BRIDAL MARKET SERIES: Using the 45% Rule to Buy
So you know what types of dresses to look for, but how many should you buy to ensure you’re still profitable? One easy rule to follow is to make sure your total inventory and special order cost from each designer is no more than 45% of your sales from each individual designer. This is one of those, less is more scenarios.
To break it down a bit more, you want your inventory buy to be no more than 10% of your sales from a designer. If your special orders took up 30% of the sales from a single designer, awesome. If you spend no more than 10% (maybe even less), then you just bumped up your profitability. This will give you room to invest in a new designer or line in your store.
We suggest evaluating your inventory and sales numbers on a 6 month basis. Then at the end of the year, do a broad comparison on how you did with buying and how each designer is performing. If you look at your sales for the whole year, is there enough profit? Based on your reports are you able to adjust your buy ?
Why should you follow the 45% rule?
Let’s say the money you spend on your customers orders in the last six months is $10,000. In the same six months, you made $40,000 in sales. That means your cost of goods is only 25%! You now have a maximum of 20% to invest in this line, new lines or you just added an entire 10%+ to profitability! That’s potentially $10,000+ going straight to your bottom line!
Let’s look at one more example, let’s say the money you spend on your customer orders in the last six months is $25,000. In those same six months, you made $50,000 in sales. Meaning your cost of goods is 50% and you need to add inventory on top of it. Can you run your business, market your business, pay yourself and be profitable if you have less than 50% left of your sales to cover all those things?
Ultimately, the most important thing to know before going to a Bridal Market is your budget, and be sure to stick to it when you get ready to buy.
Register for our Poppy Talk Webinar, hosted by Janice Yoder on Monday, February 27th 2023 @ 9am PST to get you started on preparing for Bridal Market