Finishing Strong: Year-End Inventory and Tax Strategies for Retailers
Stop the overbuying spiral and learn the year-end strategies top stores use to finish strong.
In this live session, retail experts Paul Erickson from Management One and Melodie van der Baan from Max Retail will show you how to use the final weeks of the year to clean up your inventory, make smarter, tax-aware decisions, and set your store up for a strong start in January.
Instead of guessing what will happen, you will walk away with practical steps you can take right now to move slow stock, protect your cash, and head into the new year with a focused plan.
In this session, you will learn how to:
Avoid the five most common holiday inventory mistakes in retail
Spot slow-moving items quickly and apply creative strategies to turn them into available cash before year-end.
Accurately plan December sales and inventory in dollars, not just units, so you can protect margin and cash going into January.
View your year-end numbers through a simple tax-aware lens, so you know which questions to ask your accountant and where timing matters.
Don't spend January buried in slow stock, surprise tax bills, and the sinking feeling that every other retailer got the year-end playbook you skipped.
-
Finishing Strong: Year-End Inventory and Tax Strategies for Retailers – Transcript
Management One: Hello, everyone! Thanks for joining us today. Let some folks come in out of our waiting room there. Excellent. So this is always one of my favorite webinars for Management One, because it's our year-end webinar, which… The year end for retailers is typically a pretty chaotic time, so… They often get caught up in the minutiae of… Black Friday, Cyber Monday, rolling that right into the holiday season, and it's less of a preparatory time for January, and just more of a survival time, and we really wanted to… create this session today to give people some tips and strategies on how they can use these next few weeks, the final weeks of 2025, to really prepare for 2026. How do you get yourself in a spot to really crush it starting January 1st, so that you're not struggling to figure out what to do when that time comes around? So, I wanted to… let me make sure we got everyone in there… Perfect. One more, okay. Oh, and it looks like we just lost our… Panelist. Nice. Well, I was going to introduce our two panelists, but they both just dropped off. So, while they come back on. let me take a little bit of time to, number one, thank you folks for joining in, and I'll do a little housekeeping stuff first. So, if you are curious, we are recording this. And if you do need to drop off, we understand, you know, retail is a very busy time for you, so we're gonna record this session for you, and after it's done, it will be available on our YouTube channel, so you can review all the information with your team, and you'll have everything at your disposal there, and we'll email it out to everybody as well. Now, if you're not familiar with Management One. Thank you for joining us today. Our main purpose here is to provide financial security for our people, our clients, and our retail experts. And we do that with a very specific focus on merchandise intelligence and education, like. this session here, for independent retailers. And we concentrate on a set of very specific core values, including a generous heart. Courage. curiosity. Adaptability, commitment, and collaboration. And when I say collaboration, this session included, so there is a Q&A button right down there at the very bottom, and we want to make sure that you give us your questions live, so just hit the Q&A button right there, and I don't know if we'll address them immediately as the content goes on, but we will absolutely save time at the end for Q&A. So that being said, oh, good! Mr. Erickson is back.
Paul Erickson: We're having a little internet problems here, Nico, but I just want to amend… I did listen to… I was gone for 5 minutes. I just thought you didn't really admit who… why this is your favorite webinar. It's really not about the end of the year, it's about the fact that You can see me once again.
Management One: Well, that is true.
Paul Erickson: In the presentation, so…
Management One: That is true.
Paul Erickson: True to.
Management One: You miss me.
Paul Erickson: So, anyway…
Management One: That being said, I will introduce Mr. Paul Erickson, our resident godfather of retail, and we were very thankful to have Melody Vanderbaughn from Max Retail, and also fellow retailer and previous client of Management One when you had your store out in Florida. Thanks, Mel.
Melodie van der Baan: Absolutely, I'm so glad to be here.
Management One: Well, let's jump into it, and I will again remind folks, as we're going along with the content here, hit the Q&A button and provide your thoughts, and we're happy to share them in our live Q&A at the end. So, the title of this session is Finishing Strong. What does that really mean? I alluded to it a little bit at the beginning, but we really want retailers to see December as a setup month for Q1 in the next year. It's not just a test of survival. You want to make sure that you have the metrics set up for success, so that means available cash in January. Cleaner inventory, fewer slow movers, fewer tax surprises, and Paul will get into that later. So, we're gonna do a quick overview here of… what we're going to be covering in planning, some of the mistakes that you want to avoid. We've got the top 5 inventory mistakes in retail. We're going to let you folks know how to clear some slow stock. And then again, Paul will provide some tax tips, because there's some surprises that retailers don't want to be hit with at the end of the year, so if you know those ahead of time, you can definitely steer clear. So, what do we talk about when we're saying data-driven in December? Really honing in on your numbers. Oftentimes, retailers have this gut feel when they're buying inventory. And every time we talk to retailers here at Management One, we always try to give them in the mindset of looking at the data first before going to their emotion. Simple data inputs instead of your instinct. So, things like, what's your recent sell-through? could be in your point-of-sale system, or maybe in retail orbit, possibly in your Shopify account, whatever system that you're using. That's really the first data point, and I was going to put that over, I guess, first to Melody. What do you look at when you're looking at the data in December to really get your mind set for January.
Melodie van der Baan: I would say, on Max Retail, we are constantly… working to help our Shopify retailers specifically find their aged inventory. We built a custom report that is generated for Shopify retailers once a month that shows them all of their 90 days aged inventory, because that's the threshold that it gets listed on our platform. But we have seen a lot of trouble with retailers being able to identify sell-through in Shopify, and Management One. I know you guys are very well aware aware of this, and you're trying to work through it as well. How can we help retailers understand their sell-through on Shopify products? So I think this is a joint effort, but if you are on Shopify and you are unclear as to what inventory is severely aged, just reach out to us, support at maxretail.com, and we can help you run that report.
Management One: Awesome.
Paul Erickson: I'd like to add to that too, Nico. Yeah. I think… I don't know, Melanie, did you ever see the movie Urban Cowboy? So long, she's too young. She… I'm so old. You know when you're getting old, Nicholas, when you start making movie references and no one knows what you're talking about? Urban Cowboy was a John Travolta, and there was a famous song by Mickey Gilley from that that became the number one hit in the country, and the name of that song was Looking for Love in All the Wrong Places. Right now, that they're looking in their data at all the wrong places. There is… I believe that for many retailers, and I'm going to get back to, Nico, what you said about the gut feel.
