least with those other ones as your backbone, you can now get receiving information, purchasing information and more detailed selling information than what you can get out of just Shopify, which will enable you to really more effectively manage your inventory and your sales.

So you need a great point of sale system.

That's where it starts to get good data. Right. I always say this in some of the presentations that we do, you know, you have to be willing to now start to look at some hard numbers. And I know that sometimes scares some people. Retail is a balance of art and science, okay? And the art is being able to walk a show like a magic, like an LA market, like Coterie or even some of the local shows, or walk the Dallas market or whatever and be able to look at the product that's out there and go, you know what? My customer will buy that they won't buy this. Right? There's a taste level there that's hugely important. Actually, you've seen me in person, so you know, you know, no one's gonna look at me and go, that guy's a fashion plate, right? But we have to know our strengths and weaknesses. So I know I'm a good numbers guy, right? So us paired with, you know, our group retail smart guys paired with people that have great fashion tastes and are good pickers at the show is what is a good recipe for success. So first it's the point of sale stuff. So we can kind of get some trends, get some history, etc. And then from there we can then take that stuff and connect their point of sale to our planning system and, and then we can give them some great forecasting and teach them how to buy and teach them how to deal with some of their inventory issues that are happening. I'll give you one quick insight here. Most people that I, when I first start with them, the low hanging fruit for us in the very beginning is to look for inventory they've had for longer than six months. Almost every store I start with has some percentage of their inventory that's been around and they haven't gotten out of it and they haven't catched out of it. Right? Well, there's cash tied up in there. And so the first place we make them money is we help them figure out how to get out of some of this older inventory. So if your point of sale system can tell you the last date you received something, okay, look for stuff that's really super old and find that stuff and deal with it once and for all. You know, get that stuff sold, turn that into cash, and buy the things you know that will be effective for your store.

Do you. Let's move beyond just getting the data, but those reports that you're talking about and analyzing, like you're saying, creating a markdown plan, let's start with general and then get specific. What are some of those reports that you think people should be looking for? If they're brand new to having a point of Sale system into someone who's more advanced. What are the things you want them to look for each week?

I'll talk generally about a reporting strategy. First off, I think when you're thinking about reports, if you were asked to separate yourself from the screen, not even look at the. At the computer at all, but think to yourself, if I had a magic report genie, I could just rub the bottle and they would appear and give me any reports or any insights into my business. What do I want to know? Right? Part of that certainly is selling information. What's selling and what isn't. I find too often people run like a bestseller report and they leave it at that. Okay, but, you know, that's not all. You know, it's easy to look at a bestseller report and go, oh, these are the ones that are working for me. Great. That's all really good. And by the way, when you look at a bestseller report, the thing you want to look at is not so much who the top one is, because you probably know it's who's number six in that list? Because number six is an opportunity, right? Who's your fifth best vendor? Who's your sixth best vendor? That's someone who actually probably there's an opportunity within that to figure that out, you know? You know, you got to look at selling reports, and I think, you know, looking at it by vendor and looking at it by style is important stuff. I also think you got to look at it by your salespeople who's really selling for you and what. And are they getting a good units per transaction, Right. In other words, so if you come into the store and I'm working with you, am I Getting at least 3 units per transaction? Right. Am I. Because someone comes into my store to buy a blouse and I sell them a blouse. I have not really succeeded at that point. I'm a cashier, not a salesperson. Stores are filled with merchandise. And although I've come in for a blouse, right. What really should happen is it should be, well, by the way, these are the pants that go with that blouse. Look at this jacket, look at this scarf, right? Harry Friedman is a great coach for selling. And one of his statements that has stayed with me for years is, you show, show, show, till they say, no, no, no, I love it. And all that is, by the way, is not like pushing someone to buy something. It's not saying, you have to buy this, you have to buy this. And high pressure selling. All it is, is making sure they saw everything right? You guys are in your stores every Single day. And so you know where everything is. But someone walking off the street who's got three quarters of their head in their phone, right, May miss all the things that are around there. So you've got to look at your, at your sales by salespeople. And sometimes people worry about that. We're. We're a family, we do this together, that kind of stuff. It's not about that. It's about being able to look at the salespeople stats so you can coach them effectively and make them better at what they do. I can talk for a while about selling. You know, the thing about selling is everybody sells every single day at the moment. You know, you may not think you're selling until you turn to your significant other and you want to have Chinese food for dinner, and they want Mexican food for dinner. At that moment, the selling has begun.

