Market Warm-Up: Best Buys Turn Your Spring Market Buys Into Margin Protectors

By Mike Aylen

With the spring market season upon us, in this Inside the Margin article, I will be looking at the best ways to get the most out of your attendance at spring markets with gross profit in mind. As with most best practices that lead to success in business, or any field for that matter, preparation is crucial so that’s where we will start. 

Before the Market

• Analyze your performance from last year’s market. This should include a review of products that were purchased and their results. Take note of those products that sold at full retail price and those that required markdowns to clear. Look at what vendors outperformed others and, of the successes, look closely at what retail price points performed the best.
• Explore what is new in your marketplace. Get in front of any changes in customer demand based on changes in legislation and laws, market trends and fashions. Being first in your market will impact margin, as these types of products generally require less markdowns and sell through quickly.
• Consider any changes to your product mix that will be coming soon. If your wholesaler is planning to change vendors, planograms or products, you may have no choice but to add these to your store, so spring markets are the perfect time to get proactive and buy these products when there is a discount incentive to do so.
• Look at the categories in your store that you will be buying for. What margin levels are you achieving and that need to be met to enable you to hit sales targets and also cover overhead expenses? Set a target margin by category and be ready to buy for higher margin products that offset lower margin products that drive traffic to your store.
• Prepare a simple open-to-buy plan that gives you confidence in your decisions. Your open-to-buy plan should lay out by product: whether it is a core range product or a one time buy; an initial purchase; average on hand/reorder quantities; margin targets; and sales required to achieve results.

At the Market

• Negotiation with a vendor goes beyond just invoice cost and order quantities. As you know from the previous Inside the Margin article, there are many aspects that can impact the final margin you will make on each product. Be prepared to calculate the true landed cost into your store that includes freight, tariffs or any other import fees. Build relationships with vendors, as they often have valuable information that will assure your success, such as the availability of signage, displays or any other marketing support that will assist sales and minimize markdowns. If you talk with confidence about what you need to make this product work, how much you need to sell (using your open-to-buy plan) it’s easier to agree on returns with the vendor if these targets are not being met. Remember margin relies on sell through.
• Buy for depth not width. Focusing on lesser products will help you with sell through, merchandising and product re-ordering for the successes.
• Invoice dating and extended terms are more cash flow enhancers than margin improvers, but it is important to note here that getting these things at the market from vendors can offset the impact of markdowns. Dating and terms that improve cash flow also free you up to take advantage of future bulk-buy opportunities that do improve margin.
• Networking is important. Engage with your wholesale team and the friends you have created over the years. People want to talk about and share their successes, so ask questions and share your own. Then do some R&D—there is nothing wrong with a bit of ripoff and duplication.

After the Market

• Improve your focus on retail pricing. Price with confidence. Many times margin is not lost at the buying stage but at the pricing stage. Consider each product and whether it is part of a core category that drives traffic to your store, and if so, what price point is appropriate. If it is more of a promotional type of product, choose the retail price that grows gross profit but prevents over pricing. Consider how long you give the product to achieve results before it is marked down and cleared completely. Having a plan before the product arrives is crucial. I have been in many hardware stores that suffer from this lack of planning on promotional products and the customer is hit with too many of the stores “gotta-go’s” and not the “gotta-haves” you want them to buy. 
• Work with your merchandising team to build a strategy for new products. Don’t just hope that it will sell. Have a plan for displays, price tickets and endcaps that will help with sell through and minimize the need for markdowns.
• Be ready to monitor your results. Early and accurate tracking is important to enable strategic re-orders to prevent out of stocks and to identify the warning signs of slow movers that can be re-merchandised quickly. Measure actual performance against your plan. Take quick action. All of these things will help you protect margin
• Document your wins and losses. What vendors or brands outperformed others? What mistakes lead to Markdowns? Use each market as a learning opportunity.

In an environment of cautious customers and rising costs, margin is not guaranteed, but it is a result of good planning and strong execution. By preparing well, you will hit the show floor with more confidence on where to allocate your resources, what deals to say yes and no to and how to buy with more intention and less emotion. Plan well, price well and execute well. Make sure that this trip to the market, as well as any future ones, are an investment in your gross profit and not just a buying trip.