The Retail Dilemma: Balancing Instinct and Evidence
Instinct without evidence is a guess.
Evidence without instinct is a spreadsheet.
The independent retailers who thrive year after year know that neither approach wins alone and that the real edge lives in the space between them. Often, overconfidence can cause some of the most expensive mistakes!
Join us for a candid, live conversation with our experienced coaches from Retail Foundations as we unpack the moments where instinct and evidence have to work together: the buying decisions, the cash flow calls, the inventory bets, and the quiet 3 AM questions every owner-operator wrestles with.
In this session, we will:
Unpack what coaches see in the most confident retailers they work with.
Explain the patterns that separate retailers who grow with calm from the ones who grow with chaos.
Identify the small shifts that turn a sharp eye into a sustainable business.
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Balancing Instinct and Evidence: Retail Foundations Webinar Transcript
Management One: Also including some live Q&A at the end. So that brings me to our first point there, right down at the bottom of Zoom, we've got our Q&A button there. Please use that to submit your questions at any time, and we'll open up the floor for questions at the end. One thing I get a lot of is, are you recording this? Absolutely, yes, we are recording this, and we will be sending out a recording to all of you after the fact. So let me turn it over to our esteemed retail expert, Mr. Dane Cohen.
Dane: Thank you. Okay, we are excited to be here. As he said, we kind of have an interesting twist on our webinar and digital events series. So we've heard from you guys and we have the demand for education is there, so we're going to be bringing you more digital events and webinars coming up, and we're starting with a really exciting one. As you can see, we're talking about balancing instinct and evidence, and why this is so cool today is because we're going to be meeting with three of our retail foundations and planning coaches so that you can actually hear what's going on on the front lines with retailers, right? So we talk about things sometimes big picture, and now you are getting the first hand account from 3 of our most engaging and exciting retail expert coaches. So real quick, I just want to introduce and kind of the reason for this, how this webinar came to be is because Scott, Melanie, and Fiona are all part of our retail foundations program. So our Retail Foundations program, it's newly launched, very exciting. We'll share with you some more about it at the end, but it's going to be our one-on-one customized coaching program, all based on learning the real foundation and roots of building a profitable retail business. So we thought we'd invite Fiona Horgan, Melanie Melton and Scott Smith, again, three of my personal favorite people to talk shop with. And we're going to dig in to what actually happens when they first start working with a retailer. So, guys, thank you so much for being here today.
Scott: Thanks for having us.
Fiona: Thanks, Dane. Great to be here.
Melanie: Yeah, thank you, Dane.
Dane: Okay, so we have a lot to get through, so I'm going to jump right in. We're going to do this kind of in a question format. So I'm going to ask you guys some questions. Fill me in on what you see when you're working with clients. We want the inside scoop and your mentality, and by the way, anybody watching, please feel free to ask a question at any time. I'm very good at reading the questions. I'll throw them in there if they, make sense in the moment. If not, we'll bring it back around in the end, and of course, we will save time in the end, for formal Q&A, but do not hesitate. We want you interacting. This is your time to talk directly with our esteemed coaches. So let's jump in. Instinct without evidence is a guess. Evidence without instinct is a spreadsheet. So the theme of this conversation is really going to be, how does a retailer balance that gut instinct that obviously that passion, that understanding of product and their customer that, you know, kind of propelled them to launch a successful business versus the data that they need to actually grow and scale, right? And sometimes those things conflict, but more often than not they can only help each other and kind of blend together in what, again, will help a business grow and scale. So I'm going to jump in with question number one, Fiona, I'm going to kick it off with you. When a retailer sits down with you for the first time, what are the most common pain points that come to you when you start working with a new retailer?
Fiona: Yeah, this is a great question, and something I think, you know, a lot of people feel. I think often people are… they're overwhelmed, usually, because retailers are wearing so many hats, and so sometimes they don't know where to focus first to get the biggest bang for their buck, or what's going to move the needle. And the other thing I see a lot is our cash flow woes, cash flow stress. And so understanding how they can impact that in a positive way is often a challenge for them. Those are the two things that come to mind, but I'm going to pass it on to Mel and Scott. See what you guys think.
Scott: Yeah, absolutely agree with you. I think that you know the biggest overwhelming thing is getting up every morning and not knowing how you're going to be able to pay the bills and pay your staff. And I think that we, you know a lot of retailers that we 1st meet have that struggle, and I think that that's a you know that's really overbearing, and it's hard to think through and strategize on anything else when you're looking at how you're going to find those dollars to do… to do what you need to do.
Dane: That's a great point, Scott. And Melanie, anything that you really kind of you just know that you could feel when you start working with someone that usually is going to come up as that initial pain point?
Melanie: Yeah, most, I mean, kind of mirroring what Fiona and Scott said, similar pain points that come up with my clients recently and with some new client meetings. The most frequently I'm hearing I just need to get a handle on my numbers. They've got every other part of the business figured out, and like Fiona said, we're wearing so many hats. It's hard, and you may carve out time to sit down in your office and actually have quiet time to look over the numbers, and then someone calls in sick or some catastrophe happens and you're out on the floor. So we've been there. So guidance on numbers and I oftentimes hear I need to get my inventory under control. So
Dane: Yeah, and Melanie, you are a store owner. You had your own retail business.
Melanie: I was a store owner and it's right behind me, my former boutique. So yeah, I was a store owner and a client of Management One.
