Facepalming with Ritchie

Oh Dear Lord:

I’ve already noted Sir Philip Green’s report on supposed government purchasing inefficiency, and the gaping holes in it, here and here.

But then it occurred to me – if he’s so good at buying why do his stores ever have sales?

After all, aren’t sales just an opportunity for a store to get rid, at low margin, of what they bought in error and couldn’t sell at full price / margin? If he’s so good at buying surely they wouldn’t need to do that, would they?

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I cannot believe that it\’s necessary to point out to an accountant that there\’s a difference between purchasing for resale, those items which may or may not catch the eye of the passing and fickle public, and purchasing for one\’s own internal consumption: something which you really rather should know how much you\’re going to use.

The difference being between not quite knowing what you should buy to sell and buying well what you already know you\’re going to use.

18 thoughts on “Facepalming with Ritchie”

  1. The correct comparison which Dickie fails to make is, for example, how much Phillip Green’s businesses pay for a box of paper. I doubt is is £73.

    You could work the comparison the other way. If Phillip Green’s shops were like the Government they would never have sales. The customers would be obliged to buy whatever was on the shelves at whatever prices the shopkeeper set, whether they wanted the stuff or not, there would be no competing shops to keep prices keen and most of the things you had to buy would be given to other people.

  2. only retails “bad at buying” would bother to have sales
    all retailers have sales
    all retailers are bad at buying?

  3. What Murphy is arguing is that if Topshop buyers can’t predict with 100% accuracy what next season’s fashion will be and how much of it their customers will want, central government can’t be expected to get A4 paper at the best price… er…

    Oh, and one of his disciples makes the usual, tired and wrong argument that Green isn’t competent to comment on the cost of A4 paper because of his tax arrangements…

  4. It is funny that Ritchie doesn’t know the difference between cost of sales and overheads, but he doesn’t know why sales are held either.

    Sales are about more than liquidating stock that was purchased in error, if indeed they are about that at all. Sometimes they’re a marketing device that make people think they’re getting a bargain despite paying prices that give the retailer a desirable margin. Sometimes they’re a way of turning slower moving stock into cash, then into faster moving stock. Targeted sales can get people in who’ll also spend money on other, non-discounted goods.

    In every case, they’re about the pro-active management of resources, getting the very best value for stakeholders, something that seems to be beyond not just Mr Murphy’s comprehension, but also that of anyone who isn’t keen to minimise tax as an end in itself..

  5. if he’s so good at buying…

    Ah, but he is good at buying. We know that for a fact, because he owns stores to have sales in. That’s the market in action. On the other hand, we have no idea at all whether Sir Humphrey is any good at buying because there is no market in mandarins.

    Gareth, reminds of GUM back in the good old days!

  6. I’m still laughing at the very idea that Sir Philip Green, retail magnate and billionaire, has anything he can learn from a chubby, retired dog-eared accountant whose business experience in the last ten years amounts to little more than cashing cheques from pressure groups and other assorted special interests who need someone quasi-independent to argue their case for more resources.

    If he has any experience in retail at all, it’s working in a shop as a teenager.

  7. Murphy never had a job in a shop. Not with that attitude. He’d have got in a strop with the manager over some slack-jawed misapprehension about how the retail process works and been fired by lunchtime. In fact I can quite imagine his being serially fired for being a mulish, supercilious dickhead would work as a plausible device for the plot of a hypothetical Murphy Bildungsroman.

    Truly he exhibits that quality, most refractory to ratiocination, that the Jesuits dubbed ‘invincible ignorance.’ What really stuns one is not the specificity but the generality of his ignorance. I mean, all of us are dumb about something, but being dumb about everything is quite a neat trick. I bet he was even a shit accountant.

  8. Actually ‘sales’ have declined a lot in recent years, at least the annual stock clearance type, due to better inventory management.

  9. KT: Murphy’s exact location along the spectrum of ignorance is a matter for Augustinian levels of dispute (for once Wikipedia pulls its weight.) I incline towards invincible ignorance perhaps from an excess of charity: “Lord forgive him, for he knoweth not what he do.” A more unkindly reader would put him further towards the camp of the ‘studied’ or ‘affected’ ignorant, which most decidedly is not a venial sin*, and in fact increases his culpability: “Lord forgive him not, for he knoweth what he do, and the bugger, being unrighteous in thy sight, doth it anyway for a paycheque from the RMT.”

    * albeit in Murphy’s case very much a venal one if so

  10. is it Magnet – certainly one of the fitted kitchen places – where the “sales” are actually a chance to purchase at a price higher than the local manager might offer as a standard discount? IE you might get a better deal if you did not buy at the “sale”

  11. As far as I’m aware, the rag trade ‘price in’ the sales into the total projected profit margin. So many will be sold @ full retail, early season, so many @ reduction, late season .Frocks have different values to the consumer at different points in the season Intention is to sell as many frocks as poss @ profit.

  12. On reflection,I recall when I worked for a manufacturer back in the early 70’s they were delivering frocks to outlets well towards the end of the season & invoicing at below the pre-season price. They still made a profit on those orders.
    I’d never actually considered this before, as back then I was more interested in the pub on Friday night than the intimate economics of the rag trade, but it seems a logical resonse to a cyclical demand. Sell high when demand is high, cheap when demand is low. They still had to carry the warehousing/office/distribution costs 52 weeks the year so why not utilise them?

    But then when did Spud Murphy ever understand markets or business?

  13. This is one of the silliest thing I have seen Richard Murphy say. Sales can be used as a marketing device! Obviously.

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