Wednesday, November 29, 2017

C&A trick Part Deux, "Meters are the Alpha and Omega"

Storyboard for video C&A trick Part Deux. See part 1 here:

The C&A system of Deckungbeitrag (Contribution $s or Fund $) and Opportunity Costs is based on a planning and evaluation system which is different than conventional retailing.

In Dutch: "Rekenen in Centen, in plaats van Procenten."  Counting money instead of comparing margin BCP %s.

Meters are the Alpha and Omega means you start your planning with the number of square meters of retail space you intend to use and how many gross margin $s you hope to generate.

Planning framework: Less is more

Conventional "bricks" retail planning starts with sales. Online retailers consider sales (what they refer to as "Gross Merchandise Value" a footnote.
Revenue (Sales or Gross Merchandise Volume GMV) is largely irrelevant for assortment decision making. The reason is that a retailer is a conduit for payment by the customer to the manufacturer. The amount involved in this payment, Cost of Goods Sold, is irrelevant for a retailer’s Bottom Line result, which is Gross Margin $ - Operating Expense $. To optimize assortment decision making for a store, managers should consider the Dollar Contribution of products (Fund) and the possible Opportunity Cost incurred when choosing one option over another.

Sales also know as Gross Merchandise Volume GMV
Cost of Goods Sold money that the customer pays the factories for making clothing
Gross margin dollars (Fund)    Last Year     Next Year
 - Operating expenses               Last Year     Next Year
= Net Earnings                         Last Year     Next Year

If the number of stores (square meters) is unchanged, then the target should be to increase Gross margin dollars (Fund) and decrease Operating Expenses.

When considering merchandise options and evaluating performance gross margin $ per sqm is the yardstick to compare different options.

Also $ gm per hanger (piece in stock).

Comments, questions or E-mails welcome:

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