Management One: For many retailers, their idea of inventory control.
Paul Erickson: Is… they're in a forest. And they're looking at individual trees, and they don't have the helicopter view of exactly what the heck is going on with the forest, and it could be dying all around them. And that's where I think a lot of independent retailers fall down. Let me give you some examples of that. Where you want to be. Where you are right now, you need to know by each class classification, but where you want to be at the end four weeks from now is absolutely critical. Nico mentioned we're going to talk about the tax liabilities that that presents if it's not planned correctly, which we'll get into toward the end of the webinar. But where you want to be is going to be everything in terms of your cash flow and your profitability. If you take too much inventory into January, you're going to have to mark it down. That affects profitability. If you have too much inventory at the end of the year, you can't pay off the credit cards or the line of credit. You won't have any money left. And so, this idea… That every… you can be in control of this, but you have to know how to do it, and you have to understand where… where is your ending inventory to be? Melody's joining us, and we're all, like, super… particularly me, I live in Minnesota, but she's joining us from Fiji, and I kind of hate her for that, by the way, just so you know, Melody. But Melody, I would assume, flew there, and… and the pilot somehow And I remember flying to Hawaii for the first time, going, how did he ever get to Hawaii? It's all black, it's nothing but Pacific Ocean, which is exactly what Melody was flying over, and suddenly, we landed in this speck And this speck of an island among this massive Pacific Ocean. And how did he do that? Because he had measurements to do that. He knew where to land the plane. What all retailers need to understand is. you need to know how to land your plane. And landing your plane right now is very, very important. This is an opportunity month. We… our clients do anywhere from 20% to 40% of their annual sales over the next 4 weeks. And what that means is a store that'll do $100,000 in sales this month, or $3,000 to $4,000 a day. will go to $30,000 in January and do $800, $900 days. And consequently, they can't pay anything off in January other than just pay their payroll and their rent. And so everything is dependent on taking advantage of this opportunity and getting your plane down on that runway in Fiji. where Melody is right now, that's why we all hate her. So I'm gonna end right there with that.
Melodie van der Baan: And Paul, you know, I felt like you were speaking directly to me, because that was my reality as a retailer. The 10 years that I had my independent retail store in South Florida, that is what December was for me. Right? It was exactly as you're describing, and how am I gonna land this in January? Thankfully, January would be a slower month, I was in Florida, February would pick up again, so it's even more extreme if you're in cold temps, right? If you are a boutique in the northern part of America, and especially in Canada. And so, you know, I think that this is a really timely conversation. What I'm excited about is that you know. I am here with Max Retail, and we do give retailers more tooling for unsold dead stock than they've ever had before, and that just excites me, so I'm excited for us to carry on through this and set retailers up for a successful January ahead.
Management One: Awesome, so let's talk about this one, Paul. We talk to our clients a lot about planning their season in dollars first instead of units. Describe that concept for me a little bit.
Paul Erickson: Well, I think because we work with so many fashion retailers, I believe, Nico, 50% of our client base are women's boutiques and fashion retailers. That particular vertical is very Markdown dependent. And it's, you know, there's an old saying that you learn nothing from success, but you learn everything from failure, and in the fashion business, you're going to have failures, you're going to have misses, and you just have to learn from it, but it's part of the business. Because of that, we don't… if we only look at units, we don't see the profitability. in those… what those units sold for, and we could be re-planning an unprofitable season to be unprofitable again the following year if we don't know exactly what the margins are. So. Financial merchandise planning is what it says it is. It's financial. It's not a unit plan, it's a dollar plan based on Your expenses, based on what your rent is, based on your payroll, based on paying down debts, all of that are financial plans around how you manage your merchandise, and that has to be done in dollars. Or euros. Or shekels, or pesos. Or I don't know what they have in TG. But I'm not upset about it, Melanie, at all.
Melodie van der Baan: Fijian dollars, Paul, Fijian dollars.
Management One: So, last month, co-founder and CEO Mark Weiss put out a blog, and he called it the 5 Biggest Holiday Mistakes, and I really wanted to bring that up in this session, because I was looking at all 5 of them, and I thought, this is a perfect playbook for year-end. So, I wanted to just go through these top 5 and get your take from each of the panelists here, so… Let's talk about mistake number one. We kind of alluded to it a little bit earlier, but let's dive a little deeper into it. So, mistake number one would be overbuying based on optimism instead of data. Again, going back to that gut feeling, and really hoping and wishing that something works. Walk us through that one, Melody, in your experience as a retailer. Did you ever see that in your store?
Melodie van der Baan: Yeah, and I think when we look at overbuying for optimism, I think there is a balance between art and science. The science is your management one plan. Your Management 1 plan is telling you how much you need in each category in this month of December by dollars. Forgive the happy morning birds. When we talk about the art of it, it's looking at what is trending, it's looking at what is working, it's knowing who your customer is, and you really have to do both, but it's like, when we look at how much how much in sales we need to drive this month, sometimes it can make us overbuy, right? Which is why it's so important to go back to the plan and not go too heavy in the art, or… or not reach the bar of the science, right? Like. I always say. and you two, that we lose money two ways, by having too much of what doesn't sell, and by having not enough of what does. So I think when we have this conversation, we need to be very careful to not then get too scared and underbuy for this month of December, where in the first week, we still have time to stock the critical items that are going to be what the husbands buy come December 20th, right? husbands, they didn't go online, they didn't know what to get. They're showing up in your store for their wife. who is your customer, know what she likes, have those items in stock. If she's coming in earlier for other gift items, if I were you, I would be taking note of what she's looking at and saying, hey, am I low on that, right? Like, what do my customers absolutely love? What husbands come every single year? Do I have the items that they're gonna buy? Because that's how I drove my business, was based on who I knew was gonna show up. And making sure that I… I only brought in cashmere in December, right? Because everyone who came down to Florida would buy cashmere, scarves and things like that to take home, or buy the cashmere scarf to take up north for the holidays. So, don't miss it, look at what does well every year, but don't get too excited either.
