BrainTrust Query: Six Tips to Drive Inventory Turnover
Through a special arrangement, presented here for discussion is a summary of a current article from the Hurlbut & Associates blog.
An inventory that’s turning quickly typically is lean and focused with exceptional assortments, a continuous flow of new merchandise and compelling presentations. All of that leads to customers who visit often, buy with an acute sense of urgency, and pay full retail.
Here are six ways to drive your inventory turnover:
Buy more frequently. When you buy less frequently — by front-loading your deliveries into the beginning of a season, for example — you extend the time between when the merchandise arrives and when you expect to sell it. The merchandise, and the store it’s in, tends to get stale as a result. If your best customers are in every four weeks or so, and you have merchandise an average of three months before you sell it, that’s at least two times those customers will see it before they purchase it, if they purchase it at all. Each time they come in and don’t buy it, the perceived value in their minds goes down.
Buy in smaller quantities. When you buy larger quantities of an item, customers instinctively sense that they don’t have to make an immediate decision when they see something they like. When they see less depth, they instinctively understand that they need to act quickly. Further, when you buy smaller quantities of an item, you’re left with dollars to bring in something new right behind it. That way, every time a customer visits, there are new things for them to consider.
Buy the best. In the world of good, better, and best, buy the best and leave the rest to somebody else. In a marketplace of me-too merchandise, seek out the exceptional.
Let presentations breathe. When everything is given its proper place on the stage, the stars can shine and all of the supporting actors can do their job. When that happens, customers can easily differentiate each item, find what they are looking for and discover that unexpected treasure. When presentations breathe, sales increase and the inventory turns much faster.
Cull out the sludge. Sludge is the merchandise that just sits there, on the bottom, doing nothing. In some cases the sludge can be pretty toxic, poisoning and de-valuing any other merchandise in its vicinity.
Don’t discount. Discounting cheapens the perceived value of everything in your store, whether on sale or not. It encourages shoppers to wait for the next sale, rather than buy today. In slowing your turn, it ages your inventory, leaving ever-larger swathes of inventory to clear at clearance time. And, because it takes ever-greater discounts to get the same response from customers, it takes ever-greater discounts for the retailer to get the same high.
Discussion Questions: What are some best practices for improving inventory turnover? Which suggestions would you add to those mentioned in the article?