Dane: So you know this intimately. There are two things I just want to call out here. And that idea of where do I get my biggest bang for my buck? Because when a retailer feels overwhelmed, right, there are so many directions that they can go in for help, right? There's marketing, there's, you know, e-com, there's inventory. So I hear that anxiety all the time. Like, I have a limited budget to spend. Where am I going to put my focus and attention? And then, you know, Scott, what you said, and I just want to kind of, you know, reiterate this as someone who is a retailer myself. There is, I mean, this is deeply personal, right? This is not just business. This is your livelihood. This is, you know, your employees that work for you. It's not just about paying the bills, it's about building your future and your building your employees and connecting with the community. So these are all really great things to think about. And before we move on to question two, I know we have a poll. So, Nico, let's put this up. I just want to get a little bit of a sense of where your guys' heads out there watching right now. So, Nico, we're going to put up that poll and the question we're going to ask you right now is how do you make most of your buying decisions? So take a minute, answer this poll. We think it's going to help inform the conversation and we already see some answers coming in. Okay, how do you make most of your buying decisions? Oh, guys, I think you're going to be really happy. So far, I let my sales determine my decisions.
Scott: Overwhelming favorite so far.
Dane: Overwhelming favorite. Okay, mostly by instinct. We have some instinct. I buy what's hot at market. We have one vote there, which is, hey, that's really important, right? We got to know what the hot stuff is, but yes, it seems that I let my sales determine my decisions. Guys, let's make a mental note of that. I'm gonna come back to that in some of our future questions, but let's move on to number 2. Okay? You're working with a client, they told you their pain points. Now you get into their point of sale. Scott, what are you usually seeing? I know that you… Scott Smith has a extensive point of sales. There is no one that knows point of sales better than Scott Smith. So, Scott, what are you usually seeing when you look under that hood?
Scott: Yeah, oh, Dane, like if, man, I gotta say, like, in the years, I spent many, many years, and please don't virtually stone me out there. I was a provider of point of sale systems for about 17 years. Felt really weird when I left retail and went to the other side of the table and got a ton of hate from people along the way. But I'll tell you what, like I was really blown away, in those years that people were really underutilizing those systems. So, I'm going to say that, you know, when I look under the hood. It's usually what I'm expecting is a bunch of cobwebs that the hood is not actually being looked under. You know, and it's really… it's such an underutilized tool. Yes, ringing in sales, yes, bringing in product, but really getting… drilling down and understanding the dynamics of what's selling and what's not selling, and just so underutilized. So, a lot of times, I will see, and here's where I am real… feel really guilty as a POS provider, I did not give enough support to my retailers to build their classification structure. So when you look under the hood, you often see a class structure that really can't help you steer your business. That is a really kind of big and you know I look back and I say to every retailer that I work with these days, spend some money and spend time in training with your POS provider and learn how to put this program to its best use. And that is creating a very good class structure for sure.
Dane: I've still got the stars. Yeah, well, thanks for the, that was good introspection in your time there as a training. Mel, what about you? Yeah, that's where it starts. What about you, Mel?
Melanie: Definitely underused capabilities for sure. Not fully understanding all the reporting capabilities that exist within point of sale systems. Obviously, some are better than others, but yeah, just kind of knowing where to look for different pieces of information, and then lack of categorization, I would say, is a big one, like Scott said, that I see often or either lack thereof, or it too broad or too specific or you know it's just something they've never done before. And then I would definitely say inventory that doesn't actually exist is a common issue. So whether it is tickets they sold for an event two years ago, and they still have, you know, $15,000 worth of tickets in their inventory or inventory they donated and just forgot to remove or maybe they've never done a physical inventory before. So a lot of times that's a big thing we try and tackle right off the bat. We got to know really truly how much inventory we're working with. So
Dane: Yeah. And then so category structure came up a bit. So Fiona, I'm going to ask you, I want your opinion on what you're seeing under the hood, but then I'm going to transition this and have you kind of start with question number 3 with category structure, but is there anything from a POS standpoint that you often see when you first start checking it out?
Fiona: I'm going to echo what Melanie of Scott have said. I think a lot of POS systems don't do a good enough job onboarding their people onto the POS system and what the true capabilities are and how to set it up properly. Because when you do that, it's a gold mine of information. Excuse me. And I agree with Mel. I think the right inventory is a big one. And then the categorization like that is the engine in a way of your system and the reporting. And if that is poorly done or things are in the wrong category, you're going to get bad information. When you make decisions. I'm just going to take a second and take a drink, if you don't mind.
Dane: Go for it. Yeah, you got it. So, you know, that leads us into kind of this third question, right? And I get this all the time. You know, I'm lucky enough that I get to sit down with hundreds of retailers a month. And one of the things that I get to do is I get to look inside their POS with them. I get like a sneak peek, right? You guys are going in deeper, but I get a little sneak peek and oftentimes, I am amazed, maybe not in the best way, at what a category structure looks like or I rather, how much is uncategorized, right? You see inventory levels by category, and it will be like, oh, there's $10,000 in dresses and, you know, $6,000 in skirts, and $300,000 in uncategorized, right? So, what does a retailer's… what does that tell you about a retailer and what changes when they get it right? Scott?
