Barking Mad

Hello one and all, I hope you are well and business has been good.

I’m writing this article at the very end of January, and I’ve been very pleased with the start to 2023. We’ve seen a significant uplift in consumer footfall and confidence. Customers are visiting us and most importantly, they are spending. This fills me with a positive feeling and I’m confident that 2023 will be a great year for our industry. Last month I touched briefly on this and mentioned that even though the early signs for the next 12 months are positive, the time for big business decisions may not be immediate. Positive signs are no guarantee and therefore it’s prudent to wait for a period of consistency before jumping into big plans. In fact, I intend to use this period of buoyancy to asses our offering and make some tweaks.

I’ve discussed streamlining previously, but this year I think it’s more important than ever. If the market doesn’t continue in the way it’s showing you will become more reliant on making better margins from everything you sell. For this reason it’s vital that your shopfloor is home to products and brands that you are showing to their best. Ask yourself a quick question, what’s better being a stockist of 30 brands of which only 4 or 5 get significant orders on a very regular basis or being a stockist of 10 or 12 brands with a higher percentage seeing improved levels of business? The answers a little obvious but we, like most of you will no doubt be guilty of this.

This issue becomes amplified when you consider some brands like to change colours etc every year. If you are a stockist of Brand X and you decide for 2023 to place 2 models on display. Let’s say they cost you £500 each – that’s a total of £1,000 for your display alone!

You’ll need to sell approximately £3,500 of those in order to just pay for the display, but it doesn’t end there. Next you’ll need to work out what your annual cost per metre squared is. This is simpler than it sounds. Add up all your costs – rent, rates, utilities, wages, anything that the business pays every year. Divide that (no doubt scary) figure by the square metreage of your store. The number you have left is what every square metre of your store costs you every year. Work out how many square metres your Brand X display is (2 prams would be approx. 2 metres squared), multiply it by our metre squared cost and add it to the cost of purchasing the display stock. The figure you are left with shows how much money that display is going to cost you in the next 12 months.

That £3,500 now seems a long way away no doubt. Let’s assume you can earn a 30% margin (come on admit it, you’d love that wouldn’t you?), we need to calculate how much you need to spend with Brand X to break even on your display more accurately. Divide this cost figure by 30 (or whatever percentage margin this brand operates on) and multiply the result by 100. The resulting figure is the rough annual sales this display will need to generate for you to break even.

If you know your sales for Brand X are over and above this figure that’s great news. Under this figure and you are simply displaying something that is having negative effects on your business (by this I mean it’s actually costing you money – what could be more negative than that?). The truly complicated things is deciding where you draw the line. How do you determine if a brand is worth displaying? It’s safe to say not every brand in your store will perform equally. You will never see a store stocking 10 brands seeing 10% of their annual sales going to each brand (although the OCD in me would love this).

I have my brands separated in to three blocks. Level 1 is for my big accounts, they account for the majority of my business (they actually account for about 50% of my business) and these are the brands I allocate the largest displays to. They are also the brands I earn most on, and that wasn’t through dumb luck – it’s because I ensured we pushed the brands that will support us and allow us to earn the best margins. Level 2 brands are next and they account for 30/40% of my business, on average I’ll spend 50% less with them than any of my Level 1 brands. Finally, I have level 3 brands. They account for 20/30% of my business and you’ll find more brands in this level than any other. Brands in this level are here either because they are a niche product, simply not popular in my location or there in order to pull in customers. You’ll also find those brands and products that we all love but for some reason you customers don’t. No matter what you do or say they just don’t seem to want to buy them.

Going back to my original point, I have a very small number of brands in level 3 that simply do not pay their way. I have stock on display, but it really doesn’t warrant the display given what I spend. They are simply there as consumers expect to see them. If you don’t have the brand or product the customer may (and I stress the word may) not come to your store so you need it to lure them in. Ok so you may make a sale of the brand, if not it’s not an issue as you’ll no doubt be able to shift them on to one of your level 1 or 2 brands. It’s the illusion of choice.

So can you justify carrying underperforming brands and products simply by telling yourself they are a loss leader? Only you can answer that question. I am positive you will know the difference between a brand people purposely visit you to see and not buy, and a brand that no one asks for nor orders. There’s no room on anyone’s shopfloor for a brand that doesn’t generate income or help generate income for another brand.

Just remember we’d all love to stock every brand but there’s simply not enough business out there to support them all fully and to a level that they deserve. You simply need to decide which ones you are confident with, which you can earn a living off, which offer you something different from the competition. Trying to be all things to all men never works – focus your business and become better at what you do.

In a time when some brands feel they would rather support their own websites than bricks and mortar stores you need to ask yourself a simple question. Does this brand value me and my shop? If they don’t why am I sending business their way? You could simply choose to increase support to those brands that know how important you are. They’ll thank you for it and your bank balance will too!

Until next time, stay safe.