SKU Naming Convention - Recommendations How It Should Work?!

Question 1:

SKU naming convention - recommendations how it should work?!

I try to use a descriptive name in case a tag gets lost etc. Also, since I operate hand- to-mouth I may only buy one or a just few of something each time. Many things are the same but different (earrings, journals, scarves, headbands, baskets...). Or they're one-of-a-kind which makes it harder to have a unique name.

Answers 1:

(1) You want to be sure you have a POS system that gives you plenty of data points to enter in all of the necessary data for properly tracking sales of every individual SKU in your inventory. You will need: your item number, vendor SKU, item description, country, artisan group, size, color, season, month received (critical), cost, sets (when applicable), retail, etc.

In terms of your description, it should match your item as best as possible. If you get the colorful cord bracelets and they come in three colors, you will have three SKU's all with the same item description, same artist group, but a different item number and vendor SKU. Even if the vendor uses the same SKU for their SKU you will put XE- 214-THT (Blue) for the blue one and same code plus red for the red one. That way you can track how each SKU does and your vendor is not getting confused by what you are ordering.

Question 2:

Strategies/Tips/Steps for Owners who are interested in selling their business in the next 2-3 years? How to Value your business for Sale?

Answers 2:

(1) If you are interested in selling your business, I think one of the best ways to go is to find a manager/potential manager who is looking to own their own shop. Hire them and slowly train them to take over your business with a strategic buy out plan. Slowly transfer interest in your business to them until you hit a certain point and then have a buyout in place. If you don’t find someone who is interested/capable/financially able to buy your business through a gradual transfer, put it out to the FT community and your local community. Everyone told us we were crazy to make our potential sale public but we felt like we had done right and that it would work out. The outpouring of support from our local community in response to our appeal for a buyer was so tremendous we saved many of the emails and put them in a scrapbook. # of our potential buyers came from that email alone. We also reached out to the FT community and found someone who was looking to buy a FT shop and the rest is history. In terms of valuation, we had our business professionally valuated by a company in CA that does small business valuations. They were very helpful in taking the time to understand our business, our hopes for it and explaining in great detail why they felt the number they came up with was a fair price. We had a particularly disappointing experience going through a business broker (ours worked as both representative for the seller and buyer and that did not seem right to us) so we brokered the deal ourselves and worked with an attorney to make sure we covered everything needed for a good purchase and sale agreement. The attorney was not cheap but we had to commission fees to a broker.

Question 3:

Strategies for converting customers into Fair Trade Advocates in the communities. What kinds of events have folks organized that were successful, where "success" = good sales, increased awareness in the community, coverage in the press, and/or customer base participation?

We have an anniversary coming up and want to organize something special that will really get people excited and, ideally, shopping. If it gets press coverage as well, so much the better.

Answers 3:

(1) We often hosted events that supported local NPO’s and community organizations. It was a win/win as we drew on their support network as they wanted to support their cause and our supporters wanted to support our efforts to support a local organization. We usually structured it as a benefit event- all profits donated to the org or 15% of the days sales donated, etc. Anything that broadened our support network but attracting unlikely supporters was worth it. Maybe they didn’t know about us or were skeptics of FT, but they liked what they experienced and were in once they came down.

Question 4:

In your Managing Your Inventory publication (linked to a few days ago), you say that "excess inventory ... overwhelms your customer with too much choice, which studies have shown to lower sales."

Does that mean you'd recommend more units of fewer unique items instead of smaller quantities of more items?

What's a good quantity for an initial order of a product (say in the $20-40 price range, just for example) you're testing out? Answers 4:

(1) Ideally you want to have around 1.7 SKU's per sq ft in your shop so if your retail space is 1000 sq ft you will want 1700 SKUs. In terms of an initial order you never really want to order just 1 of an item so if the retail price is $20-40 you will want at least 4-5 but what is most important is to do ongoing item eval for all new items (2- 3mos) so you can reset your min/max based on actual sales

(2) Bottom line is you do not want your shop to feel cluttered that is why you want to optimize your SKU's and only have ones in your shop that make you money!

