Inventory management can offer many challenges for both off- and on-line retailers – especially those just starting out. You might order too much and have inventory sitting there, taking up space in your store or warehouse, or tying up your money until you unload the items and recover your costs.
With limited space and money, bad inventory management can paralyze your business, or worse, put you out of business. You won’t be able to invest in other brands, nor will you have access to funds to do important tasks like marketing. What’s a retailer to do?
For more than a decade, I owned my own online retail store. One of the most difficult aspects, I found, was inventory management. I suspect many retailers face the same challenges and dilemmas I once faced, so I wanted to share five inventory management best-practice tips with you.
1. Carry More SKUs than Brands: You might think you’re better off carrying more brands vs. more SKUs of one brand, but the truth is you’re worse off. If your resources are limited, you are better off investing in an entire brand (all SKUs) vs. a few SKUs here and there. I can almost always guarantee you that most people will back out of a large order or abandon their shopping cart online just because you don’t carry one of the many SKUs they want… and you just lost a would-be customer.
2. Keep Inventory Low: While it’s tempting to stock up on all the items you think you might need or because it was a good deal to buy in large quantities, too much stock taxes your financial and space constraints. Keeping inventory low is often a challenge when working direct with manufacturers, as they often require high order minimums. You can minimize this by working with a manufacturer sales rep, which can buy at large qualities and break bulk order for its retailer clients. You’ll pay exactly the same wholesale price to a manufacturer as a manufacturer sales rep, yet you’ll have much more control over your inventory when working with a manufacturer rep agency.
3. Doesn’t Sell? Move On: If a brand doesn’t sell in 60 days, it’s time to clear it out at a discount and recoup as much as your money as possible. Don’t hold inventory for more than 60 days because it will just sit there and eventually you’ll cave and clearance it anyway, so you might as well do it now and put that money towards something else. Sometimes you have to count your losses early – and as Kenny Rogers says in The Gambler, “You got to know when to hold ‘em, know’ when to fold ‘em, know when to walk away, and know when to run.” Oh, how true this is …
4. Listen and Learn: It’s likely other retailers will have similar issues with the same brands as you. If it’s not selling in their store, it probably won’t sell in yours. Join retailer groups online and share this kind of information. The more you put out, the more you’ll get back. Green Team Distribution maintains a private Facebook group of retailers that sell the brands it carries – that is a great place to closely monitor what is and isn’t selling among your colleagues, albeit, chances are if it isn’t selling, Green Team Distribution is no longer carrying it.
5. Pre-Qualify Brands: You must make it your mission to pre-qualify any brand you carry in your store. Are they insured? What is their fan feedback like on social media? How do they treat their retailers? Can they provide you with CPS safety testing documentation? Again, if Green Team Distribution is carrying the brand, this due diligence is done for you. But if you’re carrying brands outside of what Green Team Distribution offers, make sure you do your homework.
These inventory management best practices will save you from wasting your time with brands that don’t make you money, ensure good cash flow from the ones you do work with, as well as keep your business thriving and profitable for many years to come. Good luck! – Kelly