To struggle.

I think on the selling side, you gotta look at all that stuff, right? I often ask people, what do you run in terms of inventory reports? And sometimes people say to me, oh, well, you know, I never run inventory reports because it's wrong. And I go, it's wrong. Well, if it's wrong, you got to figure out why it's wrong. You know, I can assure you that there aren't elves that snuck into your point of sale system in the middle of night and changed all your numbers. So if you're, if your on hand is wrong, it's either you received it wrong, you sold it wrong, or you transferred it wrong, or you may be getting an inventory adjustment wrong. You got to figure out, you know, right now, your inventory wrong. Being wrong is a symptom, right? It's kind of like it hurts when my arm hurts. Now we got to figure out, well, is it hurt when you raise it? Does it hurt when you lower it? Does it hurt when you reach too far? Like, what are the things that you're doing that are causing your arm to hurt? So we can correct that. If your inventory is wrong. It's the same thing. Am I receiving it wrong? Am I selling it wrong? Did I do my last physical inventory incorrectly? If I multiple stores, did I transfer from one to the other incorrectly? Am I. Are there places where people are taking goods and giving them to stylists, but they're not updating the inventory after that? You know what I mean? There's a ton of those kinds of things that you got to look for as you go through this, right? And then I believe in running things. Like, one of the things I love to do is every week Run a receiving report and post that receiving report in the back room so that when people come to work during that week, they go, okay, here's all the new stuff that arrived. Go find that on the floor. Right? So when customers come in, you know what the newest stuff is, because you know where it is because you found it. You had the little treasure hunt. So there's that. And then also, of course, certainly running purchase order reports that tell you what's coming and when it's coming so that A, you can alert customers and that becomes part of your social media. Right. Same with receiving, by the way, look what we just got in. Right? And then B, what kind of cash am I going to have to come up with?

Mm, right.

And did I buy into the things I need to buy into? You know, there's all that that we have to figure out. Right. So. So, you know, what you have to do is you have to go, okay, I have to come up with a report strategy. What do we want to run every day, every week, every month, and before I go to market, okay. And it's, what do I want to know? How often do I want to know it? And what am I going to do with it? I'm going to run a selling report. I'm going to run it every week. It's going to tell me sales by salesperson. With that, I'm going to coach my salespeople. If I don't feel like they're getting enough units per transaction, I'm going to run on hand versus sold. I'm going to look and see. Do I. Am I creating some inventory problems here? I've got 30 pieces of this one style and I've sold two. At that rate, I'm going to have 15 weeks of this thing. That's really a problem. Got to dive in there and figure out what I'm going to do about that. Okay. I'm getting ready to go to the marketplace. Do I have a vendor scorecard where when I go to that vendor's booth and they want to talk to me about what great things are happening for fall, I have to say, okay, well, let's look at what happened last fall, and let's see what worked and what didn't work. The vendor scorecard has a. Sometimes has a negative connotation, but I don't think it's that. Okay. I think it's. It's an honest, like, here's what happened last time. Let's figure out what we got to do to make it better. Okay. So, you know, last time when we were in the marketplace or last fall, this is what I got from I got X amount of blouses, I got X amount of jackets, I got X amount of pants, I got X amount of denim, I got X amount of shoes and accessories, that kind of stuff. What worked and what didn't work. So I can turn to that vendor and say, you are an amazing tops resource for me, but bottoms, I got killed with with you, I had fit issues, that kind of stuff. And then you, that way you're, you know, the vendor knows, by the way, when you do that, they actually know to put the right stuff in front of you.

Absolutely.