Paul Erickson: You know, Melanie, I was a husband. Several times, actually, but that's a whole other story. And, I was the classic last-minute shopper. I mean, literally, I would be walking the stores on December 24th. I've done that, you know? And I was in panic mode, and you could have sold me anything at that point in time, so… you know, you can let your inventories wind down, because you're going to be hit. I think you made a good point with those last-minute showers. I want to go to… and this is really speaking probably to the clients that are on this call, because I… I get this from clients where They'll ask me, I'm in December, I'm showing a negative open to buy in classification X. Does that mean I'm frozen on buy? And I said, and getting back to what you said, do it early. But there is such a thing as an organic open to buy. I made that up, Nico, don't steal it from me. I own it. But there is an organic open to buy, and I also call it, it doesn't matter what the… what your plan says on Management 1, you'd have to be an idiot not to reorder this, because you know it's going to sell. So that negative is basically there because your overall investment, what Melanie was saying, is too high. But as she also said, this is a mix of what's not selling and what is selling. And… and you cannot… the old… the oldest sin in retail is not having what the customer wants, when they want it. And that's what… so, there does come a cutoff time, though, Melanie, right? When… when you just… yes, we have to stop reordering, and that has to do with lead time. Always use the magical date in Eco knows this, December 11th. It's really the cutoff time I tell everybody, is you have to… That's also my birthday, everyone, just so, you know, if you're gonna send me something.
Melodie van der Baan: December 11th.
Paul Erickson: December 11th, Melody is my birthday.
Management One: Well, that's a good point, too, because we talked about this last week, and Melody, you had a really Good tactic of having an ongoing list of the vendors who ship the fastest. Tell me about that a bit.
Melodie van der Baan: 100%. Yes, you have to know who's reliable, who has stock on hand, and who can get it to you quick. Because the last thing you need to do is reorder those cashmere sweaters, and they come on December 27th, which is why I love Paul's birthday as a drop debt date for being able to do a reorder. I would strongly advise every retailer after this call to go ahead and do that today. See what you need in stock today. Here we are, early December, you can get it within the next 4 or 5 days, but ask the vendor, right? Can you express it to me on your dime? I'm willing to buy it, you don't want to hold this inventory at the end of the year either. Now's the time to ask for vendor support to get you merchandise quick.
Management One: Love it. Well, let's talk about mistake number two, then. Forgetting what comes next after holiday. We all see it every season. As soon as January 1st hits, all the decorations come down. Depending on the location that you're in, what is the next season that you're going to be jumping right into? So, if you're not bringing resort or spring items in early enough. the floor could look a little tired after your sell-through in January, and a better approach to that would be to start looking at maybe seeding some small, curated spring or resort capsules in there in December, just to kind of test things out. What would be your advice on that one, just given your history and your store?
Melodie van der Baan: I think it's really interesting, because we have so many stores on this call in different areas, and they need to plan different assortments. For instance, if you're a northern store, you're still going to bring… be bringing in warm weather stuff with a little bit of resort, but you're still going to be looking at practical. More now than, I would say, 15, 20 years ago. consumers are a little bit more practical, except for the ones going to Florida for the winter, Texas, California. We have to think, what will our customers buy in this month? And I think that sometimes that makes us believe that our inventory's going to live longer. For instance, that winter coat that you got in last month, you're like, oh, I'll just sell it in January. But that's not what Turn is about, right? And just because you might be able to sell it in January doesn't mean you should. You should probably sell something new in January. You know, something that Dan Jablon said years ago that has never left my head. is if your customer sees this month what they saw last month, they're not coming next month. And so, you might be able to sell some of this wintery inventory in the new year, but that doesn't mean it's a good plan, because that is not what retail is. Retail is about how many times you can buy and sell that merchandise, which is why our goal should be to move through as much inventory as we can this year, so that next year, January is next year. can be fresh. So, I would advise stores in Florida to, and the South, warmer areas, to definitely start bringing in the colors, right? You can even start bringing in colors of warmer weather items in January as well, but start to prepare your shipments to have color in them and have life in them. Because that's a great way to meet weather with the change in season. Go from dark, go to light. You're always safe in the world of white, navy, and black. You're never gonna screw it up if you go white, navy, and black to get you out of some of these holiday festive colors, right?
Management One: Yeah, and… as a marketer, I would always lean on our retailers to really make sure that you're looking at your communication channels, whether it's your email marketing, your social media, even in-store signage, and start to transition your customer from holiday to whatever that what's next season is. So make sure you have that content ready to go on December 1st, and you're not just creating it on the fly when The new year comes around.
Paul Erickson: So, real quick. So, nobody has any money in January out there. They just spend all their money on Christmas presents.
Management One: So you're looking… January is, with the exception of maybe some areas in Florida, like Naples, places like that, where you've got the real resort, where January, February, March are huge.
Paul Erickson: For the rest of the country's any reason, we're small. Almost in every case. And so that's because you go from this peak selling until the worst month, and nobody has any money. Why would… and we get back to what Belie was talking about, the winter coat. Why on earth would you want to be in competition with every Tom, Dick, and Harry retailer that's got that same coat on sale for 70% off in January? Why don't you try to sell it, and if it's not selling, try to get sell it for 30% off this month, when you've got more people in the store. If you're overstocked in umbrellas. Don't try to get rid of them on the sunny days. you know, mark them down when it's raining. Anyway, that's probably a stupid analogy, but… I'll use it anyway.
Management One: No, that's good, and that is probably a good segue into our next mistake, which is underestimating your merchandising and your presentation. So, again, with the rainy days umbrella, Paul, where are you going to put those umbrellas? In the store? Same with your holiday merchandise, and your next seasonal merchandise. How are you refreshing your floor sets, and how often are you refreshing them to showcase that newness and the best sellers? So, Melody, I guess in your experience at your store, walk us through what you would do in a December.
Melodie van der Baan: So I think even… what… We're… doing inside, I think… We need to say, have we done all channels of access, right? I want to make sure I'm not frozen, tell me if you guys can hear me alright.
