Letters To a Young Retailer: Start-Up Mix, Part 8

This is Part 8 of a 10-part series on the Start-Up Mix, which is the selection of goods a retail store orders prior to opening its doors. Why a 10-part series instead of a quick list of tips? Because as you’ll come to see, the start-up mix is pretty crucial to a store’s success in its first few months of business. And as you may able to see from looking around your town, the first few months are a pretty crucial factor in whether an indie retail shop thrives or fails.

Check out Parts 1-7 here:

See Part 1 in this series on the importance of nichification in your start-up mix.

And check out Part 2 for ideas around budgeting for your start-up inventory mix.

Part 3 explores start-up inventory principles unique to online stores.

Part 4 imparts one of the cardinal rules of retail: don’t overbuy.

Part 5 tells you which seasons of inventory you should focus on for your start-up mix.

Part 6 reveals why you need to carry both high priced and lower priced merchandise.

Part 7 investigates the balance between what you love and want to sell and what your customers will actually buy.

Photo by boocal courtesy of Flickr Creative Commons.

Today’s start-up inventory principle is going to sound so simple that you might think, this sounds deceptively simple. Like, duh simple. Yet provocatively elusive to master. You would be right.

Here it is:

Your sales figures are entirely contingent on the merchandise sitting on your sales floor.

In other words, you can’t make more money than you have merchandise to sell at a retail markup {which is at least double your wholesale cost on most items if your store’s ever going to turn a profit}.

For example, if you want to make $2000 one month in your retail store, you need to have at least $1000 of merchandise to sell, because the retail markup has to be at least double {wholesale x 2} and this is assuming you sell everything at full price and don’t have to mark anything down.

So if you want to make $2000 one month, you can’t start with $300 of inventory unless you can get a crazy high markup on it. Make sense?

You need enough merchandise to give you the yield you need to keep the doors open.

For a refresher on these concepts, refer back to Part 2 in this series.

I’ll never forget the advice from my first {and favorite} retail mentor — who’s just launched her new website with online shopping! — that she heard from a retail guru with whom she worked:

Never forget that you’re a store. You sell things. It’s your only means of making money. You must mark up as much as you can to start capturing profit. It’s not greed — it’s good business.

Retailers, are you with me? And, may I ask, how long did it take you to start figuring these inventory principles out?