You know, it's not just random. And so people that go to these booths without knowing that kind of stuff and just randomly buy end up with excess inventories because there's no, you know, you buy what you think is cute, or you buy what you think is cool, or you buy what you think might work, or you buy what you think is within a particular price point, that kind of stuff. But you don't really have the history and the trending to be able to make the best decisions you can make as a buyer. Right. So that's suite together to figure out all that stuff. And then the last thing I'll say about this, Ashley, is I, in my earliest days in the point of sale world, I kind of put together this whole list of, of, of things you should run. Right? And one of my clients took that very seriously and I went to see him one day and on the credenza behind his desk, there's just a mountain of paper, right? It's just piled up to the ceiling. And it's like Sting's worst nightmare. You know, it's like he's just, he himself consumed like 15% of the rainforest all on his own. I'm like, what is all that? He goes, those are all the reports he told me to run. I go, what are you doing with that? He goes, going to read them one day. I was like, one day? Seriously? You know, so, you know, if you don't take time out of your schedule to say this, from this time frame to this time frame, I'm going to go study, I'm going to go read some reports and figure out what's going on. If you don't do that, okay. You get yourself in trouble.

Absolutely. You can't just track. You have to analyze and you can't.

The mistake I hear most often, especially from single store retailers, is that, oh, I'm here every day, I know what's going on the problem with the I'm here every day, I know what's going on answer, you don't really. I mean, you can, you can kind of assess some of that, but it's very hard to, to figure that out. Right. It's very hard to really think in long term trends when you're there every day. Because what I find, what I'm finding is, is, you know, you remember your worst sale and your last sale, but it's hard to think of the last 30 sales you do. Right. And that's where the reporting and all that stuff comes into play. Right. So enough time to study it, enough time to run it, and knowing what you want to know before you sit down to do the reporting is the way to go, you know.

Absolutely. Let's talk about two of the two biggest things that I heard you talk about here that I want listeners to have this actionable takeaway, something they can go dig into and put in place tomorrow. The first is you had touched a bit on markdown plan. Like when you know those things have been on hand for six months or more. If you can kind of talk about what that strategy is and if they're overbought, the immediate steps they do to initiate that markdown plan.

Okay, well, every retail store has markdowns and they have to take markdowns in order to, to move through the mistakes they make. Because there is no such thing as a perfect buyer. And sometimes you go to the marketplace and you buy something and you think it's going to be great and your customer goes, yeah, not so much. Right. I like to say that people, they buy, they vote with their wallet. Right. So, you know, if they liked it, they bought it, they paid for it with their wallets. Right. If they didn't like it, then they left it there. Okay. All of us in the world of inventory control and inventory planning and monitoring, that kind of stuff, we, you know, we all have our saves. You know, mine is inventory is neither wine nor cheese and it doesn't get better with age. So if you've bought something incorrectly, the best thing you can do is get out of it as fast as you can. Right. The first thing I, you know, so, so you've identified some inventory that's not working for you. Okay. Step one, I think is to try and move it in the store and see if it's just in a bad spot. Right. Step two is, is, you know, maybe offer a spiff to your salespeople. Hey, for every one of these that you sell, I'm going to give you an extra couple of bucks or something like that just to try to get it out of the way. If that doesn't work, then you take some kind of, like, Specialized in season markdown, mark it down 25%, and get out of it as fast as you can, okay? If even with that, they have. If you've promoted it well and shown it well, and they're still not buying it, you know what they think of the goods. And you've got to increase the markdowns until it's gone, right? Leaving bad inventory in your store is devastating on two levels. First, it ties up cash unnecessarily, and now suddenly you have no money because all your money is all over your floor in goods that are not selling. Right. The second thing that it does that's very devastating is it affects the marketing of your store. If your customer comes in this month and she sees what she saw last month, she's not coming next month, right? Because she thinks she knows it, but she thinks she's seen it all, right? So you've got to move through that. So I part, you know, when you look at markdowns, they are a necessary evil of retail, but also you have to look at what's causing the markdown. Is it. I've seen this one happen a lot, right? Where you as the buyer, you land something that you think is phenomenal, and you think it's going to be great. And then your salespeople go, why did you let. I hate that. Why is that even here? Why is that in our store? So they have a disagreement with it, which means they never show it. Okay. Or they have a disagreement in general. One of my stores, she. She said to me, I can't sell denim. Like, what do you mean you can't sell denim? She goes, our customers won't buy it. Why do you think that? Well, my salespeople think that. I said, okay, let's start again. And we picked out some cool denim brands and we put them in the store, and lo and behold, their customers are going elsewhere to find denim. But she wouldn't know that because she doesn't know what she doesn't know, right? So that's part of also, you know, working with planners and working with people with outside sets of eyes is to sort of help you debunk some of these things that you think are happening in the store that maybe aren't happening at the store. So first, it's like, what's causing the markdown? If it's on the selling side, it's educating my Salespeople, this is why it's here. This is why I bought it. This is the fashion. It is. This is the, you know, this is why it's hot in the marketplace, etc. Okay, on the other side, if it's a buying mistake, right, it's too wide of an assortment, too narrow of an assortment. I landed the goods too early, I landed them too late. I landed too much, I landed too little. The pricing is wrong, the color story is wrong. You know, you got to figure out where that's coming from so you don't make that mistake again. But either way, you've got to. You've got to. So. So you've got to figure out what's wrong. Like why. Why do I have to take the mark down? And then you've got to also figure out, how am I going to get out of this? And the first step is to move it. The second step is to spiff your salespeople and then start taking progressive markdowns until it goes away. So that's that one. You asked me a second one, and I can't remember what the second one was.

