Yes they are a totally custom built car. And yes, very expensive. But what makes each car so costly are the redundant systems.

For example, there’s not one set of brakes but three.  For a Rolls Royce those backup systems make an incredibly safe ride. That’s why they get a premium price.

For a retailer, redundancy is costly – that’s your money sitting there!

How many redundant products do you have on your shelf?

When I do business makeovers, owners are often shocked when I point out multiple products in a slow category.  For example, a toy store that has six different child’s play tea sets.  They gasp, “How did so many of THOSE get there?”

Like some evil gremlin came in and stocked their shelves with excess product.

I mean really, how many redundant items do you really need?

Is there a new trend you’re riding and you continually sell out? Did Oprah mention it in her magazine? Then maybe. Maybe its OK.

But usually, it’s just sloppy buying habits. Not gremlins.

The danger with multiple products is that they are not “different enough” so you’ll overwhelm your Feeler customers. They’ll shut down.

Because they can’t see any real differences they’ll either decide by price – what’s on sale or the cheapest – or leave. Neither of which builds your personal fortunes.

Four Tips How To Avoid Overbuying:

1. Know your stock. Keep your best-sellers in stock by monitoring your POS category reports.  Check sales within each category every week, and balance to outstanding orders.
2. Cull your stock. Cut those that continue in the bottom 20%- even if you really “love it.”
3. Plan your stock. Before buying anything, make sure you know what it will replace. Impulse is for customers, not store buyers.
4. Build to your stock level. Come up with an optimal level of merchandise based on your POS reports, your merchandise turn and profitability; then create your open to buy and buy to fill.  If for example you found you had 48 child’s tea sets in stock (8 of six styles) but you only sold 1 a month, that would take nearly four years to get your money back. Notice if you just replaced the one style that is selling, you’ll continue to dig yourself in the hole.

Learn more about proper buying, merchandising and selling with a free chapter from my book available here.

Not the most glamorous, but your financials are the vital signs that can determine right away if you are in need of triage, treatment or just TLC.

Just like your temperature, blood pressure and pulse are clear gauges of your body’s good health, your financials are black-and-white indicators when it comes to your company’s overall health.  Know these and share with your management team regularly. Here are the six results you need to track:

Profit and Loss Statement

• Many times we overlook losses as inevitable but they can be seen as a failure to price right, to manage categories and cover expenses.

Average check

• It is the best judge of how well your sales crew can move your products and the most immediate report you can affect to grow sales.

Number of transactions/customers

• Recessions mean fewer customers, but if we aren’t tracking them, we may not be paying enough attention to encouraging them to return.

Sales by category

• Not every item contributes equally to your sales.  The goal is to reduce inventory in categories not producing while increasing your best categories.  This report helps manage sales to inventory; also called your open-to-buy.

Year over year to date

• Like transactions, the past year could be as much as 20% lower than other years. But is it an anomaly or part of a larger trend?

Number of units per transaction

• The profit comes from the second item.  Tracking this is another way to measure how good a job your sales crew is doing, and if your displays and signage are tempting customers to add-on.

Yes most POS systems can slice and dice hundreds if not thousands of reports, but at the end of the day – who gives a hoot to read them?

Or better yet, devises ways to alter them? The answer: few.

You need to be up in the blimp for the big picture most of the time, not down in minutia which could allow you to miss the trends.

One final suggestion I make is to share the last five benchmarks with your crew on a regular basis. The more they know how the average check is tracking, the more they respect the number of customers that purchase your goods, the more they understand what the top categories and products in those categories are, the more they understand how all of that can be affected by the number of units they sell per transaction, the more they can help both your year-over-year sales and ultimately your profit and loss statement.

Please share your comments below

To find out more about financial benchmarks, get a copy of The Retail Doctor’s Guide to Growing Your Business (Wiley.)

Do you know what the lifetime value of your customer is? How about yearly? Heck, do you track your average ticket? If not you must; it is one of the seven tools I feature in my new book, The Retail Doctor’s Guide To Growing Your Business and in the home study course I’m now creating based on that book.

To help employees realize how important first impressions are, calculate the lifetime value of a customer for your business.