Should I cancel all my pre orders?

It’s been brought to my attention that there is some confusion over pre orders and what should people do with them. So, following a few conversations about planning, pre orders and agile stocking I thought I should put some thoughts down to point people in the right direction.

I am often asked by golf Pros if they should cancel all their pre orders.  The answer is a definite “NO”. Well, maybe…

The reality is that the answer has to be specific to your situation and your current plan. Let’s run through some scenarios to see what might be appropriate for you.

In general, you should not just cancel all your pre orders. You’ll end up with nothing to sell. The only reason to cancel all pre orders is if you are about to go bankrupt. There is no point is wasting your suppliers time and money and getting yourself further in to debt. If you know things are going down the tubes put a stop to it. For 99.99% of people reading this article this shouldn’t apply.

The pros and cons of pre orders

Firstly, let’s consider what a pre order is. Fundamentally a pre order is a forward order of stock: A commitment from a retailer to a brand, to obtain their products and guarantee supply. Normally, in return for the forward commitment, a retailer will get an incentive of some sort – a discount or deal on the products ordered which should provide greater profit opportunities.

Brands like pre orders as they indicate money in the bank. Guaranteed business. Also, they shift some of the risk to the retailer. Depending on the category, they also dictate future production of goods and some brands will only create a percentage of pre orders – eg. 120% -to limit their risk. This is more usual for Apparel products that have a long lead time. Brands also like the commitment from pre orders, with the idea that if you’ve already spent your money with them, you won’t spend it with their competitors.

“Brands like pre orders as they indicate money in the bank. Guaranteed business. They also shift some of the risk to the retailer”.

Retailers should like pre orders when it gives them access to a brand’s products. They get a good deal and they know what is coming in to store.

Retailers fall down when it comes to pre orders if they don’t have a plan, if they’re over-stocked, or have over-committed to multiple suppliers. And it can really hurt a retailer when a a product doesn’t sell and more is scheduled to arrive.

Fundamentally I’m not opposed to pre orders. For many categories, they’re essential, and if you don’t place a pre order, you won’t get the product. Product lead times just don’t allow for “just in time” supply. It needs to scheduled, produced and shipped. However, the system has been abused by a few sales representatives and, on occasion, retailers have over-committed.

“Pre Orders are part of the planning process”.

A fundamental benefit of pre orders is that they allow you to work in advance. If you didn’t pre order anything, and only waited for a customer to come into the store to order a product, life would be hectic. And, without the item in store, you’d most likely lose a lot of sales. Pre orders are part of the planning process.

For retailers to work successfully with pre orders they need to be organised and have a plan. If you have some historical sales data and a plan, you should have a good understanding of what you’ll sell next year, and when you are most likely to need it.

In the main, an organised retailer should be able to commit to about 70-80% of their annual purchases at the pre order level. However, this doesn’t mean it should all turn up at the beginning of the season, shortly followed by an invoice. Several drops over the course of the season would be more manageable. I’d always leave some headroom (the remaining 20-30%) to provide some cash to take advantage of deals that will inevitably pop up. It’s also wise to allow some flexibility to enable a mid-season pivot on product if something is, or isn’t, moving. You may have backed the wrong horse – leave yourself a bit of space to manoeuvre and get something else in.

Reasons to cancel or change a pre order

I’ve said in the past, that some people should cancel orders but that’s only in specific circumstances. If you have a year’s worth of stock of an item and you’ve just ordered another year’s worth, it’s madness and you should cancel the recent order.

Similarly, if you’ve placed an order with multiple brands that represent significantly more than a year’s worth of sales, you need to cancel some of them. Pre orders need discipline. If you don’t get it right, it will cost you and hurt your business. In the main, over-ordering hurts your bottom line and is one of the key reasons for poor margins. The reduction in pricing that you achieve trying to clear out stock you don’t need, is generally bigger than the reduction you earned in ordering more stock than you need.

Good news across the industry

The good news is that, in general, stocking levels across the golf industry are getting leaner and retailers are managing stock better with an UK average stock turn, currently, of around 2.5. Brands are managing their stock levels better, too, and that means there’s less dumping in to the trade. Recently, I’ve heard reports of brands reducing their pre order commitments, while others are trying to move to operate on a replenishment model. At the end of the day, working with your key brand partners is often the way to navigate through these stocking issues. Some brands will be happy to change pre orders, others will offer the chance to return stock. The key thing is to establish a plan for what you are going to sell. Pre order a proportion of it to get access to the product at the right time and a good price. Be disciplined and don’t over commit. Cut out brands if you have to. Monitor your stocking against the plan, trying to maintain a 3+ overall stock turn.