Scott: Yeah, you know, I kind of like in the getting a class structure right to, you know, putting a set of reading glasses on for the first time, and actually seeing the words on the page, and, you know, making sense to you. You know, it's… we've got so much as retailers so much noise, and I think a lot of us, shy away from reports and from analytics, because there's too much there, right? So getting your class structure right becomes the foundation of making decisions, because you've narrowed down your focus. Right? You've narrowed it down to why is this person coming into my store? Is he coming in to buy a shirt? Is she coming in to buy a dress? And then from there, I can start to properly analyze. Instead of, like, is it about a color? Is it about a size? Is it about a style? Is it about a vendor? Is it a… like, no, let's start with the simplest point, why do they walk into our store. Right? And then I think when you really kind of lock in to a sensible class structure, you start to make sense out of your business.
Dane: Yeah. And it's like the age old saying that the best customer feedback is from their wallet, right? So when you start to track this and you understand where their money is being spent, you could better service your customers, right? You know, Fiona, Melanie, if you have any kind of insights into, you know how you really try to… because this is the retail foundation's webinar, right? This is one of the most essential foundations of a retail business. So. When you're approaching this, you know, kind of looking at a category structure, recategorizing data, making sure it's right in the POS so reporting can be used correctly, you know, what's your mentality when you go into that? How are you approaching this?
Melanie: Yeah, I want to know what their store looks like, first of all, I had a client, a children's store that I was doing a reclassification for. She had been with us for a long time and her business had evolved and I said, look, maybe this structure isn't mirroring how you think about your business right now. Maybe we should maybe we should shift some things around. And so we did some digging. I had her send me a video of her store and we realized, well, I realized pretty quickly, all of her baby stuff is in one section of the store, all everything baby, baby toys, baby accessories, feeders, teethers, apparel all together, which makes sense, right? But in her plan, baby was scattered in different departments, so we had baby toys under toys. We had baby accessories under accessories, we had baby apparel singled out, I thought, well, what if we put it all together and see how the magic happens with all things baby because her metrics are really good in baby. And she said this is the baby section's kind of this add-on portion of my space that I have actually, I expanded and I added on rent. So I said, okay, so now we have like our own, like another little baby store here on the side. We should treat it as such. So we combined all the baby together and I asked her for, okay, what portion of your rent is going to that section of your store? And we were able to really sit down and strategize what her plan should look like going forward and I can just see the excitement in retailers when they feel like it's mirroring how… what they're looking at every day, because we're not in your business every day, you're in your business every day. But I want it all to… it all has to work. And so it's not just about how you're buying at market, but how you're merchandising. And a good class structure and tracking data through a good class structure will help so much with merchandising. I can't tell you how many times I would get off of my monthly management one meeting with my consultant back when I had my store and it would guide me on so many different things. One of the first things I would do after that call is go walk my floor and take a look at my merchandising because if I you know if I'm being told, hey, dresses are down, we've got an issue with dresses. I'm looking at the dresses on the floor and figuring out what the problem is. Maybe it is merchandising. Maybe we need to do something different with dresses. So it guides your store layout quite a bit as well.
Dane: Yes. Yeah, you can't grow what you don't know. There we go. Fiona, any final thoughts on category structure?
Fiona: I'm going to echo both Scott and Melanie, and I'm just going to add, you know, often when we start with a new client, we do typically have to do some class restructuring and, you know, I kind of have always lived by a philosophy, you're going to do the work no matter what, so you may as well do it up front, setting yourself up to succeed rather than on the back end correcting problems. And when you do it up front, then you're not feeding the system garbage. You're feeding the system really great intelligence to make really great decisions. I'm going to echo Melanie when retailers come to us and we revise their class structure and they start to see the power of it, it's unbelievable the excitement. I have just a client recently, she said now she knows exactly what I'm just going to read verbatim what she needs to be ordering for each category. She's no longer guessing, and she's increased her sales by 25%. That's a that's a true number. The other thing I'll say, though, is that your class structure is the framework and and this is where, you know, spreadsheet versus gut comes in because you still have to build the assortment within that framework. You still have to know what your customer likes. And but this guides you to investing the dollars in the right area. And instead of over-investing in an area that is not going to perform for you.
Dane: Absolutely. I love that baby visual, by the way. Okay, number four, and we're going to get a little rapid fire here. When you ask a retailer to tell you exactly what they own in inventory, we all get this one. Why is it so often such a hard question to answer, right? You would think that's where all your cash is sitting. Why is that such a hard question to wrap your head around? Scott, what do you see there?
Scott: Yeah, I think again, it's really, you know, there's so much noise, there's so much going on for the retailer in terms of, you know, like their vendors and their supply and their sizes, et cetera, et cetera, that they just don't have a true understanding. The bigger point, though, Dane, I think, is that knowing what you own relative to what you should own. Right? Like, I honestly think in the years that I was working as a retailer, the years that I run stores, I had no idea what the right number was. You know, and so like I would look at the volume of the store. Melanie, you were talking about the store aesthetic itself and in many, many occasions I've found the store aesthetic, the store square footage without a proper plan and direction is one of the one of the biggest misconceptions and the ways you can really run out of money. Like, because I would look at the store and say, I'm in good shape when my stores look like this. Right? But I was out to lunch like I had no idea. I just wanted the stores to look really good because I thought people would buy stuff, right? Like, it was just… I needed to be, you know, like, when we understood how how that stock was relative to what we needed to flow, that's a different story.
Dane: 100%. Yeah, Fiona, do you see this often that on-hand inventory tends to be this like forgotten metric. And that's why, right, and why let's go back to that poll when people say, I let my sales just guide my buying decisions. Well, there's also the other end of it that that's how much inventory you have and how much have you received there? So sales are only a fraction of the equation.