The second one was about too much inventory on hand.

You can't improve what you can't measure, right? I think Peter Drucker said that. So you first have to kind of go, well, what do I have and what should I have? What should my turns be? Right? If I want my store to turn three times a year, that means that if my sales are 900,000 a year, I should have an average inventory of $300,000. Right? If I'm above that now, I have to figure out what makes up that excess. Which means you've got to go and look at your inventory. And I like to look at it based on the. How old it is, when did I get it in? Okay? If I've got something that's there six months or nine months, that kind of stuff, okay, that means my customer didn't love it. And sometimes in some of these stores, the goods have been there so long, it's like wallpaper. Like, they'd be more surprised if it wasn't there.

There is a lot of that.

There is a lot of that, right? And so suddenly, you know, you gotta go, okay, If I've got a lot of it, okay? I'm a big fan of, like a. Well, one thing I'll say right off the bat here, I'm not a fan of continuous on sale, okay? I'm not a fan of. We've got five racks in the back of the Store that are always on sale, that are just bad inventory and we're just hoping to get rid of it at some point kind of thing, right? I believe that when you've got excess inventory, you have to make it a, like a three day event or a four day event where it's like unbelievable sale, you know, 40, 50, 60 off. And it's sort of like ripping off the bat at the band aid. You know, actually it's like, let's go on sale, let's get all this stuff out of here and then let's go back to full price selling after that. Okay? So people get used to the idea of buying full price stuff from you. And in that regard, in that regard, I think what you have to really look at is, what we have to figure out here is, you know, how much of it is there and how long do I do it? Because here's the thing, if you've gone on sale for three days and you've had a, and you've had some pretty good discounting in that, right? And you promoted it well, so everybody knows it's happening and you get good crowds at the store and you still have inventory that's undesirable after that. Your customer has told you what they think of that inventory. If you get to 70 off and they still aren't buying it, now you know what it's worth at that point, you either give it to a consignment store or you donate it, but you get it out of there because you don't want bad inventory in your store. It affects your reputation, it affects your marketing, it affects how your customer sees that store.

Do you think that's the definition of the term fail fast? Like what The Founder Management 1 Mark Weiss was talking about when we were at an event with him recently?

Yeah, I think so. I think also it has to do with things like, you know, lots of people get great ideas, right? You have this idea for an event at the store, let's say, okay, and so you've got this event at the store and it's, you know, you have this idea and then 15 people will tell you why it won't work, okay? Oh, no one will show up for that, or it's not enough of a discount or not enough people are interested or blah, you know, there'll be 8 billion reasons as to why, okay? A thing won't work, right? And what happens is you talk to enough people, they talk you out of that idea, and next thing you know you didn't do anything. Fail fast means you get an idea, you try it. If it works, you pour the gas on and you keep going. If it fails, okay, it failed, undo it and on to the next thing. So let's just say you're a women's store and you think, I want to try being in the kids business. Okay, you get a couple of cute kids lines in, you put it out there, you market effectively, you put everything into it, you let it run for four or six weeks. It doesn't work, okay, I'm out onto the next thing. What you don't do is not do it. And what you don't do is let it linger for months and months and months. So try it. If it doesn't work, you fail fast and go on to the next thing. I'm more of a fan of be brave than fail fast. Honestly, I like to be able to say, hey, you know what, you have an idea, go for it. You know what, you never know how great that's going to work. And people look at stores that have things like, wow, that store has a 50,000 name email list. Well, they didn't wake up on Monday and have one name and on Tuesday they have 50,000 names. Right? A bunch of creativity went into getting that list to build that way, right? Independent retail is all about creativity. So you got to try a whole bunch of things and some will work and some won't. So you can try all that.

