Having the right inventory at the right place at the right time is what most retailers used as the golden rule for many years. However, not enough time is spent on inventory NOT in the right inventory, NOT at the right place, and NOT at the right time. Let’s talk about inventory quality improvements you can make. Using data and insights to identify unproductive inventory will help you maximize inventory investment and bottom-line profit.
Unproductive Inventory via Right Data
Consider how many times you have “run out of open to buy” due to carrying high inventories? Your focus was on maximizing sales with each category, so you aggressively bought into product you thought would sell. Before you know it, you have inventory levels that far exceed your plan.
Let’s focus on specific inventory types that you should report, analyze, and act upon, to help you get inventory back on track.
No Sale Activity
Create exception reports around items where there is inventory on hand in stores or warehouse, however no sales. This would apply to individual stores as well, where no sale has occurred. Some potential issues could be; inventory is in backroom, product was physically not received, theft, product not visually presented, or simply the customer is not responding to. Having this data available will allow you to ask the right questions and react accordingly.
Seasonal
Identify seasonal product in and out dates. Then, determine action plans to sell through before the out date. Unsold product will often be packed away or forgotten in backrooms. Be sure to address unsold items with aggressive markdowns, transfers, return to vendors or if intentionally stored for later use, be sure to evaluate overall impact on carrying cost.
Price Type
Ensure you can track inventory (and sales) by pricing activity. Do you know what percent of your overall inventory is regular, promotional and clearance priced at a time dimension? This is critical to know, as it will significantly impact overall margins. If you know in December that very few customers buy anything at regular price, try to align assortment decisions to support customer demand. Bring in special purchases, while supplies last promotional product or unique deals to offset regular priced inventory and sales.
Overstocks
Many retailers focus on in stock reporting which is obviously critical to evaluate sales potential, along with missed sales potential if out of stock. However, what about calculations around overstocks? Are you spending enough time on calculating products that have too much stock? This could simply be calculating presentation minimums plus forward weeks of sales supply. Or simply evaluating inventory turnover. You may find your basic sales units are very predictable, therefore, no need to carry safety stock. This could equal huge average inventory savings.
Freshness Factor
Do you spend enough time on planning and evaluating what percent inventory is new to your assortment? With customers having 24/7 access to online assortments, it is important to keep things interesting and fresh. Great way to do this is buying “while supplies last” inventory to create a sense of urgency. Use this to test next season’s trends or interest. This is minimal inventory investment and great way to create customer interest.
Onesies
I refer to “onesies” as those items that have one to two units, most likely from a customer return or old test product. They have been forgotten and get tucked away in warehouses or backrooms. Sad right? These onesies often amount to something significant. Find these, get rid of them and move on. Don’t spend the time moving, transferring, discussing, re-pricing, etc. Trust me, it will save you lots of time and inventory.
Beyond Data – Eyes on Your Inventory
In addition to using data and insight to better manage your inventory, walk your stores, backrooms and warehouses. Looking at the product vs. data, will provide you a fresh insight into what your inventory health is. I learned from my early years in retail, to walk our store floors and LOOK at the clearance racks.
What did I see on those clearance racks? Something very different than on my computer. For example, I saw colors that the customer clearly did not like, stretched out sweaters falling off hangers, and half the rack in size XS with no Mediums remaining.
These are things you may see in your data. But, to see it, is to believe it.
It All Adds Up!
In conclusion, focusing on reducing unproductive inventory is critical to every customer’s success. Putting process and reporting in place, will allow you to experience measurable inventory improvements today!
Download the eBook. Learn the Do’s and Don’ts to ensure your retail inventory strategy aligns to your assortment and how to create a retail assortment presentation that’s appealing to customers
