Get in the Right Frame of Mind
Follow these five steps to successfully manage your frame inventory.
JAY BINKOWITZ, HUNTINGTON, N.Y.
Frames are an investment. We buy them to resell and generate a profit. We do the same when we buy stocks and bonds. Therefore, having a “real strategy” to making these investments is critical.
Here, I describe a simplified and objective five-step system to accomplish the goal of managing one of the biggest investments you will continuously make in your business.
1 Map your displayable space.
How many frames do you have on display, not counting under stock, children or plano sunglasses? Make a commitment to have a confidence-building selection of each collection. Most opticals should display no less than 600 frames. You want to have at least 30 units per collection (minimum recommended). The reason: Consumers desire a robust presentation of a collection; not a flea market approach. They feel more comfortable buying from a provider who has a large selection vs. just a few, which looks like the provider is trying to get rid of the frames.
Carve out room for high-margin products (HMPs) to ensure greater profitability. (HMPs are frames you can purchase for 60% to 65% below original wholesale.) Most of us need at least 20% dedicated to HMPs. That means of the 600 units on display, 120 will be HMPs. That leaves 480 frames purchased at regular price. Then, 480/30 equals 16 frame collections. Now that you know you need 16 collections, plus 120 units of HMPs, you have a strategy to manage your inventory.
If you don't feel comfortable carrying 30 units of a collection, don't carry it. It is better to have 20 collections with 30 frames each vs. 40 collections with 15 frames each. Again, consumers desire a robust presentation of a collection.
2 Create frame categories.
Having frame categories enables you to understand what percentage of your inventory is dedicated to certain products and then to measure the results of that allocation.
If you sell a collection, you MUST replace it. I know we like to project how much we want to spend each month, but if you have a busy month, and you are selling off the boards, you'll shoot yourself in the foot by not replacing the product ASAP. We all want 50% of our revenue to come from the investment we make in our inventory, but how can you accomplish that if you do not have it available for sale? In other words, it is nice to project, but you must be agile and resist getting locked into a philosophy that does not support sales. Not replacing the product because it is not in your budget can cause a devastating impact to your sales and, ultimately, profits.
Use this guide to spilt up your 16 collections:
► Tier 1 = Calvin Klein, Gucci or Cole Hahn
► Tier 2 = Nine West, Banana Republic or Izod
► Tier 3 = Skechers or Revlon
► Niche = Prodesign, Betsy Johnson
► Core = Marchon, Safilo, Clearvision
► Luxury = Lindbergh, David Yurman, Judith Lieber
► Non-brand = Names that sound like a brand but are not
3 Eliminate competing lines.
Next, get rid of collections that compete with each other by price point and style. How many 3pc mount frame lines do you need? How many bend and flex lines do you need? The answer to both questions is one. If one collection has similar styles to another, either select different styles from the collection, or get rid of the collection. Otherwise you're just diluting the sales of both collections. If you have one frame collection that is similar to another but at two different price points (ie; $169 vs. $249), get rid of one of them.
By eliminating competing collections, you have a more diverse selection overall. This increases sales due to a better representation within your inventory.
|Tracking Through Technology|
Several companies exist that provide frame inventory software to facilitate the tracking process:
• CITIXsys: www.citixsys.com
• Compulink: www.compulinkadvantage.com
• Crystal Practice Management: www.crystalpm.com
• EyeCom2: www.eyecom2.com
• Eyefinity OfficeMate: www.officemate.net
• E-Z Frame: www.first-insight.com/Product_ezframe.html
• Flextory: www.flextory.com
• FlexSys: www.flexdx.com
• Key Optical: www.keymedicalsoftware.com/keyoptical+inventory+software.aspx
• Management Plus: www.managementplus.com
• MaximEyes: www.first-insight.com
• My Vision Express: www.myvisionexpress.com
• NexTech: www.nextech.com
• Optical Shop Software: www.practicemaker.com/optical.html
• Practice Director: www.practicedirector.com
• Revolution EHR: www.revolutionehr.com
• SPEX UPC: www.framesdata.com/products/spex-upc.aspx
• The Edge: www.gatewaypn.com/about.asp
• Uprise: www.startyouruprise.com
• VersaSuite: www.versasuite.com
• VisionPro POS: www.visionpropos.com
4 Acquire frame rep feedback.
Ask your frame reps for their 10 most popular styles in the two best-selling colors, and use this as your guide for your optical. Depending on whether your practice is a high-end, middle-of-the-road or a discount boutique, you may want to make sure you have the top 10 available, or you may not if you want to be different.
Don't be bashful about buying more than one style. As a matter of fact, it is better to have 15 styles two of each than 30 individual styles. Or you can have 10 styles two of a style and then 10 individual styles. I have experimented with a strong retailing philosophy of going deep. I purchased seven styles comprised of four different colors each and set up a great presentation of this collection. They sold right away. (See “Replacing Frames.”)
5 Track sales quarterly.
Using a simple rule of thumb, we know that when we buy 30 units of a collection, we need to sell a minimum of 60 frames for the year to be profitable. That means we need to sell 15 per quarter. So track your sales each quarter, and, if you are not achieving this goal, follow these tips:
► Call the rep to conduct brand training for the whole staff.
► Relocate the product to another area.
► Raise the price. (Yes I said raise it. Lowering it won't help you generate a profit, but raising it may change consumer perception of its value. Place it next to a line of high-priced frames. They will support each other.)
► Create a contest for your sales folks.
After another three months, if you don't come close to achieving the goal of 15 frames, exchange the collection for another collection within the same company. Or, add to another collection from the same company that is selling well, and then sell that down to normal levels. So, if you have 30 units of a collection, you may have to raise this to 40 or 50 if you are exchanging out a line from within the same company. On the other hand if you receive some sales, give yourself another three months to achieve the goal, and then make a decision. The worst decision: leaving the non-selling collection on your boards. That is no different than owning a losing stock that keeps decreasing in value and has no chance of getting you a return on your investment.
The right inventory style
For most of us, frame inventory is one of the top four expenses we have on our profit and loss statement, along with payroll, ophthalmic and contact lenses. As a result, we can't afford to have a “let's give this a try” or “I like it so much, I'm going to buy it,” selling philosophy. Instead, we must map our displayable space, create frame categories, eliminate competing lines, acquire frame rep feedback and track sales quarterly. OM
|Mr. Binkowitz is the president of GPN, a business management consulting company. He has had extensive experience in retail operations, merchandising and marketing. E-mail ClientServices. firstname.lastname@example.org, or send comments to email@example.com.|