You work with so many successful retailers. Do you think both on a personal level and then on the business level, whether it's financial marketing, whatever it may be, what are the traits that you see those successful retailers that they have in common?

I would say they have a great taste level, they understand what their customer wants to buy, they understand how to leverage the science side of their business, the numbers and actually are thinking, are thinking ahead in our planning. And that, by the way, planning is certainly, you know, what we do and that's part of it. But also, let's talk about marketing for a quick second, right? I tell all the retailers that I work with, I always, I have this sort of same pattern speech which goes like this. Marketing is the thing that most retailers end up leaving to last. It's too easy to not do it, right? You arrive at the store, the door is open, customers come in, employee issues happen, vendors are calling you, the UPS guy is there. You know, it's very hard to plan your marketing at the store while all that's going on because you can't just close the door for an hour and create a marketing plan, right? It's equally hard to do that at home because you're home and your significant other is there and the dogs need to be pet and you've got bills on the table and you've got the TV and whatever, you know, I mean, there's all kinds of reasons why it's hard to do at home. I tell people the best thing you can do is go someplace that's neither your store or your office and not your home. Okay. And someplace that makes you happy. One of my customers goes to a coffee place that looks out over the ocean and that makes her happy. She sits there and she gets her favorite coffee thing. She turns off her phone and for the next hour she does nothing but think about, what is the marketing I want to create for my store for next month? Right. What's the messaging? How do I create demand? How am I going to do it? Right? Like, you know, is it. How many Facebook posts will I do? How much Instagram will I do? Do I do Pinterest or not? Do I do direct mail or not? Do we do phone calls or not? You know, etc. You know, that kind of thing. She kind of lays a lot because the problem with social media is it's become more about the envelope than the message inside. Right? People arrive at their store today and go, what will I post today? As opposed to having a plan that does that. Right. So I think the better retailers are planning their inventory, which is critically important, Right. And also planning their marketing and planning what they're going to do that month. There are retailers I talk to and I go, okay, so what are we doing next month in terms of events? Well, on the 5th, I've got this going on. I got a trunk show on the 12th. I'm doing a customer appreciation day on the 19th, and if that doesn't work, I'm going to go on sale on the 25th. Okay. I can see it patterns there. I can see in store events happening. I can see that she's got a concept behind each one of those things that she's going to market. Right. There are other retailers. I go, what are you doing this month? I don't really know. Oh, okay, now we have problems. There's no plan there. Right. There's no, like, what are we doing?

Build a plan. Plan to fail, right?

That's exactly right. Exactly right.

One more numbers related question, then I want to jump into some personal questions before we wrap up our time together. I get asked this question a lot and I'm sure you've got a response to It. But as a retailer is looking at their entire cash flow and they're wondering, hey, what percentages, if I'm new to this business, what percentages should I be reinvesting back into operating, into rent, into payroll, and then that, that greater number, that's going to go back into inventory. And I know that goes back to planning. But if there is a set of numbers you can give them to get started, what's that look like?