Management One: Yep. We hear you.
Melodie van der Baan: Great, wonderful. So, here's… here's what I think is important. Take inventory of what merchandise you have promoted and haven't promoted. You've been receiving your fall merchandise for months, you've been receiving your holiday merchandise for weeks. Do you have it shot? Is it on your social media? Is it on your website? Right? We don't just want to shuffle merchandise store. We want to make sure that our customers, because that's going to drive them to come in the school. store. Chin, bye.
Management One: Nope, I think we might have lost her again, Paul.
Melodie van der Baan: Thanks!
Paul Erickson: That's what you get for being from Fiji.
Management One: I get what she's saying, though. I mean, we do talk about making sure that everything is visually seamless across all of your communication channels, whether it's in-store. Social media, email, make sure that you have all of those items properly previously shot, and with all of the descriptions and everything else. Same thing with your staff. You know, make sure that your staff, even if they're seasonal, make sure that you've trained your staff to understand the story behind this merchandise, and make sure that they're able to really sell it. If these are the hot items that you want to move in December. There has to be clear staff training to make sure that they know exactly what is the item that needs to be sold that week, and how they need to be selling it. And we did a great webinar a couple of weeks ago with Mr. Bob Negan. And it was all on holiday selling, and I can put that in the chat if you guys want to review that session, because that was actually a really powerful session for sales training, which is a huge, huge piece of the puzzle. So let me go to mistake number 4 while we're waiting for Melody to come back, because Paul, I think… I'll definitely speak to this one.
Melodie van der Baan: I'm back over here. Love it. Sorry about that.
Management One: Guys, you would think that…
Melodie van der Baan: this, this Wi-Fi would be a little more stable, but I'm still glad to be back. I had a backup phone ready. I just wanted to make sure everyone heard what I said about making sure that you take inventory of your products that you've promoted on social, that you've put on your website, because that is the greatest reason why inventory ends up listed on Max Retail is because it was the items that we forgot to promote in the first place, and so we just didn't get the word out there, and so there's in-store merchandising. there's in-store merchandising, but there's also what we're doing on the web, right? And what we're doing to get in front of our customers, and that's gonna drive more customers into your store this month, which is what we want for everyone.
Management One: Absolutely. No, I appreciate that. Let's move along to the next mistake. So, because this one, I think you can both speak very highly to how this is a mistake for retailers, and that's waiting too long to take a markdown. You know, holding everything at full price, because you know that this is a hot item, and you just want to save as much margin as you possibly can. I think the better approach there is really to take early but targeted markdowns on the slow items while your holiday traffic is still high. So, I guess, Melody, tell us about The pitfalls of waiting too long to mark something down.
Melodie van der Baan: Absolutely. Well, I want to share a couple techniques that I see retailers do on Max Retail. If it's an item that you don't want to mark down in-store yet, but you know you've had it in store 90 days or more, just tag it on Max Retail, so that way you're quietly selling it online. to someone who's not your local customer, or selling it at full price to a local customer. So if you're like, I don't want to see this in January, but I still think I could have an audience for it here, you can play to win. Remember that Max Retails, it's an anonymous platform, so… it's not gonna have any tie to your store name when we're trying to sell it online, and I think that's really important to know. That, yes, you should take your markdowns. yes, you should absolutely be clearing out as much inventory as you can before January 1st, but I think what we also want to remember is we want to sell as much full-price holiday merchandise as possible. I want to go back to the point that you made earlier, which is. We can't just look at top line. We have to look at gross margin dollars, which is why using a balance of selling aged inventory off maybe creatively, BOGOs, gift with purchase, you know, it doesn't always have to be a markdown, right? You can just pair things creatively, or double down, put it on max, as well as you're doing these items in store, and see which one sells it first.
Management One: And for the people on the call that aren't totally familiar with Max Retail, I put a link in the chat, just to kind of explain how it works, so feel free to click through to that, and you can see exactly how the software will work for you.
Paul Erickson: Let me jump in on this. I think, talking to a lot of retailers this month and last month. I want to get back to this idea that December's such an important month, and let's drill down into December itself, and what… how important that last 7 days are before Christmas. Many times that when retailers really break that out on their daily sales, they'll see as much as 50% of the December business is done 5 days before Christmas. This year, the 20th is Saturday, it'll be your biggest month of the year. And… and so, just because something's not selling right now, It hasn't really hit. Where it's gonna… where you had the biggest opportunity. So, but there's also… and Melody brought this up earlier in the presentation about using your gut, and from a guy who's data-oriented, I'm going to tell you that in our business. The gut is a big thing. It is a very, very important thing. And you have… you have merchandise that's been there for 90 days, as Melody said, and then I asked the retailer, in your gut. Do you think you're gonna sell it this month? And they… and many times they'll say, I don't think it's gonna sell. And I go, then why are you waiting to mark it down? Let's mark it down right now and give yourself enough time to move it out. And don't wait until we get into the real thick of things before we decide to mark it down. So I would be quick on that. And again, everything is based on getting to your goal, landing the plane in Fiji. Is your goal, and how we get there, you're going to have to take course corrections, and part of that is what to reorder, organic open to buy, what to mark down using your gut, and how much to mark down, by the way, too. You know, I mean, if you think you're gonna move merchandise at 15% or 20% off today, you are sadly mistaken. It's just not gonna… it's not gonna go at that price. Your first margin probably should be 30%. I think, Melody, you agree with that, don't you?
Melodie van der Baan: Absolutely.
Paul Erickson: I think it goes 30, and then it goes 50, and then if you haven't sold it at 50, it goes on max.
Melodie van der Baan: Right? So that's what we always advise our customers to do, because, you know. But what I will say is, if you still have all the units, and it's been 90 days, your odds are low that it's gonna sell in the next month. And then, to be honest with you, it's going to be harder to sell in January. So if you couldn't sell it in the last 3 months, you're unlikely to sell it in this month, and you're very unlikely to sell it next month, so we need to get a move on it.
