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+++ S P E C I A L R E P O R T +++
Copyright 1998-2000 George Matyjewicz
As published in Gifts & Decorative Accessories Magazine
and other publications
August 25, 2000

Gift retailers have a large turnover of small items, usually with low margins. Hence, the cost of a computer system is important. But don't look at out-of-pocket expenses only. Rather you should look at what the system can do to increase business, reduce or avoid costs, and the estimated payback period (which should be less than two years). The most significant cost savings will be in increased inventory turns, reduced shrinkage and reduced markdowns (see sidebar).

What do you look for?

Look for a specialized software package that will satisfy your needs (see Software Checklist sidebar) and one that is easy to use. The cost of hardware and software represents between 25-40% of your total investment in a system. The balance is the cost of training, supplies, outside help, and other such costs. Try to minimize these costs and look for a system that will guide your sales associates through the checkout process in an expedient manner (avoid lines). What do you do if something fails, i.e., the bar code scanner doesn't work, the cash drawer won't open, the credit card authorization doesn't dial out?

Since inventory is your biggest investment, you need to know on a daily basis which products are selling and which are not, so you can take action fast. How does sales compare to last year at this time? Which salesperson is performing best? But, more importantly, which customers bought what. Proper sales tracking will allow you to negotiate better pricing from suppliers, increase sales to customers by stocking properly, increase inventory turns, reduce costs and increase margins.

Other features.

The items in the Software Checklist covers most requirements of a retailer. However, there are some that require special attention:

Bar code printing. In the gift business, bar coding is not yet as prevalent as in other industries. If you plan to scan your merchandise at the register, you need to be able to print bar code labels, which means specialized software that integrates with your inventory file and special bar code printers.

Purchase order processing. If you run low on merchandise, can the system order automatically? When merchandise is received, will it match with the purchase order, and when the invoice is received, does it agree with the price on you order? All part of internal controls.

Advertising Tracking. This is a feature that most systems don't offer, yet is one that can be most beneficial. You probably spend a lot of money on advertising, so you should know which ads are pulling and how effective is the ad. A simple way to handle ad tracking even if your system doesn't is to assign an inventory item to the ad (no cost or sales price). Then when customers redeem coupons, post a “sale” to that item. 


Some systems have their own accounting interface where sales, purchases and adjustments are automatically transferred to an accounting module. Others link to standard off-the-shelf packages. Ask your accountant for help in this area. Remember, your accounting system does not generate revenue or profit for you, but your Point of Sale system will.

Sandra Devereux-Croutch, a Chartered Accountant and former gift retailer from Toronto (1) recommends to her clients: “Before you shop for a system, spend some time documenting your requirements while you are working. Keep a notepad handy, and make a note every time you need info that's not readily available, every time something takes more time than it should, every time you or one of your staff has a problem with your current process and every time you wish you could do something that you can't now.” 

How much can you afford?

Let’s assume your annual sales are $1 million and you are turning inventory 3 times a year, and your markdowns are 19% and shrinkage of 3.5% of sales. If you can turn inventory once more a year (to four), obtain a modest 1% improvement in markdowns and ˝ % decrease in shrinkage, and you want a 2 year payout, you can afford to spend $66,666 (see sidebar). 

Where do you look?

Talk to fellow gift retailers and see what they use, and if it satisfies your needs. Don't assume that it will, because you are in the same business. They may manage their business differently.

Or contact your associations to see if they have analyzed any products and would make recommendations. If you have access to the Internet, search for software or join a discussion list like E-Tailer’s Digest, where retailer’s from 40 countries meet to discuss matters pertinent to retailing, including software. 

But, you need to evaluate software on an equal basis. Take the Software Checklist, add to it the list that you developed and start reviewing. There are hundreds of systems available, all with different features. You need to find the one that satisfies your needs.

Good retailing.


Use this checklist when you are evaluating software in order to compare vendors and
packages equally.


