For New Buyers #2

In many ways, merchandising is a balancing act. The very undertaking of putting together an assortment of merchandise consisting of both style and value, taste and price, enough products that are superstars in sales as well as some that round out a selection while selling at an acceptable level all represent balance. One of the greatest challenges though, lies in when to eliminate merchandise from an assortment. The timing of the decision to discontinue merchandise is #2 in this series For New Buyers.

When to Discontinue

Discontinuing merchandise from a line-up can be a very costly, profit draining exercise. Promoting remaining inventory of discontinued products cost advertising dollars. Obviously, mark-downs must be taken. Floor display space is denied new merchandise; therefore sales of those new products are sacrificed. Wouldn't it be great if when the decision is made to cut merchandise from the assortment, all remaining inventory vanished and the invoice price refunded? Wishful thinking. It just doesn't happen this way.

So, is there an optimum time to discontinue? Logic and many buyers would dictate that an item should be milked until the bitter end. Every sale that can be made should be made; then discontinue it. I never subscribed to that theory. I believe that merchandise should be dropped, not when it has stopped selling but when it is on the way down. Merchants, by their nature and by definition, tend to be positive thinkers. He/she may believe that the item will pick back up. As a result the buyer may continue to reorder and the back stock may become heavier than is prudent. Toward the very end of an item's life in an assortment, sales frequently just STOP abruptly. The product rarely resurrects itself. With cessation of sales come heavy mark-downs, clearance promotions, and valuable space on the floor given up. Inventory dollars are tied up and new merchandise cannot be ordered. There is also the simple reality that the minute an item is announced to be no longer a part of the assortment, sales associates tend to shy away from selling that item. Just one of Mr. Murphy's many laws.

I learned that greed often causes items to remain in an assortment too long; greed to get the very last sale. It is much wiser and more profitable to drop merchandise when sales are on their way down (accounting for seasonability). An item that sold at the rate of 20 per month at its peak may gradually decrease to a rate of 2 per month. Discontinue it now and the merchant will pay the price. The same item selling at 20 per month and gradually decreasing to selling at the rate of 5 or 6 per month should be a candidate for discontinuance at that point. Clearing the item should be relatively painless with little drain on profitability; communicating to the sales team that the item has been discontinued may be made when the inventory is virtually gone.

The second point to be made is that some may feel that the only proper time to discontinue merchandise is when the line-up changes after the furniture markets. I would aggressively argue against this thinking. I believe merchandise should be dropped whenever it is shown be lagging, even if it occurs a month after the market. Profitability, floor space, and time are just too valuable. Discontinue when the merchandise is slowing, not at a pre-designated time or when it has stopped selling.

Next post: Many or Few Vendors?

Have a great holiday.