Paul Erickson: We need to pivot. I think really good retailers, Mel. We pivot quickly, and they know if it's not selling. You know, we did a study several years ago that was telling us something that we didn't even appreciate. Shelf life in fashion apparel is 10 weeks. That's it. 90% of the stores reported their sales were 10 weeks or younger. And something else very important, 50% of their sales they were doing each month came from inventory arriving in the month. It's the magic of unpacking the boxes, and the sales… you know, we are at… we're at… we are completely… vulnerable to our sales associates. And I can tell you for a fact, the unfortunate reality is sales associates gravitate to what just came in. That's what they're excited about, that's what they show customers. So. You know, one of the things that we want to do is that we don't even want 90-day merchandise in the store. You know, we need to do that full price, because you're holding it too long, and that's what's causing problems, probably, in your business, causing problems in terms of growth and revenue, because you're not showing them enough new, you're hanging onto it too long. And it's affecting your cash flow, it's gonna affect your profitability, and eventually you're going to have to pay a tax on it if you don't mark it down before the end of the year.
Melodie van der Baan: That's right, and that's why, Paul, when I advise this, when I'm looking at listing on max retail at 90 days, I'm saying at 30 days, you are going to a 30% markdown. At 60 days, you are going to a 50% markdown, and if these are not working. then you really need another outlet. But I think the bigger thing in this particular month is what do you want to sell the people walking in? If Paul is saying that 50% of sales are going to be full-price sales, wouldn't it be great if that was 60% or 70% of sales were full-price sales of newer inventory, right? Like, that's what we all want, so I think… when we look at this month of December and the high foot traffic, really just honing in on, have I hit my plan in terms of merchandise assortment? Am I under the bar on any category? Am I truly set up to hit my top-line numbers based on what my plan has said? So I just want to double down on trusting the plan. and then making sure if there's any trend things that you're seeing going on in your city, in the market in general, adding those in. But you're never gonna hit your number if you don't have the right assortment in store, which is why I can tell you, when I worked with Management One. I hated markdowns. I hated taking markdowns, and they had to hold my hands. and teach me how to take markdowns, because I hated them so much. To be honest, it's kind of probably why I continued to build Max Retail, because I knew how much I hated an in-store markdown, and I wanted to be able to get inventory sold another way without putting it 75% off in-store, but I will say it is a necessary evil. And we've got to get comfortable with it, because no matter what, coming in-store markdown or max retail, we've got to get the inventory out so we can have the money to bring new inventory in. And January 1st, every single item in your store right now is oh-so last year.
Paul Erickson: 50% aren't dogs. You know, I mean, I mean, you… I think there could be a psychological component of it, that it's an omission of failure. But being more likely clause is, I don't want to sell stuff on sale. If I mark down all the time. I'll be known as the sales store, Paul, and they'll never buy full price from me ever again. And I can tell you, and I've been doing this for 45 years, I've never seen that happen. Ever. what happens is the customer wants two things, essentially. What's new? What's on sale? If you don't have either, you've got big problems in your business. So, you're not going to develop a sale image if you're quick and take markdowns aggressively and get it off the floor fast. That's really, really the key there. So, you know…
Melodie van der Baan: Thank you, Paul. I had a footwear rep call me a couple weeks ago, and I said, how'd you hear about us? How'd you hear about Max Retail? She goes, well, one of my footwear stores in Louisiana stopped running a sale in store, except for biannually, and they're selling with you every single day, getting that unsold inventory out, so they've been able to move to a biannual customer cadence, which has allowed the customers to buy more sooner. So, Paul, yes, a markdown is necessary, but if we're going to be honest about it, the reason why a markdown is necessary is because we have to get our cash back. on what's not working. And so, if you are someone who's just, oh, my customers are always pointing it out, I hate it when they say, oh, just call me when it goes on sale, and then you're really committed. Then you're really like, oh, I'm totally gonna sell it so that I can't call you for it, right? Because you don't… you don't want that to happen. Then… then definitely look into Max Retail as an alternative for you, because all Paul and Nico and I want, and Mark Weiss, is for you to get your money back so you can place your next bet. That's all we want for you, right? So, Markdowns is a solution, right? What is not a solution is boxing that stuff up and bringing it out next year. Nobody wants it next year, okay, guys? So, I just want to make sure that that is not how we make inventory go away. to make cash appear, so you can have freshness for the new year.
Paul Erickson: Please don't ever tell me about boxing up merchandise for next year. It's like… it's like, I'd have to get a cross out and some garlic. So, I mean, it's the worst… it's the worst thing they can do, Mel, right? I mean, they're way better off sending it to you and getting rid of it. You know, think about it, if you bring things out from last year, how would you… how would you like to go see one of your vendors, and they show you the line, and the line looks strangely familiar, because it was the same items they showed you last year. You think you'd come back and buy the line again? I mean, it's crazy the way sometimes retailers think about it, but anyway.
Melodie van der Baan: Well, and Paul, what I will tell you, what I see retailers do on Max Retail, is before they used to box it and put it in the basement and bring it out next year, now they move it to the basement, but they have it listed on Max Retail, and we are selling it throughout the rest of the year, and that way it's gone by next year, so they're not having to keep it on the main sales floor, where it's not seasonally relevant, and they're still selling it. And we found that to be a really great balance for the previous boxer-uppers.
Management One: Well, I'm jumping ahead a little bit here. Before we get to mistake number 5, let's talk about slow movers, because I feel like that's relevant to mistake number 4. identifying those slow movers, and why, I think, Paul, this was your line, slow movers are the most dangerous at the year end, not mid-year, because essentially, you're holding onto cash that you could be using to buy, like we talked about earlier, to buy for January. So, how do you identify those slow movers quickly?
Paul Erickson: Is that to me, or to Mel?
Management One: I'll start with you, Paul.