Really hard to generalize that actually, because if the store is in San Francisco, it's a whole different thing than Ohio because of the differences in, in cost of living and rent, that kind of thing. Right. For example, like I have stores in Hawaii and rents in Hawaii are really, really expensive. Okay. So they are going to end up paying more rent there than someone who's in the middle of the country. Okay. Generally, let me see if I can, I can give you some general numbers here in terms of, of what that might look like. You know, rents typically go anywhere from 6 to 9% in most of the country. Sometimes they can be a little higher on the coast, a little higher in bigger cities like New York or San Francisco, that kind of thing. Marketing expenses typically run anywhere from 3 to 5% and those kind of get a little bit lower, you know, as you get into am I in customer acquisition mode, it's going to be higher. If I'm into maintenance mode, it's going to be lower. Okay. Payroll anywhere between 9 and 15% again, depending on where they're at in the country. Okay. Utilities is usually a 3% kind of thing. Typically management salaries or owners are about 8%, 2% legal, 3% travel, entertainment, and then usually, you know, so it usually leaves somewhere in the 46% year of that or 55% initial markup. Right. For purchases. Okay. But you know, that number can, it also depends. Like if you're in fast fashion and you can turn fashion T shirts five times a year, then it's going to be lower investments. But more often, you know, so one of the things that we do when we start with a client is we kind of do a break even analysis to help them figure out where their expense structure is versus what we think the ideal is. And sometimes we find things that are hidden in there. Right. Like oh my God, your credit card expenses are or 4%. That's about a percent and a half too high. When was the last time you negotiated that? When was the last time you actually went back and talked to some credit card companies that got a better rate? You know, did you Renegotiate your insurance. Did you really study what your workers comp looks like? Because how you classify employees in workers comp is an important thing. And so not every employee who's on the, you know, employees who are on the floor are different than stock employees that are different than admin employees, and they have different rates. And if you don't, if you're not cautious about how you do that, you end up paying more for workers comp than you should. And there's lots of formulas to get to that one. So it's hard to give a general response. I gave you some rough, rough numbers, but there's lots of ways to that and ways to back into what your initial markup needs to be based on what you want to do in terms of markdowns or. And what you want to achieve in terms of your net profit for you.

Yeah, well, and I appreciate you giving me those numbers, even if they are general. I think it's such a great starting place. And I think you and I could probably talk all day about different breakeven analysis and different formulas and things that we could be looking at in everyone's business. So let's leave it at this. Let's say that we are going to add a cheat sheet into our training library for our members at the Boutique Hub, coming from you so that we can get into some more of that detail, give them a resource they can go to, and then they can get in touch with you through that cheat sheet as well. Absolutely.

I love that idea.

Perfect. All right, so a couple quick questions for you. I would love to hear about your favorite books and your favorite podcasts.

Well, this is my favorite podcast, actually. Did the right thing there. Right. So to be honest with you, I'm not listening to a lot of, a lot of podcasts right now, but I have listened. You know, I've started listening to the new ones that you're doing right now, and they're so greatly filled with information that's important. I. I actually would say I, I do more rather than podcasts. I see. I'm doing more online reading of certain trend information and that kind of thing that's, that's keeping me abreast of what's working, what's not working out there. Lots of case studies. I read lots of case studies of businesses that are successful out there. And, you know, I say this a lot, too. When you read those, right, if you go into some business publication, they're going to talk about a store that's doing amazing or a manufacturer that's doing amazing. Right? They never, you know, when you read those stories, they talk about what they're doing and how they did it and that kind of stuff. First off, fail fast comes into play there big time, right? Because they talk about, well, you know, we had this idea, we took this risk. We did. We went after it and we did it. So that's one piece of it. And then it's always someone who had an idea, had a vision, went after it. And I always say this. Expense control, while important, is not a strategy for growth. So when you read these stories about these stores that are doing amazing or these businesses are doing amazing, they never go to the accountant to ask him what he did, Right? They never go to the account and go, oh, well, I cut shipping by 5%. You know, it does. That's not the success story there. You do have to do some expense control. You have to do that kind of stuff. But you also have to. You also have to look at, you know, look out a little bit. As the creator of that business, you. You create the dream of what that store is and. And what that store is supposed to be. And I find with a lot of retailers, if they've been in it for a year or two or three, sometimes they get beat down a little bit and they forgot the dream of what the store is, why they opened it, what was exciting about them in the beginning. And I'm very. I'm a big fan of going back to what that is and rekindling that purpose. Right. You know, I like to find other examples of other businesses that are doing that so that I have sort of, like, ideas that. That I can share with the retailers that are working with retail smart guys to go, hey, here's what other people are doing. You might try this. You might see if this works. Right. And make sure it fits in with their culture is okay. I mentioned Harry Friedman before. He has a great book, by the way, for those of you that want to study a little bit more about selling. The book is literally called no thanks, I'm Just looking.

