The secret to retail success is the right inventory. Location, marketing, décor, music, and displays all matter, but the heart of your business remains what you choose
to put in it.
Inventory is the heart of your business
Inventory management can be a tightrope walk. Excess inventory ensures you don’t run out of stock, but it also causes its own set of problems:
– It prevents you from bringing in fresh stock.
– It increases your carrying costs (rent, interest, utility costs, insurance, taxes).
– It overwhelms your customer with too much choice, which studies have shown to lower sales.
Excess inventory is particularly dangerous for your store’s financial health. “Retailers face higher risk of bankruptcy when carrying excessive inventory,” say two prominent professors of operations management. Too much inventory can also lead to excessive discounting, which eats into your profits.
On the other hand, not carrying enough inventory will cause you to miss sales opportunities, leading to lower revenue and dissatisfied customers. A recent study
by IHL Group showed that worldwide, retailers collectively lose an estimated $800 billion a year due to mistaking low sales for low demand, making it one of the more damaging, yet preventable, issues facing retailers.
The good news: managing inventory isn’t as hard as you think. We’ve laid out 7 best practices to help you get the perfect inventory balance in your store…