- Parent Category: Retail Tips
Overstock Help for Retailers
Tip #393 - Feeling Fat
Dear Tip of the Weeker,
For most of you inventory levels should be rock-bottom right now, but if you are sitting on too much merchandise you're probably not alone! Here are three ways to get your stock levels under control...
Trim or Cancel Orders
Everyone hates to call up vendors and cancel orders. You feel like you’re breaking a promise, letting them down, or being unscrupulous in your business dealings.
But if you are already overstocked, you probably shouldn't bring in huge amounts of new merchandise. Sometimes you have to strategically cancel or trim an order to manage your inventory levels. That’s part of doing business. Just like when the vendor backorders your shipments, or ships partial orders, or ships late. (Yeah... remember they do it to you, too!)
Your first obligation is to run your business in a fiscally sound and responsible manner. If you buy more than you can sell in a reasonable time frame you’re doing your business a disservice and, in the long run, a disservice to your vendors. They need partners who are financially stable and who pay their bills on time. They don’t need a bunch of customers who are overbought, highly leveraged, and who may go out of business.
Caveat: Constantly canceling orders is not being a good business partner. Hopefully you will avoid this by running a tight open-to-buy plan and you won’t order more than you need in the first place.
Note: Please do not take this to mean you should stop receiving all orders! Keep buying bestsellers and the fresh merchandise you need to drive sales. But if you are overstocked, consider carefully which items or lines are "need-to-haves" and which are merely "want-to-haves" that you should do without right now.
You can minimize them, but you won’t eliminate them. Taking markdowns is just a fact of life in retail. If you perfect your open-to-buy process, your markdowns will undoubtedly decrease and their impact on your business will also diminish.
If you’re overstocked, turn that excess merchandise into cash – quick – and reinvest in better merchandise that you can sell at full margin or higher. Trust me, holding on to bad merchandise and hoping it will eventually sell at full price just doesn’t work. Your store is not a museum!
Here's an article on taking effective markdowns which may give you some good ideas.
One tactic many people neglect to think about when they need to reduce inventory levels is increasing sales. This is probably the best way to get yourself back to your ideal stock levels, although it is usually a more labor intense, longer term approach to the problem.
Marketing is the engine that drives sales increases. So ratchet up your marketing efforts and watch your stock levels drop. Of course, if you need marketing ideas, you should check out the Marketing kit.
The best plan of all is not to get into an overstocked position in the first place. This requires the "double-whammy" of awesome inventory management (to keep stock levels appropriate) and brilliant marketing (to keep sales cranking). If this sounds good, check out the Retail Mastery System. It has TONS of information on how to do both!