Managing your inventory with data
Finally your dream of running your own business has become a reality.
You’re a retail store owner and you’re passionate about what you do. But like many, you’re making your buying decisions based on personal preference rather than hard data. While that may be what gives your retail store it’s unique edge, you need more backing when you’re making decisions in order to efficiently prioritize your inventory by understanding inventory buying decisions, promoting inventory the right way, analyzing your inventory data, inventory shrinkage, repairs and cutting your losses.
So what is the best practice when deciding which inventory items to restock? Knowing what specific data to look at can help you make smarter business decisions for all aspects of your store – we explain the why and how below.
Inventory buying decisions
First of all, you should be using past sales to direct current inventory buying decisions. What sells well at your store and what doesn’t. Where do you need more, where do you need less. Seasonality will always play a big role in your projections — buying for Christmas in time (i.e. during the summer) will mean that you’re prepared when the time comes. Looking at your sales data from previous years allows you to have a better grasp on when you should expand inventory and when exactly to cut back – learn from both your mistakes and successes.
“Up to 16% of in- stock SKUs that were reported lost or stolen were actually misplaced, negatively impacting profits by an entire 25% (Harvard Business Review)”
Promoting inventory the right way
The right kind of promotion can make the difference between an item being sold out verses left collecting dust on your shelves. One key way to ensure the latter doesn’t occur is by analyzing your customer and item correlations — meaning what types of customers are buying which product (s). This is useful for many reasons when marketing your items. For example, if men are the target demographic for engagement rings during peak wedding season and there happens to be no spike in engagement ring sales, taking a hard look at how you are targeting your core demographic (men) and adjusting accordingly would be your solution.
Analyzing your inventory data
Always analyze special requests and special orders that you receive from clients. If customers are frequently ordering items that you aren’t carrying, this could be a huge indicator that you’re not ordering the right inventory based on your customer’s product desires. Paying attention to what sells fast verses what what takes longer to pick up speed will also help you adjust your inventory buying patterns. Finding a happy balance between not having enough of something at the right time and having too much of inventory of an item that takes longer to sell is key in keeping your floor profitable.
Do you analyze the shrinkage in your store on a regular basis? Seeing which items you’re losing more of than you should be may further help you with your merchandising and in assessing what items should perhaps be under lock and key as a preventative measure. According to a study done by Harvard it was common that goods were routinely misplaced and “lost” by employees (also known as “phantom stock-outs”). Up to 16% of in- stock SKUs that were reported lost or stolen were actually misplaced, negatively impacting profits by an entire 25%. Ensuring your inventory is properly marked by paying close attention to your data will allow you to find any discrepancies immediately, saving you from having bigger problems down the line.
Repairs and cutting your losses
Are there key items you sell that are costing you more in repairs than expected? If these items are breaking your inventory budget while also causing your customers to be routinely frustrated, swapping the item for something more reliable could be a viable option. Diving into some online market research and finding out what other products are available or even finding something new all together will bring better business to your store. Holding on to something that simply isn’t profitable for your bottom line will hurt your business and relationships with customers.
So before you hit the restock option on all your items that you assume will be a hit with your new and returning customers, think it through and analyze your data. Having a reliable method such as a grading system to pass your products to the next level – the restocking option – will save you from making inventory mistakes time and time again. You can keep your retail store feeling unique and fresh, but it doesn’t mean there doesn’t need to be any data behind your perfectly unique recipe for success.
Want to learn more about properly stocking your retail shelves? Learn more about inventory management best practices!
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