Fiona: It's a part of it for sure, but not the end of it. It's like putting the pieces of a puzzle together. You need to understand the sales, but you also need to flow it in such a way that you're bringing in that constant newness, especially today. That's what customers expect to see. And the other thing I'll say is that oftentimes you know, as buyers, we're focused, you know, we need to know the cost because of what we're spending, because that impacts our cash flow, but at the end of the day, the retailer is not buying costs, sorry, the customer's not buying costs, they're buying retail. So you need to understand the retail value of the inventory relative to what you're going to sell as well, and there are benchmark metrics on what's a healthy average inventory for your sales. By vertical.
Dane: Yeah. And Mel, I'm going to, by vertical, exactly. By vertical and benchmarking is really important. So shout out to our Shopify app if we have any Shopify users here, because there's some incredible benchmarking, and there's my favorite report on the free Shopify app, which is an inventory balance report, where you could see how much inventory you have as a percentage and versus how much sales you're doing in a category by percentage. But Mel, we have a question from our viewers. This is from Julie. Julie asks, great question, can there be too many categories in your class structure? I want to make it organized, but not so many that there are so many small questions. Mel, could you take this one?
Melanie: Absolutely. And, you know, from a planning standpoint, we don't want too many tiny classes to be on your plan for many different reasons. I think as a buyer, it's too overwhelming. Like, when you go to market, you have to have a really good plan in place that's not going to overwhelm you, and is actionable and allows you to find new vendors, try some new things. I feel like if we get too in the weeds, it paralyzes us a little bit. Also, from a planning perspective, if we are going to plan too many small categories, we're always going to want to plan you for growth. And oftentimes if we have too many small classes, it can inflate your overall annual rate of your merchandise plan and of your sales expectation. So I think we need to see it's a recipe for your business, the class structure. And so we can have too many ingredients for sure. So we have to get it right, so yes, I see that, I definitely see that a lot.
Dane: Okay, we're going to move on to question five. And Fiona, I'm going to have you start with this because if there is one person I know that is organized as can be, it is Fiona. So, okay, you sit down with a retailer, you set those goals for the first 90 days, how do you kind of make sure that you're not just creating some pie-in-the-sky wish list, but you're actually creating a plan that they can follow and stick to? Because like Scott said, retailers have 700,000 things going on in one time and it could get overwhelming real fast. So how do you balance that, you know, kind of wish list versus actual benchmarks and goals they can hit?
Fiona: Sure, it's a great question. I think, you know, obviously when we're sitting down, we're doing a review of the business and understanding not just where the pain points are for the retailer, but also what are their metrics look like and what are the biggest things that gonna get us the biggest bang for the buck. Fundamentally, though, we want to make sure that the foundations are there. So we're going to build out a plan that's got or a 90-day goal that's got some key milestones on what needs to be done first, because there is a methodology to it. You know you need to, we've talked a lot about class structure. You need to make sure that's in place and before you do anything else, because… and that your POS system is is properly categorized and clean. Otherwise, you're just not going to make good decisions. And then, you know, you want to make sure that whatever you're setting, you're collaborating with the retailer so that it's, so everybody's on the same page, understands the why behind it, why it's important and you've got their buy-in on it, and it's going to move the needle forward. It's going to move forward. There's a lot of things that people want to do, but you can't really market. I'm going to say, until you've got the product right. You can't really get the product right until you've got your class structure and the plan right. So there is a right order of things to do, I'll say.
Dane: Yeah, I think that's really important. Like one step unlocks the other. And I think sometimes we want to go ahead and this is why foundations of your business is so critical. Because you're right, you can't go spending a ton on marketing when you don't even know what's selling in your business, right? How are you going to guide that marketing? How are you going to guide digital advertising and ad spend, if you don't know what your drive, what's driving your business. Okay, I'm going to move on to question six and that is, okay, this is a big one. Scott, maybe you'll you'll take this for the for the start here margin. one of the most misunderstood metrics in retail. I talk about this all the time. I think this goes back to making decisions based on sales. But we could spend the rest of the session talking about this but how can a retailer really understand the differences between your initial markup, your maintain markup, which is your gross margin, and then what management one really focuses on, which is cash margin. How could we just grapple with that at a 30,000 foot view?
Scott: Yeah, Melody, great question. And you know what? I think that margin, the misunderstanding of margin to me when I think about this question, the first thing that comes to mind is the misunderstanding of its context in the business. Like because again, going back to my retail days, I was in outdoor retail running outdoor retail stores and we were obsessed with the initial margin. Like, what can we get this good for? So obsessed that we might say that vendor is going to offer us a 5% discount, so we better get on to that and buy those goods 6 or 8 months in advance and buy as much as we possibly can, because we're going to get a 5% discount. The misunderstanding is that margin is only as good as selling product. Right? And and so so I think the biggest, you know, the biggest kind of aha moment I had back as a retailer was like, holy crap, you know, like, I got great margins on all of this stock, but it's still in the store, and it's doing me no good. You know, that… that's really the part that I find, and that's why I think we at Management One love the cash margin concept right cash margin simply being the difference between what you sell and what you brought in at cost. What money is left over in the time that you're looking at. You know, that's when, you know, an actual margin starts to make sense in paying bills and looking after after rent and getting all your stuff looked after.
