Chain of High Volumen Retail Shoe Stores

Using Prepacks of  Shoes

Case Study

    If you have or are considering opening a chain of high volumn shoe stores you need to consider two things. One, that not all software is the same, and two, that money spent on great software is not an expense but an investment in a profit center.

    The best way to understand this is to look at a real world business case and consider the potential profits and losses.

    In order to do this I pulled some figures off the database of one of our customer's, who will remain unidentified for privacy reasons. Let me say that this is a real world example.

    I looked at sales for the month long period starting August 23 and ending September 22. I looked at the sales of sixteen stores, this is a cross section of their great stores, medium performance stores and bad stores.

    They sell foreign made shoes at low prices.

    Here is what their averages look like.

    They sold on average 2,491 pairs per store during this 31 day period. The average dollar sales per store was $48,574.50 USD. This means that their average net retail per pair of shoes (with a few handbags thrown in) was $19.50, rounding off a few pennies.

    That is an average of 80 pairs per day.

    Now all that cash coming in sounds great, but this also implies, as you all know a major administrative problem.

    If we assume that these shoes come in prepack boxes with 12 pairs in a box then we can see that to replenish the 2,491 pairs sold each 31 days we need to ship out to each store 208 prepack boxes of shoes per month. If we have a chain of 100 stores then we need to ship out 20,800 prepack boxes to 100 stores each month. (You can download the spreadsheet here with these figures so you can check my math and change the model if you wish.)

    How do we know which prepack boxes to ship out to each store?

    Is some real smart person going to sit in some room all day for all 31 days of the month pouring over reports and decide which 671 prepacks get sent out that day to which stores?

    It seems pretty important for your software to be able to do this automatically or at least suggest a distribution for you. XpertMart will do this automatically. Further on I will present a real world case so you can ask how some lowcost software would handle this decision making process.

    Before we get into the details of how this process can be automated let's look at the dollars and cents. Let's look at the possibility to lose if decisions are made wrong and profit if decisions are made right.

    We see above that the average sale price of a pair of shoes is $19.50. Assuming for a moment that 50% of this is gross profit then the gross profit per pair sold is $9.75. So if we take the $2,000 per store that we ask you to invest in XpertMart and divide it by $9.75 then we find that the cost or investment in XpertMart is equivalent to the profit to be made on 205 pairs of shoes. Putting this into prepack boxes of 12 pairs each then we are talking about making the profit on 17 prepack boxes of shoes.

    Now we had established above that we were going to need to ship 208 prepack boxes per store on average per month to keep up the average real world sales presented above. So our 17 prepack boxes that we need to sell to pay for XpertMart is less than 10% of the total prepack boxes sent each month. So if XpertMart is truly expert enough to give us the edge to sell 17 extra prepacks, versus not selling them or having to sell them at cost then XpertMart paid for itself in one month! Personally I am quite sure XpertMart can do that in one month. But say we only score extra home runs on two prepack boxes a month then in a year XpertMart more than pays for itself.

    Now I do not know about this bargain software. It may be ten times better than XpertMart, but then again it may very well not even pretend to know how to do automatic distribution of prepack boxes of shoes. If it incorrectly sends out 24 prepack boxes per store in the year, such that these shoes have to be sold at cost instead of retail, then this software is more expensive than XpertMart. It cost you more than $2,000 in lost potential profit versus XpertMart not costing you anything as it pays for itself in extra profit.

    If you have followed me this far then you can see that price is really a secondary issue as the quality of the software will determine if it is an investment or an expense.

    Now if this lowcost software claims to do everything XpertMart does I would place before you the prepack distribution challenge.

    Here is an example prepack distribution scenario. I would suggest that you ask the lowcost software company to explain to you how and why their software would choose to distribute or not distribute these three available prepack boxes of shoes among the five stores with the last 30 days of sales shown and current stock shown.

    Let me pain you by reminding you that for your business to work with 100 stores, you HAVE to ship out 20,800 prepack boxes per month and do it intelligently.

    You can also download this spreadsheet here.

    We need to see if these five stores need restocking

    These are the three prepack boxes we have available to restock

    What stores if any do we send them to?

    Again, how would the low cost software handle this distribution decision?

    If you are in the decision making process in regards to software for your stores I am sure you will be interested in considering the details of this real world example.

    We would be glad to tell you how XpertMart(tm) automatically handles these distribution cases with our Xpert patent pending technology. We offer you proven retail software that not only handles all your needs at point of sale but also optimizes your inventory. XpertMart(tm) can administer mixed inventories of single items and prepack boxes. XpertMart(tm) can do automatic replenishment and inventory balancing using both prepack boxes and single items. In addition to this XpertMart(tm) offers you more than 250 reports so you can analyze and optimize your retail operation.

    Give us a call at (954) 688-3045 or drop us an e-mail at sales@xpertretail.com.

    We have systems for Macs to find out more click here.

    Our point of sale and inventory control systems are written in Java.  To find out more click here.