Changes in the way we sell product has also had a significant effect on stock levels. Just look at custom fit clubs and how quickly they turn now. You almost need need next to no stock – just a fitting cart. As a result, profitability in this category is the highest it’s been for over a decade or more. With good discipline, and planning, many of the other categories could go the same way.

Good luck.

Phil Barnard is European Partner of Golf Datatech and Chairman of Crossover Technologies, the providers of market leading epos and business solution, XPOS, which was designed specifically for golf retailers. Follow Phil on Twitter @phil_barnard

Get Set for 2019

With the build-up to Christmas well and truly underway, most retailers are trying to maximise their sales and take advantage of all the festive fervour. I’ve seen some great promotional efforts in golf clubs around the country. It’s amazing who has a special Christmas suit!!

While most people won’t start thinking about 2019 until long after the turkey has been eaten, there’s no harm inputting some thoughts together in preparation – especially as we all want next year to be “the best one ever”. Again.

Principle Planning

The main area for consideration here is planning. In Crossover’s recent Pro Shop Retail  Tips advice article, we brought up, what is, for many, the dreaded topic of budgeting.  This may not be the most popular area of business, but it really is a key part to running your store. I’d encourage all business owners to spend a few hours over the coming weeks to make sure they have all their numbers together. If you want to have a really Happy New Year – you need to have some idea of what you intend to do.

“While ignorance is bliss, that just isn’t sustainable for retailers”.

So, before you get a bit too merry on the sherry, let’s put down a few points. Now, I’m not going into too much detail about how to make a budget, but I will give you some good planning principles, along with suggestions as to how things might go next year. At the end of this, you should have a basic list of all your income, broken down by category, and list of supporting costs by category, and perhaps supplier.

Okay, so let’s assume you’ve thought about a budget but haven’t actually put it to paper. Even if you have one, there are some good basic pointers below. Remember this is supposed to be a basic budget so its not all-inclusive.

To start with, write down a list of your key sales areas – eg shop, lessons, retailer and commissions. Then you need to look at your costs – eg shop stock, staff time, rent and other business costs. Assuming this isn’t your first year, you should have some historical data to work with from your EPOS system, or accountant.

The aim at this stage is to estimate, using prior knowledge, what you’re going to make and what it is going to cost. Once you have those two numbers, you want to check that the income is bigger than the costs. If it’s not you’re starting off on a bad foot and need to reconsider or re-plan.

Budget Basics

Assuming the initial mathematics work out okay,  you should have the basic income and cost outlined. You now need to flesh this out and consider how each area is going to change.

Starting with retailers. For most, this will be fixed so there isn’t much to consider, other than an annual increase, (and hopefully not decrease). Commissions may be based on green fee sales, so perhaps put some numbers down to show how that will be generated.

“You are buying stock to “SELL TO CUSTOMERS”, not for decoration”.

For lesson sales, break down what you made this year: How many lessons were given, and at what unit cost. Ask yourself, are there are any ways to increase the number of lessons, or perhaps, increase the value of lessons. When was the last time you put up your prices? It may also be worth considering changing the lesson format to make it more profitable. Can you tweak the length and price of the lessons? Perhaps you could give the same number of 45 minute lessons over the year, as 30 minute, but charge 50% more. The most important thing to consider is what is going to change and how do you plan for it.

Finally, there’s the Retail. For most, this is where the biggest figures are, in terms of sales and cost. Importantly, this is where lots of the costs comes from too. Even if you have lots of staff, the shop stock will probably be the biggest outgoing. The average shop currently sits on between £35K to £40K of stock. So, during the year they’ll probably spend over £85,000 on buying stock to sell to customers. That’s a lot of money.

Key mindset point here – you are buying stock to “SELL TO CUSTOMERS”, not just as decoration.

Thinking about spending £80K or possibly £200K, or £300K, (depending on your shop), can produce some anxiety, so to try and reduce the sleepless nights, let’s put a few more details down in the budget.

To make the plan more solid, we need to look at how the sales are made up: which categories are we going to sell and what changes will there be? Most retailers will look at last year’s sales in their EPOS system to take a view as to what they’ll do next year. Ask yourself, what’s going to change, or influence, this year’s sales?

We all want to make more money, so how can I do that? In the main, there are 2 ways to make more money – create more sales and do this with less costs. So, if we want to increase sales, what are we going to change to make this happen? Attract more customers, stock a wider range of products, or perhaps improve your sales technique?

Also consider what might cause a reduction in sales this year. Are there any changes going on in the club or shop?  You should aim to increase sales by at least 3% – why? Because that’s the average rate of inflation, and costs in general will be expected to increase at that rate. So, if you don’t increase your sales by at least this – you’re going backwards. If you’re going to make some changes, then why not aim for 10% increase in sales, and then work out how you can achieve that.

Another thing to consider next year is Brexit. If it happens, we’re due to leave the EU at the end of March. This might cause some jitters for the economy and affect consumer spending.