(3) The sku per square foot ratio is hard for me to visualize. But this all reinforces your bottom line from last time: ditch the stuff that's not selling and stop holding out

(4) You should not have to visualize it Your POS system should do it for you. Take your retail sq ft X 1.7 and that is how many SKU's you should have. Compare that to your active item list and see what the difference is. If you do Item eval my guess is you can get that # down in a strategic plan that will not hurt you too much financially and give you space to bring in some best sellers that will make you $$$$

Question 5:

In store music?

In the past we've sold Putumayo cds and uploaded samples cds to an iPod to play over speakers in the store on an unending loop. We've had some ongoing communication problems w/ Putumayo and in our particular store cd sales have been negligible (plus the fact that with technology cds are on the way out & environmentally they're not a great idea)... so we're looking into other options. We've thought about playing cds of local bands with a global sound & selling their cds on commission as a way to have music & connect with the community but that doesn't cover the environmental/technological side of things. Do most of y'all go the way of Pandora?? Curious what's worked for you. Thanks!!

Answers 5:

(1) I've been going pandora

(2) I guess I'm wondering if there are any 'little guys' doing the same thing as Pandora. Though I guess you'd probably also have access to less music that way. Hmm

(3) It gets to be a really long day if you have limited music to play! (4) Yeahhhhh...no good

(5) Pandora. We make stations for each of the employees based on the song that was #1 on the day they were born. Thumbs down to anything explicit.

(6) Pandora isn't available here in Canada. I have used tunein in the store but since we started carrying Putumayo we've just been playing them and they sell fairly well. Not all titles, so we just let them sell down and reorder the best movers.

(7) I used to play Putumayo, but it's not doing so well for me either. I actually play the local college radio station. It's commercial free, they cover several decades in music, and people seem to like that it's local.

(8) Yes! We've actually advertised on our local public radio station (based at UT) so that's been another thought but based on the time of day can get too rockin' for some customers. Guess that's when we pop on a Putumayo. That's also the most cost effective option so far

(9) We stopped selling putumayo when the local market got so saturated. Plus, most people wanted to listen to it then would go home and buy something online. We unfortunately gave up on CD sales...

(10) I'll do the same. Every so often they'll schedule in some heavy metal, so I have the CD's handy.

(11) I have a global mix on an iPod or use Pandora and do the same for holiday. Mainly I do it to create a vibe in the store. If I have someone working and allow them to play their music list it has to fit in with the vibe I'm fostering.

(12) We're still selling Putumayo - I guess our customer base isn't quite as hip to online music purchasing yet?

We copy all the tracks of the cds we carry into iTunes and play them all day. We have each disc as its own playlist and one playlist with everything in. If a customer asks what's playing, we can play more of that particular CD for them.

(13) Pandora one and love the variety and low cost

Question 6:

If you have a business and/or marketing plan, what sources of data did you use? Canadian sources in particular if possible.

Answers 6: (1) There is a lot of good info from LOHAS in Boulder, CO but focuses on the entire consumer trend.

Question 7:

I really believe that our best hope for success lies in engendering a sense of ownership or camaraderie in our customers, so that they feel like stakeholders in our success. Would you agree? Do you have suggestions for how this can be accomplished? Suggestions for how to turn customers into ambassadors for our store in particular and fair trade in general would also be great.

Answers 7:

(1) I think this harkens back to the earlier question on how to convert customers in to advocates. If you are awesome then people will generally believe you are awesome and spread that word. We did very extensive training with our employees on the customer service experience and the goal was for every customer to leave our shop feeling like they just left the best shop ever. Not only did we want to have the best merchandise, with the best story behind it, displayed in the best way possible, but we wanted them to have an experience that left them wanting more and talking about it with friends colleagues, etc. There is no better advertising then word of mouth so if your customers think your store is ho-hum they may mention the availability of fair trade products at your shop but they are not likely going to “sell” your store to anyone.

Question 8:

Does anyone out there use Quickbooks as their POS? If so, may I pick your braaaaainz?

Answers 8:

(1) I do, but I there's still tons that I don't know. We bought it with the store, and sometimes I'm totally confused. I'll try to help if I can, but can't promise anything. I think I know just enough to make a sale and put inventory in. Reports are a total mystery.