Dane: Oh yeah, there's nothing I love more with, you know, a retailer that kind of comes in with the approach of, well, I don't take that many markdowns, so my margin' healthy. And I go. Can you pay yourself a paycheck? You know, like, that's right at the end of the day, you can't take margin to the bank. All right, Mel, let's go to question seven. Oh, this is a good one. Okay. You're opening up a retailer's P&L. You're looking at their balance sheet, which I think are sometimes underutilized tools in a retailer's business. But what is a red flag, like, what catches your eyes in the first 30 seconds when you look at this P&L? What's a red flag for you?
Melanie: Yeah, when I'm looking at a retailer's P&L for the first time, my eyes immediately go to their cost of goods sold. So I want to know kind of piggybacking off the last question, gross margin is great. It tells you how profitable the goods sold that you sold were after all your markdowns, but cash margin is really what's important. That accounts for the unsold inventory. The inventory you've purchased but is still sitting on the floor. So I really want to know, you know, what did we sell last year and what did we buy? How much money is left over to cover your expenses? Is it a healthy amount or an unhealthy amount? Where can we make some changes? So that's usually the first place that I go. And then the big ones, rent and payroll to see what percentage of sales their rent and payroll are taking up because those are usually the two highest items and expenses.
Dane: Yeah, and then Fiona, any, you know, I think this is also one that's kind of lost in conversations that I had. The difference between, you know, when you're looking at a P&L, the difference between fixed and variable expenses. You know, yeah, can you tackle that?
Fiona: Sure. So fixed expenses, you don't control those and they're things like rent. You've got to pay your rent and that's it. Variable expenses, you completely control those. So how much you spend on marketing or how much you spend on your labor costs that's within your control and you want to make sure that your overall expenses are, you know, a decent percentage of your sales, usually around the 40-45% mark. And then, you know, looking where if they're above that, looking where you can contain them. And there's, you, at the end of the day, it's a percent of sales, so either you drive your sales up or contain your expenses, or you do some and some.
Dane: Right, and those variable expenses, as you grow, those variable expenses can grow. That's not a bad thing because you're also then covering your fixed expenses with more sales. So, you know, I often see that like it's actually healthy for variable expenses to grow sometimes because it's growing with your sales. I do want to ask, we're gonna… I'm going to throw in a little bonus question and get your guys' opinions on. We asked some of the pain points of retailers when they first come to you. Is there anything you're seeing today, you know, May 2026, is there anything you're seeing that's kind of unique to this moment, when you're dealing with retailers? And I know I'm throwing this on the spot, but, you know, anything that, you know, we, of course, we have had a lot of ups and downs, in the in the overall scheme of everything from the economy to retail, is there anything that you're seeing specific to now?
Scott: I definitely, something like specific to our environments at the moment would be the sneaky increases in the cost of goods that people's margins, you know, tariffs and things that are coming in that, you people are not as aware of those things adding up, that they're… that they end up getting a little bit surprised by the fact that in this last 12 or 18 months, you know, it really… I have really seen a difference in, you know, the the margins that are being achieved from the suppliers for sure.
Dane: Okay, very cool. Let's go on to question 8. Alright, we're gonna… this is a lightning round. Okay, if a retailer could only track 3 metrics starting today, which ones would you tell them to zero in on? Mel.
Melanie: I got to go with monthly sales, monthly net sales, inventory on hand at retail and gross margin.
Dane: Love to hear it. Scott.
Scott: I'm going to go with cash margin as a percentage and as a dollar figure, knowing how much money you're pulling out from your goods. I'm going to say that I want you to go back to your financials and know what your expenses are as a percentage of your sales as well, so you can compare the two together. And I want you to be obsessed with turn rate. I want you to just live to get good turns out of your business.
Dane: And Fiona.
Fiona: I'm… I had cash margin as well is super important to the health of your ability to pay your bills. Expenses as a percentage of your sales. And if I'm looking at things on a monthly basis, I'm definitely looking at my sales a vis-a-vis plan vis-a-vis comp and my inventory vis-a-vis plan and comp, making sure that I'm turning the goods.
Dane: Amen. And then I'll just add one on top of this. It's not just the three metrics, it's that you consistently look at them. So you're tracking whether they're up and down. You can't just look at it once, just viewing it once is not doing it. You gotta see how the things you're doing in your business impact that. Great question. I do want to… we have a question, not a question. Rita. Hi, Rita, we're big fans of Rita Phillips here. Rita says, shipping cost is also a big red flag in the P&L that's having a lot of effects. So I often get this, right? Some retailers look at shipping costs baked into the cost of goods. Some retailers are viewing it as a variable expense. So, just can we quickly touch on shipping costs and the rise in shipping costs specifically?
Melanie: The silent killer is really, I like I like seeing the freight end costs from vendors in with cost of goods. I think it's really important to monitor that and yeah, absolutely, it's the costs are on the rise for sure.
Fiona: I agree with Mel. I think that you know whatever costs that you have to pay to get the goods to your store is part of cost of goods, or else the goods don't arrive in your store. And that's usually typically how I look at it. So, if you're importing goods, you've got to factor in the duty exchange any brokerage fees that you're paying as well, and any shipping costs. I think you've got to factor them into the cost of goods.
Melanie: And think about it when you're pricing your goods too. The first price you pick when that item hits the shelf, factor those costs in as well.
Scott: If your system has the ability to spread those costs in, and you can get that inside your POS system, it's a game changing number to have internal so you can really measure it.
