Inventory. Such a huge subject. Everyone in retail talks about ‘managing your inventory’ but it’s easier to manage a rogue employee than it is your own inventory, particularly if you are a multi-brand boutique with various product types and many suppliers.
I’m not sure I would say I completely ‘mastered my inventory management’ even after 10 years and multiple stores. The problem grew when I increased my number of stores because suddenly not only was I dealing with stock levels but I was also dealing with stock locations…
For sure my number 1 advice with inventory management is to really monitor your stock turnover rates. It almost takes the number one place over profitability because your stock turnover rates tell you both what is selling fast(or slow) and when to re-order.
Which leads me onto ‘Missed opportunities’. This is a big part of your inventory management. It is equally as important to monitor what you don’t sell as what you do. I’ll give you an example. Brand X is the number 4 selling brand in your store. It continually sells well every time you receive it. Yet you only re-order it when it is almost sold out because it takes up a lot of your cash flow. Then sometimes the delivery is delayed or the supplier is slow to respond. For 2 weeks you don’t have it in stock and perhaps 10 clients come in asking for it. You have to tell them you don’t have it at the moment. What’s the opportunity cost in that? Is it just those 10 clients or is it also the other potential clients that have been in the store but don’t know you normally sell Brand X and therefore didn’t even have the chance to see it or buy it. Is it also that the clients may find another retailer in the meantime who does have it and move their loyalty to them?
Let’s Get Real…
In saying all of the above, I do understand it is impossible to have all items in stock all the time. Heck, even huge retailers don’t achieve that and sometimes it is out of your control when a supplier isn’t able to deliver what you want. However, your advantage as a smaller retailer is how you and your team are handling situations of out of stock.
For example, a customer asks if you have the Rosemary Shampoo from Brand X. Your assistant checks the shelf and the computer and apologetically informs the client that unfortunately you are currently out of stock. She may go one step further and ask if they would be interested in another brand? But the customer knows what she likes and kindly refuses. She leaves and googles an online store who carries the brand and orders online, after all she needs it quite quickly as she is running out.
How could that situation have been better handled? Sure, the assistant was polite but ultimately she let the client leave without a purchase. A real missed opportunity as the client came in willing to purchase. Team communication plays a huge part in this. Had the sales assistant been aware that the new stock was arriving within a few days, she could have offered this information to the customer and suggested to call the customer once it arrives. Chances are the customer would have been happy to wait 2/3 days and come back. In some cases, if you have a delivery system set up for your online store, you could also offer free delivery of the item to your customer if she wanted to purchase it now.
‘A lesson from larger online stores – communicating your ‘back in stock’ items to your customers. A customer won’t be frustrated to hear from your store if their favorite product is back in stock. Even if they don’t need it right now, it was a nice touch point with your customer so they remember your store next time.’
Another factor in managing missed opportunities is creating a communication method that your team uses to record information for you. Perhaps they spoke to a new customer who came in looking for a particular brand or product that you don’t sell. It’s worth knowing that they thought to try your store for it. But what if over time, many more clients are asking for the same thing? If your team are not feeding this information to you, it won’t show in your sales reports or your out of stock reports or your slow selling, in fact it won’t show in any reports that your fancy POS system is generating because you don’t yet have it as a category. You never sold ‘baby lotions’ before as your store is focused on organic skincare for women for example. But if there is a demand coming directly from your clients, then it is something you should be looking at. Train your team to log and communicate ALL this vital information to you. They are your eyes and ears and your direct contact with your customers.
The overall lesson is there are a lot of potential sales to gain from managing your missed opportunities. And best of all, it doesn’t require any extra marketing dollars!
“I was reading all these reports that were down on retail brick and mortar, saying it’s all about online… I think brick and mortar is an amazing opportunity to use our stores and our store staff as a vehicle to truly engage with the community in a way no other retailers are doing.” – Jim Brett, President, West Elm