Let me start by asking if you have super powers? Do you have the kind of super power that can see into the future and see what other people will do? No? I thought not. Then start by not giving yourself such a hard time over inventory. Inventory can be a huge headache point for a lot of retailers, big or small and I want to help change that negative mindset a little.
There are many facets of inventory – quantities, location, pricing to name a few. Inventory control in its simplistic form – you buy a product, you display it, you sell it, you re-order it. The complications come when we are doing that with hundreds of items, you sell some quickly, some take longer and some don’t sell at all. Some items have good margins, some don’t. Some take weeks to be delivered, others only days. Some products need barcodes creating, some already come with barcodes, some items are repeats, some are one-off orders. The list goes on, it’s no wonder it’s a huge form of stress for retailers.
I want to firstly bust the myth in your mind that big retailers have amazing systems and processes that enable them to know exactly what to buy and where their stock is at all times.
Do big retailers go on sale? Yes. Why? Because they didn’t sell everything they purchased or manufactured. They have excess stock to move because they can’t totally predict what consumers are going to buy.
Do big retailers run out of products? Yes. Why? Because again they might have under-predicted how well a certain style or colour will sell.
Do big retailers lose stock? Hell yes! All the time!
So what is the ‘right’ way to be managing your inventory? My belief is that there isn’t a ‘right’ way that works for everyone but here are some basic principles that can apply for independent retailers:-
- You need to know how much inventory you have at all times. When you lose a grip on that, and don’t trust what your software report is telling you (been there!), you are in dangerous waters. Your inventory is one of your biggest costs in retail and it’s where your cashflow can get into trouble which as we all know has terrible consequences. So put strict procedures in place in your business to keep a track of your inventory.
- You need to be turning over your inventory at a reasonably fast pace. No stock should be sitting for months on end if you can avoid it. This is for a few reasons – products generally don’t sit well for long and will start to look tired and less appealing, stuck inventory is money sitting in your business that you can’t access and there is also a danger that clients will tire of seeing that same stock on your shelves and it will portray a negative brand association. As a general rule of thumb, if it isn’t moving after more than 6 months (less in some cases), discount it, don’t waste time storing it or endlessly re-merchandising it. Just reduce and move on to purchasing something else that will hopefully sell better.
- You need to be inputting the right cost prices into your system and be pricing your products at the right price for your business. Sounds obvious but cost prices can get into a mess if you aren’t careful. For example, different suppliers will price things in different ways on their invoices. Some apply a discount to the entire invoice, some show each product price separately, some show retail price and then a discount percentage, some will be taxed, others not, etc etc. Some of your suppliers may give you fixed retail prices, others might give you more flexibility. My advice is to always take a little extra time when inputting your purchase orders into your inventory software to make sure the numbers are accurate.
You have to be realistic about the control of your inventory. Set up processes, use your data and make clever decisions based on the information you have. And then sprinkle that logic with a bit of ‘faith’ and fairy dust….
For more detailed personal advice on managing your inventory, schedule a consulting session with me by getting in touch here.