Paul Erickson: Well, that's an easy answer. It's all based on time. This is a business that is based on time. Not margin. Let me say that again. This is a business based on time, not margin. I've seen stores go broke with great margins. They also had 5 years' worth of debt inventory in the basement and boxes. This is… everything is based on time and sell-through. And so, you simply look at the fact that we know some facts already from this presentation today. We generally have about a 10-week supply of inventory. That's optimum. So, if you're sitting there, and if we're sitting in May, and you have a bunch of merchandise that hasn't sold, that was received in January and February, even early March. what are we waiting for? Because it's been proven it's simply not going to sell. Plus, it becomes a cancer, and I know that's a strong word, but it is. It's a cancer that metastasizes throughout your store. If you're unwilling to move, either send it to Melanie's company, to Max Retail. Or 10 markdowns on your own, whatever it is, if you're not willing to make quick pivots. To move on it. you're never going to realize how good of a retailer you are because you've got this cancer in your business that you're not rooting out. And that's so, so important. I can tell you that the most successful retailers that I work with are willing to admit a mistake, and take quick action on it, run it away, and move on, and learn from those mistakes so that it can be a better retailer, grow their business. Those are the successful retailers that we work with. And it's all tied to time, and what we call inventory turnover, which is long-term looking at time, where inventory sucks through, which is a short-term looking at time. Time is all about this business.
Melodie van der Baan: I would love to give them a tactical win here. What I used to do is I used to put a little, like, a highlighter dot on all the inventory that absolutely needed to go, right? Like, if it had been in store 60 days, and I knew it was gonna start being at risk soon, I would put a little yellow dot on it, and then I would give my team, if they sold something with a little yellow dot, my average retail price point was $220. If they sold one of those items, I would give them a $10 SPF, right? And so, if they sold 5 items that were more than 60 days old. that I knew weren't on, like, you know, super sale yet, and I could still get a better margin on them, I would spiff my team, and they could make 50 extra bucks on, like, a $1,000 sale of 5 of these older items. But I think the other thing that's really important to realize here is when a customer walks in, the best question you can ask is, like, I used to say, welcome to Blessed Boutique, have you shopped with us before? If the answer is no, I would show them all the oldest things, I would show them all the things, like, I would say, it's go time, because when they walk in and they say, yes, I've shopped here before, I know I need to show them new. But that question helped me clear out stuff, because it was new to them, guys. The same way when you list on Max Retail, the stuff that you've had in store 120, 180 days, it's new to our online shoppers, right? It's sitting in your store, we're getting it exposed to 400 million end consumers who love a deal. Your old stuff is brand new to these online customers, but it works the same in your store. Your old stuff, as long as you know who just walked in. You can target and move that older stuff faster, so please do that. The other thing I just want to caution everybody of is something that I see called sale fatigue, and I've experienced this firsthand, where there's a lot of retailers that I obviously follow on Instagram, and when I see them posting pictures of their inventory that I know they posted 6 and 8 months ago. I get worried about them. Right? Because as a shopper, I'm like, why are they still showing that dress? Like, they didn't sell it yet. And these thoughts go through my head, and then I think to myself, are they okay? So, we need to remember that, like, freshness and newness, this is our business, and even though you might need to sell that item, there will come a time that, like, online promotion is just, like, a sale fatigue thing with the customer, so we… that's why we really want to promote items heavily when they're newly arrived for the first 30 days, first 60 days, clientelling. But remember, your customers, especially the ones that are super loyal to you, they know how long you've had it in there. It's very important to know.
Paul Erickson: Since we're going to be on this topic, one thing that drives me nuts And this, again, gets back to time against margin, okay? So, you get a coupon in the mail. Now, the coupons have been proven to be really kind of a very effective way to get people to come into the store. At a time when everybody's on sale, like nobody's saying, you know, people still look at getting a coupon in the mail from a store that they shop as being something delightful, believe it or not. What drives me nuts is that you get a coupon, and in the back it says, they have the exceptions, so it's $50 off, and part of the exception… and there's a whole long list of exceptions you can't use the coupon for, but one of the things they say is not valid on sale merchandise. Melody, when I see that, I just want to jump off a 9-story building and end it all, because there's no hope. Really, what that is saying is that an accountant got involved in… from… in that store, or in that business, and they're saying, well, we can't… we're already marked… that person is already marked down, so we don't want to mark it down anymore. So, think about how ridiculous that is. I'd rather have them get a discount on the stuff that came in last week. That's the stuff that's been there for 9 months. I mean, when you really start thinking about how ludicrous that is, and again, it's getting back to thinking… I want everybody on this call, think about time. That's what you need to think about, how long it's been there, and I love Melody's idea of, like, those little stickers. I mean, that's old-fashioned, but it's great.
Management One: Yeah, and it's not just about a sale or a markdown. I think we talked about a couple of these earlier. There's other ways that you can move your items. You can add bundles together and gift sets, put some of those slow movers into a bundle with the hotter items. You can offer a gift with a purchase. Spend a certain amount of dollars, and you get a free hat that they don't really need to know wasn't moving, but they get a free gift, and they feel a lot better about it. We've had some retailers that do cross-promotions with their community. So, for example, let's say you have a coffee shop. across the street. If you bring in a receipt showing that you got a cup of coffee, guess what? You get a free, again, maybe a small, slow item that wasn't gonna move anyways. Or, you get a 10% discount on anything in the store. Something to really build that sense of community. You can run specific contests or SPFs with your sales staff to just those targeted SKUs that you want to move, because as Melody mentioned earlier, as soon as the new stuff comes in, that's what the salesmen are going to be focused on. So if you can run some specific contests on the SKUs you want them to move, that could be another interesting way to really motivate the sales staff. Good segue there, too, because I don't want to lose this before we go into our tax session. Mistake number 5, and that's leaving the sales team out of the plan, whether that's your Management 1.
Melodie van der Baan: plans.
Management One: or your sales plan for the holiday. If you're not using your sales associates as your partners to move those key items that you want to move. you're definitely missing out. That is a big mistake that we saw in our webinar that we did with Bob Negan a couple weeks ago, and I definitely want to talk about it here. Just some of the different incentives that you can run with your sales staff. Melody, walk us through a holiday season with your sales staff. What's the meeting look like when you're going into holiday?