(2) Heh. I've been using QB for POS for years now, but don't have the actual POS component of the software. I'm trying to figure out which reports will (help me?) calculate sell-through, turn around times, etc. I'm also curious whether anyone who has the POS component could comment on what it can do that regular QB Pro can't. (3) If *I* can help you, let me know! We may be an example of the blind leading the blind, but at least we'll have company?

(4) Are you referring to QB POS? There is the financial software and they also have a separate POS Program (http://quickbooks.intuit.com/point-of-sale-systems/)? If you are talking about the POS system I used it for 7 years and am quite well versed in it and would be happy to help in any way. There are limitations to it but there are also some great work arounds and tricks for being able to maximize inventory control.

(5) Not the POS program, just plain old Quickbooks Pro. We've been using it for our "POS" (using it to track inventory, do sales receipts/returns, etc.) and have been very satisfied with it so far.

Now I'm wondering how to get it to tell me the stats I need to calculate sell-through and all the other numbery bits needed to implement your inventory control advice.

(6) Also, we have the non-subscription form of QB and I'd very much like to stick with that rather than the online subscription version.

(7) Quickbooks financial is not suitable for POS and tracking inventory. You really need to get their POS (or another retail POS program) to be able to measure what you are seeking to do. QB Pro is VERY limited and really does best as a back-end business tracking- money coming in and money going out...

(8) We'll look into a separate POS system but in the meantime it'd be nice to know how to get these numbers out of our accounting software. If anyone knows how to do so, I'm all ears.

(9) We use the QB POS, but Sage Peachtree for accounting, so have not integrated them -- quite happy with the POS, though

(10) Do you have the desktop or online version?

(11) Desktop

(12) It's a flat fee, yeah? Not a subscription?

(13) yup -- you get free 'help' for a year, and then have to pay for that, but after one year almost all my questions and problems were worked out, and when I DID have a problem, I called and they gave a month support to answer the questions I had and now nothing more. We've had it since 2012

(14) we have QB Pro too. If you have very descriptive SKUs and are meticulous with your sales receipts, you can use the built-in sales reports to track how various SKUs do. We export the reports to Excel and then have to monkey around a bit to get the numbers we want. Sorry I'm not being more specific, I'm away from the software right now. It's not as good as having a true point of sale system, but it allows us to measure margin and turnaround.

(15) that's *exactly* what I need! Are you up for further consult sometime?

(16) A MATCH!

(17) I'll get back to you when I have QB in front of me. It's clunky but you can make it work, and I just can't spring for a true POS right now.

(18) I use QB too and am believing I need to upgrade to a version with more capability.

(19) You have QB POS and they are talking about QB Pro (financial). You could be a good advocate for getting a POS system!

(20) it's really confusing -- our version of QB POS is also a pro version!

(21) There is a Pro POS version but QB financial is VERY different from their POS software

(22) Yup -- I'm sure!

Question 9:

Here's another that was pre-submitted and really gets to the heart of why inventory control is so critical (see a theme in my direction):

Is there such thing as too wide a scope for products? I try to maintain a mix of items and price points - sometimes I wonder if I am trying to do too much. People appreciate that I have a mix, so I think I am doing right. I want the store to be fresh for locals so they don't always see the same things.

Answers 9:

(1) In terms of product mix, you always want to try and have something for everyone. Maybe you don’t carry clothing or some specific thing but it is good to have home accents, jewelry, accessories, bath and both, food, music, cards & stationary, kids clothing and toys, books, etc. Keeping things fresh is not so much a matter of scope of products as it is doing ongoing inventory control. Remember that 1/3 of your SKU’s will likely not make the cut on an annual basis. If you are evaluating new items as they enter your inventory (2-3 months review to set accurate min/max levels) then you will know right then if it makes it or not. If not move it through and make space for new items. Plus if you are doing item eval 2X’s year (which you should be) you will be eliminating a lot of items thereby leaving room for new items to refresh the look of your shop. For a 1000 sq ft shop you should be bringing in 500-600 new items a year!

(2) That's part of the challenge and fun to find new products!

(3) I find it extremely challenging to keep finding new item. I have my favorite suppliers, but they don't always come out with enough new items. I feel like I'm always looking for new suppliers.

