Getting a start on vendor selection can be overwhelming. Whether a spa is planning a new retail space or just rethinking its current one, there are some guidelines that can help a spa professional through this process.
The relationship between spas and their vendors can go far beyond the simple provision and purchasing of products. The relationship is one that can develop into a partnership—a partnership that is of equal value to both the vendor and the spa. When this happens, the vendor goes from being a seller to being a resource partner.
While 42 percent of spas within the industry have private label products, there is a direct correlation between the size of the spa and whether it carries private label products.
At the Urban Spa …
Reuben laughed conﬁdently at the retail consultant’s question. “Of course I can tell you our top 20 selling items,” he said.
Once spa professionals understand how to establish a solid retail plan that incorporates product classiﬁcations and revenue goals, the next step is learning how to support the plan. This chapter presents the essential concepts and tools for effective retail inventory management. Many of these concepts and methodologies are second nature to those working in traditional retail operations, but are not so intuitive for many spa professionals.
Two key concepts are fundamental to all retail management: turnover and stock-to-sales ratio.
Basic retail management concepts can help spa retail professionals improve their inventory management methodology by implementing the basic techniques of min and max order levels and keeping the stock-to-sales ratios within industry standards. This will certainly improve their retail effectiveness but it does have limitations in terms of how precisely it can hold the operation to its retail plan.
An important step in monitoring the retail plan requires posting to the planning format each month’s actual sales, markdowns, and other activity.
Simply stated, shrinkage is the difference between the inventory the spa has on hand and what it should have on hand. In the retail industry, an estimated 1.54 per cent of annual sales losses are due to inventory shrinkage. According to the 2004 National Retail Security Survey, specialty apparel is the category with the highest shrinkage, at 2.93 percent, while department stores run around 1.51 percent. But where is the merchandise going? Losses break down as follows: 47 percent internal/employee theft, 34 percent shoplifting, 14 percent paperwork errors, and 5 percent vendor fraud.
At the Urban Spa …
Reuben, the manager of the Urban Spa, hung up the phone in frustration. Fiona Matthews, the owner of the Urban Spa, a day spa and salon, was demanding that Reuben explain why the cost of goods sold in April was 56.5 percent when it was budgeted to be 50 percent.