One opportunity that we’re seeing right now is in the men’s knitwear business. This is an area that has been out of trend for a long time and now it’s holding up. The traditional men’s denim business is also faring relatively well. In women’s, we’re seeing strength in skirts, and the top business is sure to follow. Remember to take a look at how product mixes work together to produce trends.

If you see trends like these in your business the first thing you need to do is a market survey to see why the category is growing and if there is something behind the trend. Ask your customers and colleagues if they are seeing the same trend to make sure it’s not a fluke. Then you want to look at your turnover and margin goals and ask yourself whether this is a product that you can buy in-season. Normally, what will lead you out of a down market is product that you can buy immediately, in season.

If the trend is something that you can respond to in season, you’ll want to increase your planned turn and make sure you are not overbought in other areas. Getting out of down cycles is a chasing process. You need to find your opportunities and put yourself in a position where you are chasing inventory to improve cash flow and increase margins. It’s all about gross profit dollars. You want to be in a position where you are chasing gross profit dollars rather than running from payables.

A down market brings with it other opportunities, particularly in real estate. If you are looking to expand, this is the time to negotiate lower rents on prime locations. It’s also a good time to check out your competitors’ staff. There’s likely to be some unhappy employees who are great sellers but who aren’t being given anything new to sell. This is your chance to approach these sellers. Tell them that you are chasing product and you need someone who’s dedicated to growth. You may get them to come over to your team, and bring their big customer books with them.

It may be tempting to hunker down when things get rough but that’s not how you survive in a down market. Take a look around at the opportunities within your own store and make some strategic decisions.

I use a critical tool to help my clients stay in-line with their profit goals. I call it the Acid Test. The Acid Test measures the relationship between how much we buy and how much we sell. It compares your purchases at cost for a season or a year with your sales over the same period. You can also use the concept to project gross profit.

You can do an Acid Test on your business by taking your purchases at cost over a defined period of time (such as the last 12 months or year to date) and divide that number with your sales for the same period. Your goal is to get a factor that is the inverse or cost complement, of your planned margin. For example, if your planned margin is 55% you want your Acid Test to come out at 45%. If the factor is higher than the inverse complement, you are building inventory, turn rates are slowing and cash is being squeezed. If the inverse complement factor is lower, you are driving down your inventory and freeing cash.

For retailers, this number is one of the most powerful indicators we can use to assess the profitability of a business. Give the Acid Test a try and if the numbers don't line up, give Blacks a call. With a little analysis an optimum factor can be determined for your company.

What you may not realize is that trends are at the very heart of your business. The trend cycles you see in your company are directly related to trends in your industry and in the overall market.

You can take advantage of these trends if you know how to interpret them. When you spot a major market trend, you need to determine how that trend will play out in the segment of the market that you live in. Then you look at your own business to see if and how you can benefit from the trend.

Let’s look at an example in the apparel sector. Last year, men’s wear vendors told us that shorts were going to be huge this year. That’s an overall market trend. If you owned a better men’s wear store, you might ask yourself, “How will the shorts trend affect my segment of the industry?”

Since the better men’s wear market is primed to pick up on high-priced shorts, you may determine that this is an opportunity for you. But first you need to look at your particular situation, including your position in the trend cycles. If you have a fashion store, you’d probably do well by picking up on the shorts trend. If it’s a more traditional store with older clientele, you may choose to sit this one out.

Information is King
Entrepreneurs often use intuition to detect and interpret trends. Most successful businesspeople have good intuition about what’s going on in their market. However, at a certain point, businesses grow beyond the capabilities of intuition. As the company gets larger and more complex, you need information and guidance to validate and support your natural instincts.

In trending, information is king. You need as much information as you can assimilate to make smart choices. You need highly refined data and data analysis to tell you exactly what’s going on in your business from month to month, and a system for accumulating information on external market trends.

Once you have pools of knowledge on external and internal trends, you can leverage this information to increase sales and improve margins. Intuition is still at play, but now it’s supported by a validation mechanism. And it’s easier to fund your intuition because you’ve acquired data that backs up what you ‘feel’ will happen in the market.

Knowing When You Need Help
It can be easy to feel overwhelmed by trending if you don’t have the right information at your disposal. If profits aren’t in line with expectations, you know you need help. It’s time to invest in resources that will help you track and interpret the trends. This could mean investment in a data system to allow you to extract and analyze information and the help of a trending expert who knows how to read the data.

First, you need a system that will structure your data in a way that mirrors how the market looks at information. In apparel, for example, the data should be structured by category so trends happening in womens’ knits match what’s going on in your own knit category. Once you have the data, you can look at trends that happened last year as well as this season. From that information you can begin to predict what will happen in the next 60 to 90 days and even further out.

Unless you are really market- and numbers-savvy, this may require the help of an expert data analyst who is trained to read the cycles. Your analyst should be able to interpret the trends from the overall market level down to your specific situation. With the right data analysis, profits should begin to align with expectations.

Every business is affected by trend cycles. One of the greatest mistakes we can make as businesspeople is not seizing the opportunities that trends offer us. It takes information, intuition and diligence to keep on top of the trends, but that’s part of what makes business fun.

At Blacks we are constantly working to improve our analytical tools (which we think are best of class) and to expand our knowledge and expertise in different aspects of retail business such as e-commerce, leadership development and mergers and acquisitions.

Everything we do is aimed at helping our clients succeed in their own unique businesses. There are no cookie cutter solutions. We look at each aspect of our clients' businesses – from finance to fashion, to management, competition and sales strategies – to identify growth opportunities and fine tune profits.

I am excited about the work we are doing and the results we are achieving for our clients. This blog is about sharing my experiences with the public and creating an open dialogue on how to improve our skills as retailers. So, stick around because it should be an interesting ride. And remember, always Be In The Black.

-Steve Pruitt, Senior Consultant at Blacks