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Riding the rapids of today's economy: how to make the most of your firearms store's resources in challenging times.


Most recently, interest rates have risen, once again. If you're a retailer who remembers the high interest rates earlier in the decade accompanied by the ensuing recession, you may be feeling a bit anxious. Should we be bracing ourselves for another rough stretch?

No one knows. Interest rates, like the price of any commodity, are controlled by supply and demand. Rates are affected by large sums of money coming into and leaving the country. They are affected by the number of consumers who want to borrow at any given time. Even the most knowledgeable economists can't say with certainty what the future holds. But it is reasonable to expect that if interest rates continue to rise, major purchases (ones that necessitate loans--e.g. houses, cars) will drop. This, in turn, will create ripples through the entire economy--including the firearms industry.

I am not suggesting that you panic. I am suggesting that in time like these, the survival of your firearms business will call for tighter management, controlled costs, higher productivity, sound strategic thinking, a lot of courage, and, as always, enthusiasm.

The pointers that follow are organized into four basic categories. You cannot afford to overlook any one of these management areas if your goal is the continuing success of your store. These pointers are meant to remind, reinforce, educate and stimulate you. With the right attitude and energetic attention applied in the proper places, you can not only make your business survive--you can see it prosper during this difficult period.


1. You must continue to achieve satisfactory turnover performance. Carrying excess stock is expensive and wasteful in the best of times. The higher interest rates go, the more critical inventory turnover becomes. Have you noticed changes in the economy affecting your turn? Is it generally slower or just down in certain product lines? If you don't know, find out.

2. Take a hard look at product lines, categories and markets. Determine which are meaningful and profitable. Then, identify and cull out non-producers, thus pulling in working capital from weaker lines and concentrating it where you are strongest.

3. Weigh the contribution of every merchandise purchase, every assortment, every vendor, and every classification in terms of the hard-to-get gross margin dollars that each provides. As stated above, streamline your assortments.

4. Keep ample open-to-buy at all times. Watch for opportunities to buy stock at reduced prices. Vendors will be faced with many of the same problems as retailers and will be trying to turn their inventories into cash. If retailers are over-bought, the opportunity to take advantage of these special purchases will be lost.

5. Bring merchandise into stock as close to the selling season as possible. Have cancellation dates on all orders and see that vendors comply.

6. Merchandise toward central themes, or groups of merchandise perceived to be smaller, rather than automatically replacing sold inventory with specific SKU's (stock keeping units). This strategy can reduce duplicate assortments.

7. Figure your turnover in terms of weeks of supply, rather than months. This method helps to minimize on-hand inventory and even out the flow of goods to actual sales periods. Even a slight improvement in turnover can produce a dramatic increase in gross margin dollars.

8. Regularly scrutinize rate of sale and age of merchandise. Every container of rifles and case of handgun ammunition that comes into your store should be dated, so you can keep track of the month in which it was received. After a reasonable time, mark merchandise down, no matter what.

9. Continually review open orders. If merchandise should be cancelled, cancel it. If an order should be cut in half or delayed, call the vendor promptly. Refuse to accept orders not shipped as written. Return all damaged goods swiftly.

10. As the average consumer's buying power goes down, tastes turn to value, quality and mainstream styling. Listen very carefully to your customers and adjust your selections accordingly. Effective merchandising is a matter of knowing who your customers are and doing your best to provide what they want.

11. Whenever possible, pre-sell merchandise to customers before actually taking delivery yourself. This technique is especially useful for your more expensive firearms. Teach your staff how this can be done (with caution).

12. Pay attention to what's happening in your stockroom. Merchandise tied up in receiving because of missing purchase orders or mismanagement is costly in terms of idle goods, lost sales, higher interest and storage expenses. Watch for delays.


1. Don't just control expenses -- reduce them! Insist on actual dollar reductions in appropriate areas. Greater motivation of employees, strict, tight business organization, increased part-time help (with decreased full-time help), and other such actions will increase your store's productivity (the current word for "running a tight ship").

2. Teach your personnel the importance of adhering to a strict budget. Involve them in the budget process and reward them for achievements.