Having established your total sales figure, you’ll need to break it down into the various categories that you stock in the shop, (eg. balls, bags, irons, putters, shirts, etc). This’ll help you identify what, and how, you’re going to sell. It’ll also help you focus on any particular tactics that you’ll need to employ.

For example, if you’re struggling to see how you’re going to lift your sales, look at your strengths and weaknesses. If you’re any good at selling a particular category, it’ll probably be easier to make increases in that category, than others. However, if you don’t stock a category that may be selling in other stores, that could be an opportunity.

When looking for some basic tactics, consider this. For the average on course retailer, making an additional glove sale, in every 5 sales, would increase their total sales by nearly 10% by the end of the year. Little changes can have a big impact.

Having worked out the sales you’re going to do’ you need to work out what it’s going to cost. For this, you’ll need to know the margin you make. So, for example, if you sell £15,000 worth of irons (inc VAT) at a 22% Gross Margin, you’re going to need to buy £9,360 worth of irons.

Now, complete this for all categories. You should end up with a list of categories and a column of sales values, margins and costs.

Buy Better Next Year

When considering changes to for next year, it’s worth remembering what happened this year. Irons had a pretty crazy year in 2018, with the 3 biggest sales months ever recorded in April, May and June. Will consumers continue to buy, or will they switch some of their spend to other categories. Woods might get a bit more attention this year, with big new launches coming from at least 4 of the main brands.

Once you’ve got the costs, there’s one more thing to work out: how much do I actually need to buy. This is a critical part of the planning for two reasons. 1 – can you get the cash to fund it? And, 2 – What do I already have in stock that I should try and sell through first?

Once you’ve got a view of your required purchases and stock levels, it might be worth going through another activity to review your current orders. Most retailers will have completed their commitments for next year, but now is a good time to review the past year and make sure those commitments are correct. If it looks like you have a lot more in stock, and a lot more on order than you need, (based on your new budget), then don’t be afraid to pick up the phone and talk to your suppliers. It’s in their interest that you sell through their products.

I was recently asked by a customer if he should cancel all his pre-orders. Definitely not – it depends on your circumstances and stock situation. Unless you’re in a real mess, with more than a years’ worth of stock, you’ll need more stock to come in. However, make sure it’s planned, and that you haven’t over-committed to multiple brands. It may be that you need to have a situation where you pre-order a certain amount with some, and then a flexible arrangement with others.

“If you get a great deal on something you can’t sell – it’s not a great deal!”

Other factors should be considered, such as stock availability and upfront deals. Whatever you do, please consider that you should be turning your stock over at least 3 times in most categories. Also, be disciplined when you do need to commit to buying stock. Don’t get dragged into buying stuff that you don’t need, or haven’t planned for. If you get a great deal on something you can’t sell – it’s not a great deal!

So that’s about it for the basic budget. This exercise should take no more than about an hour, and, at the end of it you should have a clear outline of your total sales and outline costs, along with some thoughts on which areas to grow, or focus on. You should also have some indication as to whether you have the right stock levels, and if your future commitments are reasonable, based on your current position.

Remember, if nothing else, you have something to measure your success by. When you come to next year, you can see how close you were to your plans. Finally, one more thought: It’s pretty well proven that if you measure something, it gets better.  Need I say more?

 Wishing everyone a Happy Christmas and Prosperous New Year.

 

 

Female Attraction

When it comes to numbers of women golfers, the UK is lagging behind other European countries. Fortunately, associations such as the R&A are taking big steps to help the situation, but what can Pro’s and clubs do, at grass roots levels, to attract more women to the sport? Crossover Chairman, Phil Barnard, talks seeds of change.

This year marks the 100-year anniversary of the Suffragette victory to secure voting rights for women. It’s a landmark year, but, while UK school children have been marking the occasion with themed events and special talks, some golf clubs are only just clearing away hugely prejudicial signs, such as “No Women or Dogs Allowed”.

It’s no surprise that the UK has one of the lowest percentages of female club members than many other European countries. At approximately 15%, the UK is overshadowed by Germany at 35%, and Sweden at almost 30%.

Continue reading “Female Attraction”

Bettering Amazon: Advice for the Smaller Retailer

Following my article outlining some of the lessons learned from Amazon, here are a few pointers for the golf retailer on how one could use some of Amazons tactics.

So what does the rise in online sales mean for smaller retailers?

First of all, you are going to have to compete with Amazon and the other big online marketplaces – this is just a fact of life.  These behemoths of the online world have advantages in the scale of their operation, the sheer range of products they can provide, their reach, and their infrastructure – but do not be disheartened.

You have strengths that the online giants don’t have. So, what should you be doing?

Continue reading “Bettering Amazon: Advice for the Smaller Retailer”