I didn’t have the luxury of more than two team seasons each year with my team dealer business. Being that my specialty was competitive aquatics, I had a summer and winter to keep me going. I used retail and weekend events to help even the keel. To make things more complex, most of the manufacturers that I represented would offer three types of uniforms; one-year, two-year and core. We’d always see an uptick in business by about 30% every other year when styles were discontinued. We loved those years.
Traditional team dealers see similar cycles. The popularity of dye-sub uniforms that never need to change doesn’t help. Thankfully kids grow! So how does the team dealer combat these consumer buying cycles? I’ll start by addressing a few methods that are easy to implement and pay off both in the short and long run. Over the next few minutes, we’ll talk about inventory, purchasing and infrastructure investments.
Every team dealer has inventory on the shelf. If your business has a retail component, your inventory levels may be higher than those that only handle teams. Either way, it’s important to truly understand the needs of your customers. Many of you are saying “I know what my customer’s needs are”. But do you know the items that they aren’t buying because you don’t stock them? By not having something your customer needs, you open the door for their business to move elsewhere. Anticipating your customers’ needs (and wants) helps to make you a trusted asset vs. a uniform source.
The Balancing Act
The big eCommerce sites all have computerized algorithms that track every facet of a customer’s buying history. The software can be so good that it can often predict the customer’s needs before they even know they need (or want) something. I like to think of this as the “do you want fries with that” sales technique. The goal is to capture as much of the customer’s budget as possible at a one-stop-shop. Similar technology is available and within financial reach for you too.
Purchasing for the team dealer industry requires special skills. You must balance the three-legged stool comprised of forecasted sales, seasonal purchase programs, and cash flow. Throw in the often over-eager attitude of your sales rep who’s standing on top of the stool telling you to buy more. How a company purchases can make or break the business. I love asking team dealers about how they plan their inventory purchases. These are a few of my favorite responses (they even have their own acronyms); DILY – “Did it last year”, PWA – “Purchasing by walking around”, OSWO – “Oh shoot! We’re out!”. I’ve swapped out a word to make the last one a bit more family-friendly. Are any of these familiar to your business model? None pass the test of being financially sound.
Cash is King
We are well aware that in this business, cash is king. Do you know that for every year an item sits on your shelf unsold its cost increases approximately 25%? With typical team dealer margins in the mid- to high-30% range, that’s a staggering amount that you can’t afford to lose. Proper planning and buying smart all contribute to your success (and customer satisfaction). Buying what your customers want, at a lower cost is critical to your long-term viability.
Shortly after I bought my business, I had a manufacturer’s rep that would come into my office quarterly and excitedly tell me that I had only X amount of purchases to meet my numbers for the quarter. I would continually remind him that those were his numbers and not mine. Remember, a volume discount is only valuable to you if you can sell what you’re purchasing BEFORE the bill is due.
I mentioned a few acronyms earlier. Let’s add a few more. ECR vs. POS vs. ERP. I would bet that most team dealers are familiar with ECR (electronic cash register) and POS (point-of-sale software). The differences here are straightforward. But what about ERP? An ERP (Enterprise Resource Platform) expands significantly on the role of the POS and adds the other tools you need to run and grow your business. In addition to POS functionality, key features may include quote and order management, a customer database that tracks purchase history, integrated accounts receivables, and purchasing advice to name a few.
An ERP gives you a microscopic view of your business. It can provide you with the tools to make decisions needed to increase your margins and grow your overall sales. Remember Tom Hanks in “Big”? It’s kind of like having your own personal Zoltar fortune-telling machine for your business. Not only will it help you know what to buy, but when to buy. And, just as important; what you should close out and never buy again. Purchasing advice capabilities often include the following:
- Min/Max: What are the minimum and maximum on-shelf quantity I should have of a product. Using Max quantities can be a useful tool as you are ramping up for a season.
- Replenishment: Replace what you sold yesterday, last week, month, etc. A great tool when you are in the middle of a season and don’t need a lot of inventory.
- Days of Supply: I love this function the most. Let’s assume that you are getting low on some key items. You have net 30 terms with your manufacturer, and it will take 7 days for the goods to get to you. Let your ERP calculate 14 days of supply. Technically speaking, this should allow you time to sell the merchandise before the invoice is due. Pretty cool!
- JIT: Just In Time purchasing can be a great way to keep your inventory at safe levels. The beauty of companies like San Mar is that you can most likely get what you need as you need it. This can dramatically reduce your on-hand inventory value.
Many of you know that I’m a huge fan of NCR CounterPoint for the team dealer market. Not only do I sell the product, but I also used it for 15 years to run my business. This makes me a very atypical salesperson – I’ve lived in your shoes. What makes CounterPoint unique is the capability for significant customization. Our SportsPlus module adds embellishment tracking for team orders to CounterPoint’s arsenal of capabilities (many of which have been mentioned earlier in this piece). If you are using old school tools (Excel, paper, ECR, etc.) to run your business it’s time to look to your future. An investment in SportsPlus powered by CounterPoint typically has a short ROI (there I go again); Return On Investment window.
December is an ideal time to invest in your company’s future and begin the implementation of CounterPoint. An often-overlooked benefit is that your business may qualify for Section 179 tax deductions based on the purchase. You’ll need to confirm this with your CPA. I welcome the chance to talk further about your needs. If you’re going to be at the Sports, Inc. Team Dealer show next week in Las Vegas, stop by and say hello. I’ll be in booth 120.
Chip Allen was a team dealer for over 25 years and has extensive industry knowledge and experience. He can help you improve customer service, grow your business and increase your profitability.