Dane: Great. goes back to that getting the training on your point of sale. And Nico just put in the chat, we did just release a podcast, sorry, a blog post regarding shipping fees and how they can sneak in and really impact your business. So it's in the chat. By the way, we're going to move on to question nine. But audience, keep questions coming, throw them out there. This is your chance to, you know, kind of get what's on your mind and answered by our coaches. So I just want to make sure I'm not missing any questions. Oh, we do have some questions. Oh, wow, there we go. Okay, we're gonna go through these quickly. Do you have any experience working with retailers, e-commerce? Okay, do you have any experience working with retailers that can only pre-order inventory once a twice a year. Yes. Especially when most inventory models upgrade every two years. Does your software help with this type of retail inventory planning and purchasing decisions? Winner, winner, chicken dinner, of course. I'll take this one, guys. Yeah, I mean, the whole concept behind inventory planning with management one really revolved around the ability to forecast your business right so that when you're placing pre-bookings, you can have a sense of the right amount of inventory, when to land it, and forecasting the future of your business so that you can make decisions in the now. Really, the kind of modern retail phenomenon of ordering so close to season and in-season that is actually more on a you know, more of a recent development, and then especially, you know, going into COVID, but yeah, of course, yes, I will say that is kind of the ethos of what we are accomplishing with our clients. Next question, how much margin product, you have to sell for it to even matter and move the needle? And is it a trap? So I'm gonna guess that that is high margin product. We're talking about deep margin, high margin product, so is that a trap, Scott? A high margin product?
Scott: Absolutely, absolutely high-margin products are trap if you can't sell it. It's also a beautiful, fabulous thing when you can have get sell through from it as well. You've got to be testing. You want to test those kind of products. You want to see if they're validated in your business getting those kind of initial markups is a really, really required thing these days. Our expenses are all going up, you know, like we see that the back end of our business costing more. You've got to have that in there. But like we said earlier, it's only good if it sells. So hey, look at your classifications. Look at what your business can handle. Absolutely test high margin goods in your inventory assortment. If it tests well, go deep.
Dane: Okay, thank you. Yeah, and I'll just give you a rule of thumb there and then Fiona, I'll let you jump in. High margin product should also be high turn product, right? Yeah, so that's just like an easy rule of thumb. You're getting it in there at high margins that you could be buying it at a great wholesale price, you know, getting that great markup and churning it in your business. So, Fiona, what's your take there?
Fiona: I was going to agree. I also would say that at the end of the day, you have to look at the product and determine the value to the consumer and work backwards. And at the end of the day, you know, if you have some high margin product and some lower margin product, you're going to average out to a margin that's healthy for the category. So my first rule of thumb would be is to look at the value of the product to the consumer, work backwards. If you get a great margin on it, terrific. As long as the value's there to the consumer, and then… and the consumer will tell you right away, if you've overpriced it or not. Because they're pretty savvy on value.
Dane: Yeah. And then on the flip side of high margin product, if you have low margin product in your store, it better be driving people through your front door, right? That needs to be, you know, it's kind of like the Stanley water bottle phenomenon, right? You need that brand no matter what margin you're getting, you need it to get people through the door, so high margin, better have high turn, low margin better be getting people through that front door. Okay, one more. Okay, Mel, I'm going to give this one to you. It's basically someone talking about their changing their point of sale system, their point-of-sale system is sunsetting in a few years, and there was some shock over the pricing on Shopify and other point-of-sale systems they're looking at. Can a change in point-of-sale system really bring ROI and increase sales? Or am I just going to get stuck with this more expensive system?
Melanie: Yes. I mean, this sounds like a great question for Scott, but I will say, I mean, I think my perspective on it is do your research, spend time with it, ask a bunch of questions, ask about reporting capabilities and really get somebody who's not just going to check the box, make the sale, move on. I'd ask about support. How available is support? Is support included in the monthly fee? I, you know, I… when I was, I had to shop for a new point of sale with my store because I had started out with Retail Pro, and that version was going away. And in order to upgrade to the new version, they wanted like $15,000, like right then and there to upgrade, and I was like, well, I can't do that. So I started shopping around and ended up with one that was just a monthly subscription, cloud-based, a lot easier and had really good reporting capabilities. So I think you can land somewhere really good, but you just got to be cautious when you're talking to the sales reps.
Scott: Yeah. Remember to remember that it's a great opportunity for the person calling in. This is, if you're not utilizing your reports particularly well right now, and this little jump makes you look at a new system and look at the reports you're going to potentially 10x your ability to become a better retailer, a stronger retailer, make money in the future because the most underutilized part of every POS system are the reports. Look for a system that is that you think is going to be easy to work with on the reporting side. And we're happy to help in the back end there as well. We've got lots of information that we can kind of help you with that.
Dane: Yeah, and also make sure the point of sale system you choose aligns with your goals, right? So if your goal is to really grow your e-commerce business, Shopify could be a great choice for you. That's really going to have your ROI. If your goal is to allocate and have a 3PL that you're going to be working with, then that may be another point of sale that's going to be a better fit for you. So it needs to align with the goals you have in your business. Okay, coaches, we got 15 minutes. So we're on question nine. We're going to go. I'm going to ask one of you for each. We have three more questions left. So what are the costs that most retailers miss when building their operating expense budget? I think shipping was one that we were just talking about. Fiona, anything else? A cost that retailers miss.
Fiona: Debt repayments.
Dane: Yeah. Oh, that's a good one. Absolutely. That's a good one. And that is something that Fiona, when you're working with a client, a planning client, that's something that you're factoring in.
