The holidays are in full swing and products are flying off the shelves.
But have you thought about your inventory strategies for next year?
Here are a few ways to manage your inventory in the new year:
Be careful with end-of-year purchases
“The holidays are almost here, which means that unless you are looking at egregious holes in your assortment, sell what you have,” advised Ted Hurlbut, principal at Hurlbut & Associates, a business management consultancy in Foxborough, Mass. “At this point, anything that you bring in will sell in place of something you already own. Then, you will have to go through the clearance process on what you already own.
“One of the real margin killers during this time of year is bringing in last minute purchases.”
Mark down poor sellers
“Identify your weak sellers and mark them down to move before Christmas, when your traffic is at its peak,” Hurlbut said. “If you wait until you take everything at 20 percent of after Christmas, you will have to take your weak sellers to 50 percent off, instead of the 20 percent off you could have done before the holiday.
“The markdown will cost you less now than it will later.”
“Retailers have a tendency to fall in love with their inventory, so they keep it past the time they should,” said Peggy H. Taylor, co-owner of Progressive Profit, a retail consultancy based in Fairview, N.C. “If it doesn’t sell within 90 days, you need to get rid of it. If you’ve had something in your store for a year, chances are you will never sell it. Donate it to good will and you can write it off on your taxes.”
Use the garbage can
“Identify your sludge and dispose of it,” said Hurlbut. “For example, if you have a rack filled with great clothes and one mustard yellow shirt, some customers will be turned off to the entire rack because of that shirt. Get rid of it. If you have it heavily marked down and it still isn’t moving, it has no retail value and could be dumpster fodder.
“Then, you can take a tax credit for it. By keeping it, it is poisoning everything else.”
“Make sure that all of your material is properly recorded,” said Jon Schreibfeder, president of Effective Inventory Management, Inc., an inventory management consultancy based in Coppell, Texas. “Otherwise, you will have no idea what is in your store or warehouse, which means you would be forced to overstock to maintain a high level of customer service. You also might be reordering products way too early or too late.”
Display seasonal items
“Don’t pack away any seasonal items unless it can’t be prevented,” Hurlbut said. “Maximize your cash recovery now. Cash is more valuable to you now than in six or nine months. If you put something away, new things will come along and make the item not as valuable.”
Forecast, forecast, forecast
“Make sure you have the best possible forecast,” Schreibfeder suggested. ”A good forecast is made up of five different elements: past sales, trends in popularity of an item, external factors such as weather and the economy, collaborative elements such as events, and the time of a forecast—today’s date less a product’s lead time.”
Write a list
“Develop an approved stock list and know what your customers want you to have in stock,” said Schreibfeder. “A lot of small business owners have stock and then they have stuff, which are the things the customers don’t want or don’t expect you to have. Liquidate the stuff; it will free up space and cash.”
“Even if you’ve had a tough time in your business, you should be going to market,” Taylor advised. “You should go to market no matter what. That is where you see new things. Even if you don’t buy anything, you can be mentally shopping and ordering for the future.”
Katie Morell is a Chicago-based freelance writer specializing in small business concerns.