Margin "Goals"
Are you addressing them optimally?
If you are in the Apparel business, chances are Margin Goals (Guarantees) are a painful yet necessary part of doing business. Sadly we hear of more and more instances where this practice is spreading into Home Textile, Toy and other Departments.
A brave and/or well positioned few have vigorously challenged this precondition to doing business. Others have simply paid whatever the retailer has requested - or some arbitrary amount in between. We suggest alterntives in the middle of these approaches. The following are a few ideas:
Understand the background. Even if your buyer made his or her numbers, the department may not have. Your buyer may need to collect additional dollars to make up for the profit shortfall. Put yourself in their shoes: Who would you call on to get those dollars and what negociation strategies might you use?
Do your homework. The spreadsheets you receive contain hidden formulas and obscure as much as possible. Do what ever you can to validate the numbers: check the math, make sure the items that are being marked down are the ones you agreed to, validate the retail sale quantities. The more you know, the better you can negotiate. We even had one case where the buyer made an honest mistake and apologized for it once it was uncovered.
Change the perspective. Find something compelling to fortify your case. It could be poor planning, improper distribution, significant lost sales. Use what information you can to even the playing field.
Give and Get. Many of our clients make the same mistake: They agree to pay a sum of money with no strings attached. And then even lose the business going forward. Try to tie this payment into the next season's business or some other give back. Of course this won't work all the time and one must be careful in such negotiations. At the same time, who wants to leave money on the table?
Know when to fold. Have the insight to know if a program is indeed profitable. We have anlayzed many that were not and could never be, based upon the parameters. Have the conviction to walk away from business that is not. Or to renegotiate it so it can be profitable.
This advise may be obvious to some, yet our experience is that it is not to all. It is our hope that at least some of this advise is helpful to you.
Jim Lewis
Founder and CEO
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