Melodie van der Baan: I would say the meeting looks like whose clientealing today is number one. Right? We're doing defense, we're doing offense, right? We want to make sure that every box that's arrived is getting to the floor as fast as possible. So I would say step one for me is dividing up the team, who's ops and who's sales, right? And really understanding how am I getting merchandise on the floor fast, and getting customers reminded to come into my store, right? They're not just gonna remember, people are tempted by online, so I would say that is step one, and then definitely just having spiffs, right? Hey guys, if we hit this number today. we're gonna do free lunch tomorrow. There's team goals, and there's individual bonus goals. But I would say the biggest thing you want to make sure you're doing is staying open extra hours. Be the first one open in your plaza an hour earlier. There will be that shopper that will come and spend a grand before 10 a.m. Stay open an hour later. There are the people who are getting off of work late, and they need to go shopping, especially if you have restaurants around you. If you have, children areas, anything where there are symbiotic businesses, I know, Nico, we talked about doing some collaborations with, like, a local coffee shop. Hey, shop here, get a free coffee. Hey, you know, go buy a coffee, send them over to my store. So I would say talk with your team about who wants extra hours. What are our… Bonuses, what are our individual bonus opportunities, like selling through slow sellers at full price, I always loved. But definitely just make it coming in that is above average, but don't miss this. Double down. I used to have my staff, each one of them had to call 20 customers a day. If I had 3 girls working, that would be… 60 clientelling calls a day. 60, if you do that for a week, that is over 400 extra client communications. That is 1,600 customers reached a month, simply by requiring each member of your staff to do 20 a day, 1,600 additional contacts. This is a go month. This is a let's go. Next month, you're going to be calling them for different reasons. You're going to be calling them for sale. It is what it is. But this month, you're calling them to come in and shop, right? You're remembering, hey, they're in the mood to buy for other people. There's holiday parties, there's New Year's Eve, but right now, more than anything, people are buying for other people. Make sure you have that husband's list and hit it hard.
Management One: I love the idea of extra hours, too. Don't be afraid to set up VIP hours for some of your top clients, or one-on-one buying sessions with stylists. Things like, we've had clients put, like, things like that together that have been really, really successful for them, and it makes the customer feel special. They're not just in the herd with the rest of the holiday traffic.
Melodie van der Baan: But Nico, I want to say it one more time. If you have restaurants that serve dinner near you, and you're closing at 5 o'clock, please don't do that this month. Please don't do that. Give yourself the extra hours. Give yourself that extra… think of how many units you can move between the hours of 5 and 7, right? They're coming for their dinner reservation, and their table's not ready yet. Where should they go? Into your store, okay? If you have that restaurant with dinner, don't close at 5, I beg of you.
Management One: Love that. I want to make sure we're mindful of time here, because, Paul, we want to discuss taxes before we run out of time here, and it's one of the things that retailers don't think about as often as they should. Obviously, they have to think about it when the year comes, but there's certain line items on those tax sheets that they probably haven't been looking at. So let's talk about year-end retail when you're going to be doing your taxes. What is… what are the things that they need to be looking at, and the pitfalls they're looking to avoid?
Paul Erickson: I'm not an accountant, and I think that we need to have a disclaimer that you need to work with… Excellent disclaim.
Management One: Yes.
Paul Erickson: advisor, and but I am going to talk about one thing that I have repeatedly heard from retailers over the decades, and this… the first time I heard this was I was very young retail consultant here in Minnesota, and I had a new client, and the son was taking over to take over the business from his dad. He was buying the business from his dad. The first meeting, the dad came in, great man named Don, and Don came in, and he goes, you know, the business, and this is in the 80s, Mel. Because the business is getting tougher right now, and so I need… my son needs help, and I'm glad we hired you, because I remember the good old days when I made so much money that I had to go to the bank Borrow money to pay the taxes on all the money I was making. Which seemed, at the time, Odd that you would borrow money to pay For taxes on money you're making. And we started hearing that over and over again. A retailer told me, he goes, you know, my partner, we ended our year, we saw we made $300,000 last year. And he goes, great, cut me a check for $150,000 on my half, I want to buy a Lexus. He goes, oh, and he laughed at him, the partner laughed, he goes, oh, no, no, no, he said, that's what we make on paper, we don't have that in cash, of course. Like, this is the way it's supposed to be. And so I started really looking into it, and started doing some calculations on very basic GAAP accounting principles of how… how does this happen? How is it that you can show paper profit and make… and pay a tax on it? And have no money in your bank account whatsoever, and it's as simple as this. Your beginning inventory is X, and if you end the year with X plus whatever, 10%, 20%, That delta between where you started the year in inventory and where you ended the year in inventory, the way gap accounting principles produce cost of goods sold, increases your profit, reduces your cost of goods sold, which thus increases your tax liability. And it's as simple as that. I have talked to accountants about this, and some of them get it, and some of them have a blind spot on this. They keep thinking, you're talking about an asset tax. Well, I go, no, I'm not. There's only about 12 states in the Union that can't… you have to pay an asset tax on inventory anyway, and it's like 1%. It's like nothing. What I'm talking about is, you need to know where you need to be at the end, in 4 weeks from now. If your… if your fiscal year is a calendar year, which the vast majority of Nico of our clients are. And because if you end the year with more inventory than last year, you better hope you've had a sales increase than mass that inventory increase, otherwise you're being overtaxed. The same token. If you do what Melody is saying, what you do what I've been saying, move now to get the inventory lower. you'll actually save money on taxes. You won't have to pay. Now, eventually, it'll all come out to the watch where you pay the right amount, but I find so many retailers that end the year with too much inventory, and it's all taxable. Why do you think that in the UK and Canada, they started Boxing Days on January… on December 26th? They don't do it on January 5th, they do it on December 26th, so they give the… we get people to come in the store before December 31st to reduce their inventory and reduce their tax liability. That's my point on on taxes, and it's… you can save more money doing that, if you… if you know how to do it, than anything else I think your accountant can tell you.
Melodie van der Baan: Paul, one more thing. Not only do you reduce your tax liability, you have more cash in bank for January shipments. Exactly.
Paul Erickson: Yeah, what'll happen initially when you do this, Mel, is that you'll reduce your… you'll reduce your profits. So you pay less taxes on your profits, but you'll have more cash in your bank account. That's essentially what happens. Now, at some point, it'll even out. Which it should, but you don't want… I've seen stores go for 2, 3, 4 years, pay hardly any taxes, and accumulate hundreds of thousands of dollars in cash. By just reducing their inventory at the end of the year.
