Product Preference / Profit: New Merchandise

Here's a trend I'm seeing now.

In 2021 it was hard to source new merchandise (for some). This means that there were fewer new items sold in 2021, and less sales from new items in 2021.

Now it is 2022. Those new items have become existing items. Guess what? Those items are delivering reduced sales in 2022.

Example: Your brand might expect to offer 100 new items in 2021 and generate $10,000 per new item. 100 * $10,000 = $1,000,000. The following year those items generate 120% of the sales of the year prior. Therefore, 2022 should show $1,000,000 * 1.2 = $1,200,000.

• However: In 2021 only 80 new items were sourced, generating $8,000 per new item. 80 * $8,000 = $640,000. In 2022, those items should generate 120% of 2021 levels. $640,000 * 1.2 = $768,000.

Yup, you lose $1,200,000 - $768,000 = $432,000 in sales in 2022 because of new merchandise issues in 2021. If your "Profit Factor" is 40%, well, you just gave up $432,000 * 0.40 = $172,800 profit in 2022.

Trouble, folks.

In 2021, we had gains caused by the compound interest generated by all those COVID-buyers in 2020.

In 2022, some of us will lose money caused by having too few new items in 2021. I'm seeing the problem all over the place, now.

Analyze your data carefully. If you don't have the tools to do that, contact me for a "Hillstrom's Profit" project (click here).