by Barbara Crowhurst
Profit margins are the first numbers to look at to determine and weed out slow-selling lines. Although determining a profit margin can be a useful tool to determine your business' success, there isn't a one-size-fits-all retailers should hope to achieve. Rather than determining your margin based upon somewhat arbitrary industry averages, you're best suited to projecting reasonable profit goals, and attempting to set your profit margin to meet those goals. After you determine a profit goal, work backwards to determine the margin you need to achieve to reach that goal.
Maintaining the proper amounts of inventory can be very challenging. While maintaining inventories to satisfy customers, being over stocked comes at a price. In previous articles, I have talked to you about the OTT System of setting buying budgets against sales. If you are currently using The Open to Thrive System of buying, you are now in much better shape and more in control of your inventory. Check out my website for my Retail Makeover Open to Thrive System.
5 tips to help you through this important issue:
First: Stop over buying to avoid being over stocked in slow-selling lines.
Using inventory software which allows you to print and read bar codes with a pricing and dating option while providing a wide and detailed range of reports and statistical information is best. I recommend you have a serious look at a good inventory tracking system a.s.a.p. The costs here are reasonable and well worth the investment. In most cases you can pick up a leasing option which I highly recommend retailers look at.
I work with many retailers who choose manual inventory systems. That’s ok as a very short-term solution but it’s time consuming and in most cases lacks accuracy and speed for required information.
In general tracking inventory takes time and an understanding that your cash flow is directly linked to your inventory.
A well run inventory system will help meet your customers' needs, which looked at another way will take sales and your business to the next level.
Second: Determining slow-moving lines is made easy if you have the tech support and a well maintained inventory system.
Third: The report that will show you most accurately what you are selling, how much you are selling and what amount as a percentage of total sales for each of your lines is called Sales by Category.
Fourth: Product tracking will help you keep on top of your inventory and weed out your slow-selling lines.
Fifth: I recommend that you check your inventory numbers monthly at a minimum.
Slow sellers that have been in inventory a long time must be moved. Unless these are seasonal items, which will sell in a very specific time frame, you should consider putting them on sale so you can put your money into faster-moving items.
Any lines that have been in your store for more than one calendar year and have not sold must be weeded out. I say to my clients the test is over at this point. The slow-selling line is asked to leave the store. After you have identified the slow-moving product do not wait to clear it out. Put the product in your clearance area or have a special inventory clearance event sale.
Barbara Crowhurst is North America’s leading retail business coach. She also writes retail specific articles, blogs and e-books, and is an international speaker. Her comprehensive and detailed approach to retail comes from years of working in the industry with some of the largest corporate retail stores in North America and tens of thousands of independent retailers.
Barbara was a Retail Solutions Seminars speaker at the recent Fall 2017 Toronto Gift Fair.