Perfect. We'll leave that in the show notes. They can link up to it too.

Yeah, yeah, it's a great book. And it literally is there just to talk to people about. What do you do? Every customer that walks into your store, if you approach them, they say, no, thanks, I'm just looking. Right. We're conditioned to do it as just we think we're supposed to. Right. So how do you get around that? How do you actually convert it from customer vs salespeople? To friends shopping together. He does a great job describing that in the book. So I encourage people to read that.

Perfect. How about, who are your mentors? Who do you look up to?

I certainly look up to Mark Weiss, who's the founder of Management One. When I first started in this business, there was a guy named Jeff Pinkow who still runs the kids clothing manufacturing firm there in New York. And his insights into retail and into apparel sales were amazing for me. And I learned a great deal about selling from him. And I would be remiss if I didn't talk about my dad. My dad sold everything that was ever to sell ever in the history of mankind. He sold real estate. He sold. He sold real estate. He had a chain of. Of wig stores in the 50s. He sold stocks, he sold housewares, he sold advertising. I mean, he kind of sold it all. It's funny, you know, the first thing you do when you're a kid growing up is you do the exact opposite. You think you're going to do the exact opposite of whatever your parents do. Right. And so I tried not to be a salesperson for a long time. And then I realized, you know what? You have to really learn how to sell if you're going to do anything. Just by, by the by, no matter what happens in the economy, the one job that already exists, that always exists, is sales jobs. Right. There's always positions for that one. I learned a lot from him in terms of how to approach people and how. And how to be effective and, and how to really make all that work. You know, so I'm a big, big, you know, I'm a big fan of my dad. And the more I talk to him, the more I realize, or the more, I mean, he's not around anymore, but the more I think about him and the conversations I've had with him, the more I realize how amazing an impact that had on my life.

Yes. And serving through selling, which obviously is something that you have figured out how to do so well, you've left an impact on a lot of people.

Some people think selling is not pushing people to buy something they don't want to buy. Okay. If you do find yourself selling something that you don't feel good about or that you feel you're just pushing people to push them into it. Yeah. You're doing the wrong thing. Okay. And selling gets a bad connotation. Right. A lot of times people think of selling, they think about the guy in the. With a really bad toupee and a horrible jacket trying to sell. You A bad car. Right. I mean, that's sort of a connotation that people get. But selling really is helping people. And I find what I'm. If I'm selling and I'm actually. But I'm doing it because I'm helping people, it changes your whole day, changes your whole outlook. And helping retailers is something I found a real passion for, and it's been life changing for me. Working with Management one and working with our planning systems and helping people realize the dream that they had when they opened their store and really have fun. Being retailers again and actually earning the kind of money they were hoping they were going to earn is everything to me. So that's what we strive for every single day.

Perfect. Well, before we wrap up with the last question, quickly, how can anyone who's listening to the podcast get in touch with you and learn more about the services that you offer?

Absolutely. My Cell phone is 818-720-2585, so please feel free to call me on my cell. My email is danretailsmartguys with an S@the end.com and our website is www.retailsmartguys. and you can find us on Facebook, you can find us online where we're, you know, we're not hiding. They can find us easily. And certainly, by the way, we're a member of the Boutique Hub group on Facebook and we're on the Boutique Hub website, so you can find us there, too.

Perfect. All right, so last question. I kind of want to end with this, and it's two parts. First, we talked a lot about your love for retail and how much you love helping those retailers keep more money in their pocket at the end of the day, and also how this industry is changing so quickly. So I would love to hear, first, what is the opportunity you're most excited about as this industry continues to evolve, especially for independent retailers? And second, as your time in this industry, someday, we've got a lot of time left, comes to a close, let's say you've retired and you've sailed off to Bermuda or whatever your plans, what do you want? That legacy that you leave behind with the people you worked with, what do you want that to be for them?