Fiona: 100%. I bill them out of cash flow and I have lines, you know, I understand what their debt situation is. And we build a plan on how long it's going to take to build out that to pay off that debt every single month. We know what we're spending on that.
Dane: Awesome. Okay, and then question 10, we're going to jump into markdowns. The theme is markdowns, friend or foe. Mel or Scott, I'll let you fight it out for this one, but what are the most common misconceptions you see when speaking to retailers on markdowns. We've touched on them a little bit, but anyone have a strong, go ahead, Mel.
Melanie: Yeah. I hear it all the time. I don't want to be seen as a sales store. I don't want to be seen as a store that's always on sale. I've even heard people say that I won't have a sail rack in my store. I just won't. I won't have anything discounted in my store. And I think if everyone could be a perfect buyer, there'd be a lot more people wanting to work in retail. So it's markdowns are key. They're important. If you take them at the right time and you're strategic, you will not be seen as a sales store. It's the stores that don't take them and let their inventory pile up until one day they need to pay their vendors for the next season's goods, and they don't have any money. So they look to their biggest asset, which is sitting out on their floor, and they have to do a massive store-wide, big end of season clear out. And I really stress with my clients, it's if you can take that first markdown in season, you will sell the goods so quickly. Take an aggressive markdown first, get it out, get it out in season. Don't be trying to sell chunky sweaters in the middle of July.
Dane: Pennies on the dollar, right? Please. You're going to be selling those for $1, for pennies. You're going to be asking your customers to please take them away from me. So yeah. Okay, here's a good question from the audience. Any thoughts on conflicts between Markdowns and vendor minimum advertised pricing? I'll just weigh in quickly. There's ways around it.
Melanie: Yes, yeah.
Dane: There's ways around it, let's get creative, people!
Scott: Remember, this is being recorded, Dane.
Dane: I know, careful. Oh, yeah, okay. Vendors don't come for me, but Scott, anything there real quick?
Scott: Yeah, you know, like, we deal with this all the time and it being creative for sure, being in store, adding value with the promotion, be creative. But I think our advice would be the event… be respectful to your vendor, you've… the vendor has to have a win as well, right? So your customer, you and the vendor all need to win in this relationship. But don't let them dictate what you need to do in your business. And be creative about it. Also too, don't feel that you're a failure as a buyer if you're taking markdowns. It is a required strategy. You know, so make sure that you're… that think of yourself as a strategist, rather than something that went wrong, you know, in when you're taking those markdowns.
Dane: Yeah, much more diplomatic answer there, Scott. So thank you for that. Okay, I need all of you to answer this one. What does 30 minutes on the first Monday of every month actually look like for a retailer who runs their business by the numbers? I'm just going to do a little sneak peek, because whenever I give a demo of management one in our reporting, I always say your inventory action report is your Monday morning report. So what what does what does this look like for you, Fiona.
Fiona: You know, as a retailer, I'm looking at top line key metrics first. So the sales this year, last year plan, and then I'm going to the inventory reports and I'm looking at, so the inventory action's a good one, I'm looking at, you know, what's sold, what's the on hand, what do I need to do becomes my next action step. Do I need to reorder? Do I need to advance orders, do I need to remerchandise? Do I need to market? Do I need to mark down? That becomes my action based on how the month transpired. And I would argue that you want to look at that almost every week as a former retailer, Monday morning, like, the vendors knew never to call us on Monday mornings, because we were looking at our numbers, and we were looking at how things sold over the week, and did we need to action anything?
Dane: Okay, Scott, what's your take? Quick here.
Scott: Yeah, real quick, I would say reflection, detection, and correction. And do you have a report.
Dane: Yeah, I like that. Spot on. Oh, wait, wait, wait, wait, wait. We need to slow down for that one. Say that one more time. Preach, Scott. Say that one more time.
Scott: So, you've got… so, do you have something in front of you on Monday that allows you to reflect on how you've done, detect the issues that you need to work on and then make your corrections.
Dane: Yep, love it. Love that. Reflection.
Scott: Well said.
Dane: Detection.
Scott: Correct.
Dane: Correction.
Scott: You got, she said correction. Nico, put that on a t-shirt. I love that.
Dane: I'm getting t-shirts made. Yeah, there you go. Oh, that looks good. Look at that. Mel, what about you?
Melanie: Yeah, I love that. So I'd say it's a good reset moment, reflection moment. I would spend that time looking back on my previous month, and I would be looking at stock to sales ratio for my categories. So wow, I sold over half my tops last month, and I sold a fifth of my dresses. What's… what's, what's happening here? So that's usually my go-to metric that I'm looking at, just for kind of a overall performance for the month.
