Retail Management for Spas | Chapter 4.1 | Supporting the Plan

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.

Although spa retail operations are important to the success and profitability of the overall spa operation, many spa retail managers spend little time applying even the most basic retail management principles to their inventory management. While retail sales in most spas average 10 to 18 percent of total revenue, those sales usually contribute between 20 and 25 percent of the spa’s profit. Many spa retail consultants think that retail could easily be greater than 30 percent of total spa revenue, making a significant impact on spa profitability.

While retail inventory management is not the only contributing factor to increased retail sales, it certainly has a direct effect on revenue and costs, and therefore, profitability. Poor retail management techniques (or worse, a lack of any retail management techniques) result in poor retail performance, understocking of popular retail items (“stockouts”), overstocking of unpopular retail items, increased markdowns, and ever increasing inventory value. A disciplined approach to re tail inventory management leads to a brighter picture: strong retail performance, higher turnover of top sellers, fewer markdowns, and greater profitability.

 

a. Automation Makes it Possible

Technology has removed much of the drudgery and time commitment tradition ally associated with retail inventory techniques and concepts. To calculate many of the necessary numbers and metrics by hand is time consuming, error prone, and unnecessary. Face it, most people won’t follow through if they have to perform these tasks manually. By utilizing the capabilities available in most point-of-sale computer systems, spa professionals can let the computer do the grunt work while they check and make sure the numbers are in line and do not require their attention to bring the retail operation back on the course, set out by their retail plan.

A computer system can be compared to an airplane cockpit. It shows the relevant information about the business in a quick and easy-to-understand format. Therefore, spa professionals, as the pilots of their business, can realize that they are off course in a particular area and make some quick adjustments to put the operation back on course. Having the ability to make quick, informed decisions is key to running any successful retail operation. Waiting until the end of the month, or worse, the end of the year, is too late. It’s like the pilot not knowing she’s about to run out of fuel, or that she is flying over South America instead of North America.

A good point-of-sale computer system will allow spa professionals to run real-time inventory reports to determine sales by a choice of variables, including location/classification/sku, what is selling, what isn’t selling, and what needs to be ordered. A high quality point-of-sale computer system will even enable spa professionals to generate purchase orders (POs) automatically to the appropriate vendor based on min/max levels. Of course, even the best computer system is only as good as the information configured by the user. To make technology work for retail inventory management, managers use a standard or easy-to-manage classification scheme for their retail inventory. Spa managers can confer with a spa retail consultant and the Uniform System of Financial Reporting for Spas if they need help determining the classifications needed for their particular retail operation.

By allowing automation to put inventory management on autopilot based on the retail flight plan, spa professionals can focus on the dials and levers of their business instead of having to periodically manually calculate their course and coordinates. If a spa retail operation is running manually and the spa professional decides he or she is too busy (as invariably happens) to check the coordinates, the retail business is essentially flying blind.

 

b. Retail Inventory Management Techniques

Spa professionals achieve greater retail success when they take a disciplined approach to inventory management. They experience higher levels of sales and increased profitability when they make a commitment to a structured approach to inventory management. Even the most basic retail management techniques can ensure that they:

  • Carry the right inventory
  • Carry the right amounts of inventory
  • Manage cash flow
  • Earn a profit

While there are some advanced retail techniques that will accomplish the above goals, they involve a commitment of time and effort to grasp the concepts and implement them daily. Many spa professionals will feel overwhelmed by these techniques and eventually abandon them. Therefore, this chapter presents inventory management techniques in two formats: basic and advanced. The basic section will offer some easy concepts, tools, and techniques to get spa profession als moving in the right direction. With these basic techniques alone, spa professionals will be able to dramatically improve their retail management effectiveness and boost their revenue and profits considerably. A few minutes a week can make a measurable difference to a retail operation almost immediately. Learning these basic principles will start spa professionals on the path to superior retail management, which they can achieve through the advanced techniques discussed later in the chapter.

 

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