We may need a whole nother podcast, but for that. Okay, so I think what I'm. What I'm most excited now about now is that the, the ability to use really effective information to grow a business has never been more available to the independent retailer than it is today. So in the past, you know, you were a Single store, or you had two stores or three stores, or even five stores. You were guessing a lot. Okay. There is so much more information available to you now that the clever retailers, the really great merchants can utilize to grow their businesses and make independent retail and small business, which is the backbone of this or any other country. Right. To make those dreams come true. Okay. Where someone can go, you know what? I'm going to go out and business for myself and I love fashion or I love pets, or I love gift and home decor and that kind of stuff. And I want to spread my love and my knowledge for that in the marketplace by opening a retail store. There is so much available to that person now in terms of merchandise and in terms of information and ways to assemble all that to really make an impact in your community. One of my stores is a great gift shop in Orange county, and they really made a concerted effort to participate in their community with events, with charities, with the local people and that kind of stuff. And that community has surrounded that store. And there's a really great love affair between that city and that store. They figured out how to do that. And I watched that. I watched the genius by which they put that together. I'd like to tell you it was my idea, it was theirs, and they've done it brilliantly. But now one of the things that's different between me and most retailers is I'm in a different retail store every day, so I get to see things other people don't see and kind of collect up all the really kind of good, juicy nuggets of things that work. Right. Those people made a real difference in their community, and that's heartwarming for them to have people come in their store and say, you know what? You got me the perfect gift for my wife. And so I'm so happy, and she's so happy. And you've changed our lives. We had the most amazing anniversary. Right. So I think that as retailers that want to make impacts on people's lives and change how they think about themselves, you know, I mean, think about fashion. Fashion is a great way to feel great about who you are and how you look and that kind of stuff, and people that really do that well and help people feel better about how they look and how they feel, that has a ripple effect that goes to all of society, you know? So I think that's what I'm most excited about, is that there's tremendous opportunity now for independent retailers to do much better than they've ever done before. If they can leverage the information that's available to them. And if they don't know how to do it, you know, that's what guys like us are around to help them do and to really get the. And really live well, you know, and accomplish their dreams. And in terms of a legacy, for me, if I can say that I've done that lots of places and helped people live their dreams, that's what I want to do. You know, if I've helped them put their store together and because, you know, I guess of my improv background, if I've helped them have fun doing it and if we've had a couple of really great laughs and we've had some great experiences together, that kind of stuff, if I can say I've done those things, that's enough for me to sell to. And funny. Yes, I would sail to Bermuda. So that would work for me if, you know, there you go.

Well, Dan, I just want to honor you and commend you. Thank you so much for being with us today and being the light that you are to this industry and helping people on the level that you do. And thanks for the friendship. I just enjoy every time that I'm in your company and look forward to all the great things we're going to do together in the future.

You and me both. Ashley, I just want to quick shout out out to you and. And Boutique Hub. Even before we got on this podcast, I was telling Ashley that I was talking to a retailer who had had, you know, just recently discovered Boutique Hub. And what I was telling Ashley because she needs to hear this, okay? Because she's working so hard at putting this community together that sometimes she doesn't get, I. I don't think enough feedback for. For the great work she's doing. This retailer said, you know what? I didn't know where any of these resources that I needed to run my store were until I found Boutique Hub. And now when I need something from my store, I'm thinking about doing something or I need help with something and that kind of stuff. Her first stop is Boutique Hub. So if you're an independent boutique and you're not leveraging all the resources that are in Boutique Hub, take some time and really dig into that website and get to know Ashley and get to know her staff and her people and look at what's on that site. There is a gold mine of stuff that will separate you and make you not just a good retailer, a great retailer.

Thank you so much. I appreciate that. Thanks.

It is my pleasure and I hope to see you again. Soon Ashley and we can fight again on some panel someday.

We'll keep it G rated and it is on exactly. Hey guys, thank you so much for listening to this episode. We hope that you loved it. Don't forget to hit subscribe and leave a rating and review down below for a chance to be one of our featured listeners each and every week. For more information on our spirit of community over competition and how to access complete show notes and bonus downloads from our guests, head on over to the boutiquehub.com and join the community. We'll see you next week.

Sa.