I RECENTLY READ Moneyball: The Art of Winning an Unfair Game, by Michael Lewis — you may have seen the recent movie adaptation featuring Brad Pitt. If you’re not a baseball fan, the information below will seem foreign. But keep reading, it will make sense for your business.
Moneyball is the story of how Billy Beane took over as the general manager of the Oakland A’s, the team with the lowest payroll in the major leagues, and made it a winner.
He realized he must be a winner to keep his job, but he didn’t have the budget to buy players. So he scouted players overlooked by other teams whom he could sign cheap. But he also used statistical numbers such as on-base percentages instead of batting averages and home runs. Runs scored, he figured, were more important than batting average. What the information in the computer told him about the player was more important than what the scout saw on the field.
His team was winning with the lowest payroll in the majors and showing a return on investment and a positive cash flow. If the player did not perform, he was released. If the player wanted more money, the team sold him.
This true story sounds like the perfect jewelry store. I’m sure the folks at the Edge Retail Academy and Focus Business Management Institute and David Geller are jumping up and down at this moment. It’s the scenario they have been teaching stores for years.
Your inventory should be made up of items that have the highest return. If the inventory is not performing, release it or trade it! Yes, you picked the wrong styles, but you don’t have to live with the money invested. Purchase based on what your computer sales program is telling you, rather than buying everything you like.
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When you go to a trade show, have your store sales data with you. You want to know what styles and price points are the top performers. If you can find a collection that has great markup and return and fits your store, take the risk. It’s the small investment that can have a large return. If the item does not perform, sell it off quickly. But don’t think you can get your exact cost out of the nonperforming inventory. Sell it or scrap it!
Work with your vendors to trade it or sell it as a closeout. Do whatever, but just get rid of it. It’s costing you money on a daily basis.
You don’t want to end up like the Yankees, spending too much money and then losing in the playoffs. Instead, spend your money only on proven winners, and watch your team win you the World Series — well, the World Series of profits.