3. State a competition among your employees for expense-saving ideas. This may reward you with not only creative ideas and handsome savings, but also with a spirit of team play.

4. Analyze and review advertising and promotion. Study past media track records. Does your newspaper advertising bring better results than that recent radio spot your purchased, or vice versa? How do they compare in terms of expense? A marketing rule of thumb: Advertise less in months when you expect low sales, reserving the majority of your ad budget to stimulate good months even further.

5. Don't overlook freight costs. Are you paying for unnecessary premium transportation? Could you fly in less merchandise if you ordered more carefully?

6. Be aware of the total cost of expense increases. For instance, it may be that before long you'll receive a notice from your lending institution of an increase in interest charges. Don't just wince and toss the notification in the round file. Find out how much of an increase in sales will be necessary to offset the increase in interest expense.

7. Now, the best expense control tool we know. List, by category: (1) Last year's actual cost to run your store; that is, your operating expenses (rent, utilities, insurance, advertising, etc.). (2) This year's budget. (3) Actual this year. (4) Variance this year (difference between budget and actual). (5) Budget year to date. (6) Actual year to date. (7) Variance year to date. Then, investigate all significant variances. This detective work will show you how to effectively reduce your costs.


1. Whenever cash flow is hurting and there is a debate between the cash impact and profit impact of a decision, forego profit, not cash.

2. Promote your willingness to accept MasterCard and Visa. Consider accepting the Discover Card, as well as travel and entertainment cards (American Express, Diners Club, etc.). Publicize the fact that you accept these cards, for their use is likely to increase.

3. Create an innovative method of bringing in more cash. Perhaps you could sponsor a shooting contest. Or offer a prize to the person who guesses the correct number of shells you've poured into one of your store windows. (BB shot in a large glass bottle?) Cash discounts may bring in more cash sales but are legally questionable. Consult with your attorney before offering any of the many forms of cash discounting.

4. Break down large orders to vendors into smaller shipments. Ask for dating. Consider using wholesalers more frequently. Generally manage your inventory with an eye on cash flow.

5. Always, always have a current cash flow plan detailed out on a spread sheet. Constantly rework and revise it as your situation changes.


1. Use each square foot of space as efficiently as possible. Is that corner you set aside for hunting apparel too large for the inventory at hand? Analyze operations, identify inefficient areas, and close units and departments that are not producing acceptable returns and cannot be improved. That is, bite the bullet.

2. The usefulness of dollar sales as a measure of efficiency is impaired by fluctuations in the economy. You'll find it more accurate to make comparisons based on the number of transactions. If sales transactions decrease, perhaps the sales force should be cut proportionately even though volume appears to be holding up.

3. Don't ever go for volume for volume's sake. Sales may create gross profits, but they also create bills. Watch your gross margin carefully.

4. Maintain a good relationship with your banker. Study the effects of rising interest rates on financing. Talk with your banker about these effects and, if possible, obtain advance commitments from your bank. Try to survive without borrowing. When you must look outside the business for financing, never borrow short-term money for long-term needs.

5. Know where your business stands in comparison to the industry. A sense of the overall condition of the firearms industry will enable you to form realistic goals for your own store. Contact your trade association for your industry's average ratio figures, and compare them against what you come up with for your store. You'll want to know the following: (a) Quick ratio (b) Current ratio (c) Debt-to-Worth ratio (d) Cost of sales to inventory ratio (or turnover ratio) (e) Gross margin (f) Net profit before taxes

Last but not least -- never underestimate the importance of your attitude. The retailer who will survive and grow and take advantage of the opportunities in this difficult period will find ways to accomplish much of the above. It isn't easy, but manage enthusiastically.

No matter what, keep your chin up and those around you will tend to do likewise. Enthusiasm is not just indispensable -- it's contagious!
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Copyright 1989 Gale, Cengage Learning. All rights reserved.

Article Details
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Author:Outcalt, Richard F.
Publication:Shooting Industry
Date:Jun 1, 1989
Previous Article:Stocking oddball and obsolete ammo can improve the sale of used guns.
Next Article:Security and the gun shop.

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