· Vendor name and address and contact (including owner/president)
· How long has the vendor been in business?
· What operating system and hardware platform?
· What is the typical customer profile to whom the vendor sells?
· How often are updates provided?
· How much does the vendor spend on R&D each year?
· When was package introduced?
· When was it last updated?
· How often is it updated?
· What were the major features of the last update?
· Is the software compatible with year 2,000?
· How many installations?
· How many similar to your business?
· Is the package multi-company? Multi-warehouse?
· Does it have a note pad ("Post-it ®")throughout system?
· Does it have a Report Writer (whose)
· Can the user define information on screens?
· What database structure is used? 4GL?
· Include references of similar customer profile (name, contact, telephone#, date went live)
· Password Security - Multi Level


· Price Look Up (PLU) for each item, and displays item description for verification. 
· Inventory look up by item, vendor, description or price.
· Multiple sales tax options
· Discounts and returns per item or for the entire sale
· Checks for promotion price in effect.
· End of day ("Z" out) routine for controlling cash and nightly deposit.
· Tendering user-defined payment types, i.e., cash, check, credit cards, gift certificates,
store receivables, etc. 
· Credit limit checking on customers.
· Allow for user-defined levels, i.e., style, color, size, width.
· Provide customer profile information to allow you to better service your customers. 
· Ability to add new customers at the store.
· Track customer "club" purchases.
· Maintaining special functions like layaways and gift certificates.
· Maintaining "kits" which are items made up of other regular inventory items. 
· Serial number control, if needed.
· Accepts payment or deposits on account.
· UPC bar code scanning.
· Credit card authorization


Allow you and your store managers to obtain more useful information to better manage each
store. Some information provided includes:

· Assess staff requirements for peak/slow periods and simplifying scheduling activities.
· Maintain inventory items by manufacturer, class, subclass, department, season, product
line, model and up to four user-defined levels, i.e., style, color, size, width.
· Provide customer profile information to allow you to better service your customers. 
· Send mailings based on buying habits.
· Produce purchase ordering information.
· Physical inventory via scanning UPC bar coding.
· Fast/slow moving reports.
· Track sales by employee, customer and item for sales analysis.
· Layaways, Gift Certificates and Bridal (or Gift) Registry.
· Employee Time Clock
· Sales exception reports
· Sales promotions reports
· Sales time analysis reports
· Sales by day/week
· Comparison sales reports ­ this year vs last year by day
· Ease of Programming Price Changes & Promotions
· Flexible Report Formats - Plus Easy Pre-programmed Report Formats
· Ability to Network - do you want to do everything at the Sales Desk?


· Sales audit reporting
· Sales reports by department, vendor/season, vendor/class, class, fast/slow moving items.
· Inventory turn report
· Inventory sales reports and graphs
· Sales performance report by employee.
· Commission reporting.
· Customer sales summary, call list, history, mailing labels/letters, etc.
· Accounts receivable
· Purchase order writing and control.
· Merchandising reports and open-to-buy.
· Ticket printing.
· Polling from/to stores.
· Accounts payable.
· General ledger interface to many standard packages.


Does the vendor provide...
· National 800 telephone number help line.
· On-site support.
· 900 number “pay as you go” support.
· What are the hours of support? (You need weekends and evenings.)
· Software updates and enhancements.
· Disaster recovery backup facilities.
· Education assistance (at your site or vendor’s?).
· Regularly scheduled review meetings.
· Implementation schedules.
· Custom programming.
· Consulting services.


· Implementation meeting?
· Training at your office or vendor’s? To who is training geared?
· One vendor for hardware, software, network & support?
· What testing procedures are used? Parallel runs?
· Data conversion if you presently have a system.
· Computer form and supplies including custom-printed forms like hang tags, labels, checks,
invoices and statements.


· Identify management and staff
· Physical planning
· Operation of the system
· Training and availability of time for staff to learn the system.
· Staffing and discipline ­ employees must be reliable and available.
· Extra workload and overtime ­ Plan for it!
· Internal controls ­ check with your accountant

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