Inventory is one of the cornerstones of any retail business. It’s also a retailer’s single biggest expense, and managing it efficiently is crucial for success. The March 2022 manufacturing and trade statistics from the U.S. Census Bureau reveal that for every dollar a retail business makes in sales, they have $1.27 in inventory still on their shelves. The costs associated with inventory impact pricing, purchasing, and stocking decisions, so it’s essential to understand them.
Inventory costs include more than just the wholesale price of the products themselves. Besides purchase costs, retailers must also factor in:
One way to keep inventory costs low is to increase the turnover rate. Products sitting on your shelves are tied-up capital that you can’t re-invest back into your business. You need to keep it moving quickly to free up that capital and reduce the costs of storing it. The longer you hold onto inventory, the lower your profits will be as the holding costs mount. Often, liquidating inventory in a timely manner is the best option for preserving the highest possible profit margin, and inventory management software is an essential tool in this process.
Smart forecasting and purchasing can help keep a lid on surplus inventory. It’s vital to monitor inventory data to keep a finger on the pulse of what’s selling and what trends may have passed with each season. Analyzing historical data from your inventory management software enables you to identify patterns at your store and forecast demand in your market. You’ll understand your business at a granular level, learning how many of each type of item will prevent stock outages (and disappointed customers) but not result in excess inventory. You can then work with suppliers and vendors to find that sweet spot between under-and overstocking.
However, nearly every retailer has merchandise that changes with the seasons or when the next latest and greatest thing is introduced (such as the newest seasonal trend such as back to school or valentines day). Seasonal shifts include candy canes and hot cocoa vs. s’mores ingredients and lemonade in the grocery store; cold and flu medications vs. allergy meds and bug spray in the pharmacy; and winter dry-skin moisturizers vs. sunscreen and seasonal scents for soaps in health and beauty stores. Liquidating inventory may be necessary at the end of each season to clear space for what customers will be buying next.
If you find that inventory is slow-moving, or you need a refresh for a new season, there are several strategies you can implement in your store:
Your strategies for liquidating inventory, if done well, can result in better customer experiences, increased loyalty, and repeat business. The customer spend that these approaches generate can make up for money lost on costs for the liquidated inventory.
Managing these strategies can easily be done using an advanced inventory module. With advanced reporting features and robust management software implementing these strategies has never been easier to do, with Star-Link this can all be managed from one headquarters.
If your in-store strategies for liquidating inventory still leave you with excess, there are additional outside approaches to try:
A warehouse full of inventory that isn’t moving won’t help your business or your customers.
Thanks to inventory management software you can avoid having to liquidate inventory and minimize loss prevention. Reducing the amount of older products on your shelves that are more prone to getting lost, stolen, damaged, or outdated. With the right management tools, you can build a data-based strategy to forecast, purchase, and move inventory, delivering what customers want and need while maximizing revenue and profits.
Auto-Star has been an innovator in inventory management for more than three decades. Ensuring that small businesses can optimize their inventory and stock to keep cash flow even throughout the year. Visit our website to download our free eBook detailing the ways an inventory management system can improve your business. For a demo, a quote, or any questions, contact us today.