Melodie van der Baan: So what we want you to do is move out the old, have money for the new, and have less tax liability. And that was really the long and short of this entire webinar, right, Nico?
Management One: Absolutely. A couple other levers that we have in there, too. We've spoken about this in the past, is do you have any planned expenses for the store? You know, do you have some new displays that you're looking to purchase? Do you have equipment in the back that you need to purchase? Make sure that you get that purchased before the 31st, so that you can use that as a write-off to help drop that taxable amount that you're looking at, too. I know that we've spoken on that one before in the past, Paul, and I really do appreciate your disclaimer. Paul is not an accountant. So please… Talk to your accountant first. I want to save a little time here, for Q&A. We have a couple, let's take this one quickly. Erica was asking about the sales training video. Erica, I just dropped a link in the answer section for you for that sales training video. Melody, Sergeant is asking, does Max Retail work for Canada, too?
Melodie van der Baan: I wish we were in Canada, but we are not quite yet. We are available for all 50 United States. We do have customers in Alaska and Hawaii that we support with their excess inventory, and don't you worry, we will eventually be in Canada, but we're not quite yet.
Management One: Love it. Also for Max Retail, does Max Retail deal with pet supplies?
Melodie van der Baan: Our primary categories are apparel, footwear, accessories, and handbags. We have been seeing a lot more sales in beauty, but pet supplies has not been a strength. Normally, we are selling on e-commerce sites and resale marketplaces, where there's end consumer demand for brand name merchandise. That's why it doesn't matter if it's past season, doesn't really matter how old it is, if you've heard of it, we can sell it. It just has to be light enough to put in a box and carry to the post office to send out.
Management One: Love that. There's a couple of other questions about very specific points of max retail, reach and fee structure, things like that. I'd love to put you in… contact directly with these folks, just so we don't spend a ton of time on Q&A. I'm happy to do that. One of them is from Doug Works, who we know and love. Happy to put you in contact with Doug, because he has some excellent retailers that he works with in the skate surfaceboard section.
Melodie van der Baan: Sure, just email melody, M-E-L-O-D-I-E, at maxretail.com, and I'll connect you with your team. But just the 10-second clarification on pricing, our goal is to help you get your wholesale cost back on past season inventory, and the way we do that is by helping you anonymously sell it online via retail and resale e-commerce sites, where there is consumer demand for the products that you couldn't sell yourself. We handle all payment and shipping logistics, and so we also create all your listings on your behalf, so there's really as easy as you tagging the items in your point of sale, Square, Lightspeed, and Shopify, and then we charge a 15% fee for that service and give you shipping labels provided to you at a discounted rate of $5.99 per order.
Management One: Love it. We got that one. Oh, here's one, okay. So, Reese is asking, how do I tell if something is a needs-help item versus just a true dud that will never recover?
Melodie van der Baan: I would say, have you seen any sales yet? How long has it been in store? What is your sell-through? Are you at 10% sell-through? 30%? 50%? If you're at, like, 30% or less sell-through, it's… it's gonna be a very at-risk item that you're gonna be looking at for a very long time. If you're at a 50% sell-through, you know, maybe you have a little bit more hope, but either way, I'd still focus on, you know, motivating Via price point, markdowns to get it out. If in doubt, just get it out, is how I would probably veer, like, there's winners, and then there's anything less than a winner, do we really want hanging around?
Management One: As Paul mentioned, it's all about time. And that's a good segue to our next question, kind of related. How often… Michael's asking, how often should I look at my sell-through during December to keep my buying decisions accurate? Is this a… is this a daily thing? Is this a weekly thing? Is it just at the midway point? What do you think a best practice would be, and how often they look at that sell-through by category?
Paul Erickson: Let me jump in real quick on that. So, December can be funky, and it's funky in the respect that so much of the business is downloaded the 5 days before Christmas. So, you need to kind of have you need to understand what the percentage of the first week should be in terms of sales, what the percentage of the second week should be of sales, and then that third week just before Christmas. Because if… if you're… if you're looking at… I do this with several clients, and the first week is usually about only 10 or 12% of the month. So you can't really look at poor sell-through the first week, because it really hasn't started yet. You know, you could have a store that we want to do $100,000, or a classification we want to do $100,000 in December, and you're out the first 7 days with $10,000, you think, I'm never going to make $100,000, when the reality is, if it's 10%, you're right on track. So, it's really important to know… to know those kind of weekly indexes on where you should be. That… that gives you a much more accurate trend on how the sales are going to end for the month.
Management One: Love that. Final question here. How far ahead, Brianna's asking, how far ahead should I start introducing spring or resort items so my floor doesn't look so empty after the holidays?
Paul Erickson: That's a melody question.
Management One: Yeah, we'll toss that to Melody. In your experience in Blessed Boutique, when… When is it okay to start introducing those next season items? Or, I guess, how far ahead?
Paul Erickson: And Melanie, you're here. You're muted.
Melodie van der Baan: Sorry, guys, there's this incredible Melanesian, gorgeous singing going on, but you wouldn't be able to hear about merchandising if that door was still open. I… I would say bring in, like I said, if you want to play it safe, just start bringing in at least the safe colors now. You're never going to go wrong with white, black, navy, right? You don't have to go full-on spring, but start getting out of the holiday colors sooner rather than later.
Management One: Love it. And for those that were looking to contact Melody directly, I did put your email directly in chat. If you are watching this later on in YouTube, we have it right down in the description underneath. All right. Well, I think a good recap for all of this is something that we've discussed multiple times in this session, and that is… Treating your slow-moving items as trapped cash in your business. How quickly, it doesn't matter if it's a markdown, if it's just another clever strategy to move it out of the store, how quickly can you turn that item into cash for next season? And that's something that we help our clients here with at Management One. It's something that Max Retail does a fantastic job with for retailers, and… I just want to thank Melody for joining us all the way from Fiji. We really do appreciate the insight, and thank you to Paul, as always, for lending your expert retail experience to the mix. We hope all of our retailers here have a wonderful holiday season. And we'll be here January 1st and beyond in 2026 to help you move even more items and discuss some of the strategies for Q1 as well. Thank you, folks.