I'm co-hosting an AMA on retail purchasing for new stores today and thought I would summarize my purchasing advice. I've been purchased 14 million dollars of games since 2004, and purchasing is now my main function working from home. Here's some advice:
- Focus on What Works. 80% of my sales are from 10% of publishers, roughly 30 of them. Get right with this 80% and you've achieved most of your purchasing objectives. It's not an issue of "if" but "how much."
- Pre order Most Things. I pre order everything. You might decide to only pre order from the aforementioned 80%. The primary reason to pre order is: a) I almost always get what I want, b) I almost always hit the street date, and c) It frees up my time. I do not look at "dailies" or pay attention to most marketing communication from distributors. I have instructions to auto-ship orders when they hit "free freight."
- Back Order Essentials. I have $62,000 of pre orders, but only $900 of back orders. We are a front list driven trade, so the new is vastly more important than the old. I place my orders online by hand, so I regularly see what's back in stock.
- Track Your Purchasing. I use an Open to Buy (OTB) spreadsheet to track every purchase so my purchasing budget is balanced. I know when my inventory is bloated (most of the time) or when it's lean (almost never).
- Budget and Cash Reserves. I don't budget, (OTB is not a budget tool, just a tracking tool), but I have a cash reserve. Even if I'm following my Open to Buy spreadsheet, variations in monthly sales can leave me in a hole. Having a $150K sales month followed by a $100K sales month means that even if I kept my inventory stable in month one, I'll still have problems paying bills in slower month two. If my purchases were good, I'll resolve it in the future. In the short term, I probably have about $25K of bills I can't pay without a reserve.
- Your Best Hat. Purchasing is just one hat you wear, and it's easy to rush purchasing decisions between other tasks, maybe while standing at your point of sale system. Make purchasing special. Find a quiet place where you won't be interrupted with a stretch of time to contemplate what you want. With more time comes more options. You can go off script and open direct to retailer accounts or back Kickstarter projects. Prioritize purchasing and purchasing will expand and reward you.
- Buy For Your Particular Sales Team. You are probably your sales team, but think about the product you're ordering. If you have a mostly passive sales staff, the product you buy will need to sell itself. Product will need to be obvious. If you have a demo program, you'll want games that demo well, meaning you will have to be part of game demos, including attending trade shows, conventions, and local game nights. The more active your sales team, the more you will sell, but know what works for you. Purchasing is not aspirational.
- Exhaust Port. You can't get another portion if you haven't finished what's on your place. Have a system for clearancing dead product. There's no shame in an in-store clearance section. Game conventions are great for moving bulk overstock. And of course there's the Internet. The system is in a closed loop and you need to move the dead stock to buy new stock. If you personally move your mistakes, you'll get better at buying decisions.