(4) There are SO many new items all the time- my wife kept folders by department of new items she wanted so when we did item eval and old items came out she just pulled the folders and generated new orders from those (great way to keep your SKU count down)

(5) It is not unreasonable to have 40-60 vendors to choose from- so many good ones out there!

(6) Ahhh...I need to bump up my vendor base. Got it.

(7) Contact me and I can get you a good list to work from!

(8) Much of our popularity as a wholesaler rests in our wide variety.

(9) We have some niche vendors from whom we get just a few items, but we've also got two or three biggees from whom we get a bunch of different things. Ganesh is at the top of the list!

(10) Ganesh Himal is one of our best/biggest vendors after villages too grin emoticon Love it. And more importantly, the customers love it!

(11) We can't order from Villages. At first that seemed like a real handicap but in the end I think it sets us apart, so it's all good.

(12) will also be emailing for your vendor list! Always looking for new groups to 'keep in the wings' so to speak (we're a villages contract store so we've got a whole different sent of parameters and random complications in terms of working within their POS system and getting sent 'new items' that we may or may not always want. What do you have to do to sell TTV product by the way? I don't even know)

(13) You have to be in the US. The Canadian branch isn't taking on new wholesale customers.

(14) You CAN easily do a FT shop w/o TTV!

(15) Yes, please, Kevin - would love a copy of that vendor list as well! (16) email me at [email protected] and I will get it to you

Question 10:

One more that STILL gets to inventory control (themes...):

We currently identify products as being one of several different categories, such as food, lifestyle, home dec (which is broken down further into subcategories), etc. Does anyone have suggestions for useful segmentation - how many categories, or what they should be? Which categories are universal best sellers, if such a thing even exists?

Answers 10:

(1) What is most important is to see how each SKU does on its own merit, but it is good to have home accents, jewelry, accessories, bath and both, food, music, cards & stationary, kids clothing and toys, books, etc. You do not it much more broad than that and you should pay attention to how departments do overall when you do item evaluation but don’t get stuck on the departments. Most of our shops are too small to really think about “departments” but it definitely helps in categorizing items and creating open to buy (OTB) based on holes you need to fill. It can also help control your buying in departments where you don’t need to be doing buying and keeping your SKU count under control.

(2) "Open to buy"?

(3) Accessories are ALWAYS best sellers!

(4) How much you have to spend on a monthly basis which is determined by your current inventory valuation minus your needed inventory valuation for the following 3 months of sales (assuming 4 turns).

(5) When you say accessories, do you mean bags/purses? scarves? jewelry? what else?

(6) How do you determine what you need for the following three months if you don't have any history to go on? We're finally coming up on our first anniversary but even so this summer won' be anything like our start-up summer.

(7) We lump all the above in one group -- but jewelry & scarves are the largest portion of that

(8) we defined accessories as purses, scarves, headbands, etc but kept jewelry separate. (9) My prior inventory only allowed 6 categories, and I've never broken it down again.

(10) If you don't have history that is hard but use your previous 3 months and anticipate as best you can what the next three months will be like based on other retailers sales curves or sales curves from your chamber or other local biz orgs.

(11) We've got jewelry on its own, bags and scarves are subcategories of accessories, and then everything else (headbands, hats & gloves, belts, etc) just falls under the main "accessories" heading.

(12) I've been adjusting our categories now that we've got several months of business under our belts. I started with broad categories (home dec, accessories) and then broke out anything that represented a very large portion of the category into its own subcategory. Hence the bags & scarves in accessories, and baskets and pillows as two of seven subcategories within home dec.

(13) Love the idea of getting stats from local biz orgs & chamber. As someone said recently, folks outside of the FT sector aren't as inclined to share this kind of intel, but there might be some aggregate data available.

(14) you don't need their actual numbers, just their sales curves. Local biz orgs should have that data too from the retail sector just make sure you are comparing apples to apples.

(15) I've even broken Jewelry into subcategories (Necklaces/bracelets/earrings/rings/other). (One funny caution - when we first got our POS system and were printing labels, our POS would 'truncate' our categories, so many of our labels came out printed 'Jew'! We manually fixed it but it lead to some interesting conversations).