Tales Of A Fourth Generation Textile Executive: Markdowns At The Supplier Level & Beyond

I recently was reading through the latest issue of Fab Shop news and I came across a very interesting article from Karen Montgomery where she was giving suggestions on how to manage your quilt shop.  One of the subjects she covered was marking down goods in order to turn slow moving fabric in to cash and reinvest it elsewhere. This made me think about how we manage our markdowns and closeouts so I wanted to share some insights as to how we deal with this as a fabric supplier.

Let’s call a spade a spade, when something isn’t going to sell, we usually figure this out fairly quickly.  It’s what we do after that which determines the type of owner we are. Like quilt shop owners, on the supplier level, we too need to deal with the same things. When I visit our fabric warehouses, I can usually can tell what needs to be marked down by the amount of dust on the polybag covers.  I am sure that you can tell when your fabric has been sitting on the shelves too long by how dirty it is, how big the bolt is, how frayed the fabric is or how beaten up the board end is. 

From the time that I joined the business, I learned that we aggressively mark goods down.  We usually do this when we take an inventory which could be a couple times a year.  Sometimes we take one big markdown and other times we do it piecemeal. The sooner that you embrace the markdown the better off you end up.  The problem would be if we didn’t take periodic markdowns and just do one big markdown all at once which could be pretty painful and be a big hit to the bottom line.  We prefer to keep things smoother rather than drastic.

In any case, when we do ultimately closeout the goods, depending on the price, we may or may not be making money.  The thing is that we already took the markdown, so if it is a gain, we take a gain, if it is a loss, it probably isn’t terrible because we already marked the goods down.  The bottom line is that it is important to keep moving through the slow moving goods and keep turning them in to cash that can be reinvested in new and better places.  No one is so good that every purchase or sale is a winner.  That would be nice though!

In business, we need to deal with the problems because that is what brings us down. The good things work themselves out.  Hence, this is why we take an aggressive position when it comes to markdowns and closeouts.  Keep moving and don’t fall in love with fabric….you can always get more.  Trust me!

Mark it down & close it out Scott!