Dane: Yeah, and if you don't know where to start, anybody on here with Shopify, I highly recommend you download our new free Shopify app. And a lot of this information could be a good way to start. Obviously, it doesn't have some of the forecasting and the actual inventory plans, but it is a heck of a tool if you want to start monitoring that Monday morning business. Okay, last question, and then we have some questions from the audience. So, audience, please retailers out there, this is your last minute to get your questions in. We have one that we're going to get to. So this is just kind of a fun one. I think we could all know that this is a little bit, sarcastic, but what is a bigger issue in a retailer's business? Is it slow traffic, bad weather, or the economy. I'll take this one first. I think what I've learned today, right, and speaking to all of you, is every business is so unique and usually the issues that are going on in your business is not what's on the outside. It's what's happening right inside from your point of sale to your category structure, to the way that you're viewing your reports. So if you actually take some time to reflect, to detect, and to correct that bad weather and that slow traffic and the economy, you'll probably find are less impacting your business than jumping in. So, okay, ready. We are going to ask… answer some questions from the audience. So I'm a Management One client. Where do I find the new Shopify app that you mentioned? Well, Shannon. Just go right into the Shopify app marketplace. You can either type in management one or search retail orbit. The app is called Retail Orbit. That's obviously our software system. Download it, talk to your retail coach, Shannon, and they can kind of link up on how to use it and how it will work hand in hand with your inventory plans and reports, but it's just a great way if you're a client, you're already getting this information, but it's a great way to now have it just at the tip of your fingertips in Shopify. Okay, the other question we have… oh, and Nico is putting the link in chat. Right, Nika, you'll put.
Melanie: And then use your retail orbit login to log into the app.
Dane: Use your retail orbit login. That's very important. Nico made a shirt for he actually made a shirt. Okay, next question. Our POS system is trying to force us into using their merchant services company. We have such a good rate with who we are with now and our POS wants to charge us the fee for not using their services for credit cards. Is this something that you're seeing, guys? Are you seeing this? Because I know this, that they try to strong arm you into using it. Is that something that you're seeing or
Scott: Yeah, it's… unfortunately, over the last couple of years, it's become, you know, like these POS companies are owned and make their profit and money from the merchant services, from their credit card fees and the debit card fees. Man, look, I would always recommend that you try to stay open with that because as much as it's not an expense that's as high as rent or any of the others. It's one of the most ignored and kind of sinister expenses that can creep up on you if you're not on top of it. It's very difficult. I would honestly say, like, weigh that up when you're making your decision whether you want to stay with your point-of-sale system or not, that they're going to allow you flexibility, and if you're going to have to take their payment, their merchant services, they better well be competitive.
Dane: Yeah, you listen, you're still a customer of that point of sale system, right? You need to, you know, you need to hold your ground. And I know that changing your point of sale system is no easy task, but you got to let them know that you mean business. And if they're not going to give you a fair market rate, then you may have to take your business somewhere else. So guys, this was such a fantastic discussion. I do want to give a quick shout out to our retail foundations program. If this resonated with you today, if this felt like, wow, look at the retail knowledge that our experts have and you know the best part about this, and I think you heard from everyone, is this is not coming from textbooks, right? Everyone here has lived this, right? We've been in the trenches, both with our clients and our own retail businesses. So when we approach working with our clients, it's from a place of compassion, from knowledge, from real, you know, ability to empathize and understand what you're going through and lead you to a more profitable business that's going to really help you, again, set the foundations for success. Foundation is our new coaching course. You're going to get paired with one of our coaches, like Melanie, like Scott, like Fiona, and be able to work month to month with them to really accelerate growth in your business. And most importantly. where it's right for you, right? So, no business is… no two businesses are exactly alike. Everyone has a unique business, so this is going to give you the opportunity to discover your baseline, to learn at your own pace right with the modules that we have. So you're going to be able to go through our education modules, to have those monthly expert sessions where you're going to strategize. Maybe you need to vent, maybe you need to just talk shop, maybe you need a therapist. I know that that kind of, you know, happens sometimes, and give you the confidence to really grow and make just smart decisions in your business. So with two minutes left, I don't see any questions. I think we're done with questions. If anyone has one last one, now's your time to put it in. Nico, thank you for adding the Retail Foundations web page into here. And Scott, Fiona, Melanie, this was a really exciting conversation. Any final thoughts before we go?
Scott: Just, you know I think that we've all got to remember that it's a tough game. It's a very tough game as a retailer. We have nothing but empathy for the people that have, you know, given us our jobs in our lives and we want to just say that we are here to absolutely support you. That's what we we live to do and we get joy from that for sure.
Melanie: Yeah, we're here to talk about the hard stuff that, you know, you don't… I felt when I had my store, I just owning a store, owning a business, you don't have a lot of people to talk to about the hard stuff, the cash, the financials, the rent and payrolls do in the same week. What am I going to do, you know, those stresses that we very much have lived and understand. One of my favorite things about conversations with clients is that it might start one way and end a completely different way, because there's been so much self-discovery in and we end up with a whole list that I wasn't even anticipating giving them, you know, at the end of the conversation, so it's we're here to help and we're here to talk about that nitty gritty.
Dane: Melanie, you mean it's not all glitz and glamour and shopping trips? And Fiona, final thoughts.
Fiona: You know what? Retail can be hard, and it can be lonely. But most people get into it because they have a passion, and they have a passion for the product, and they want a… they want a lifestyle, you know, they want to be their own boss and it's eminently doable, and we're here to help make that happen. And there is nothing nothing more powerful when you help somebody achieve that.
Dane: All right, well, thank you, everyone. This was absolutely fantastic. As always, we love you guys participating, showing up, just showing up is half the battle, right? So we appreciate you being here. We appreciate your engagement and your questions and we will see you next week. Next week's webinar is all about Shopify, Shopify, Shopify. So if you're a Shopify user or interested in Shopify, that's going to be the focus. We have someone from Shopify actually going to be coming and giving a little education and talk and we're going to ask them the tough questions. So thanks for joining us. We'll see you next week. And coaches, you guys are awesome. You rock.
Scott: Thanks for having us.
Melanie: Thanks, Jane. Thanks, everybody.
Fiona: Forever.