September 03, 2019

A Healthy Business

The healthiest businesses are able to charge more for items ... when you see Macy's constantly selling at 40% off, you might be tempted to say "that's their business model".  That's not their business model. That's the outcome of failures in the past. If business is good, you maximize gross margin dollars.

I once worked with an Inventory Director who constantly wanted to mark down merchandise, in an effort to get rid of merchandise. Her goals and objectives were tied to getting rid of the crap. She didn't care if she harmed customers as long as she got rid of the junk.

We can use our Above/Below framework to determine how healthy a business is. Remember, the healthiest businesses are able to extract the most gross margin dollars possible. Tomorrow we'll discuss the business featured in the graph above.

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