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In my previous article I raised the factor of Merchandise
Turns and their positive or negative effect on the bottom
line.
It's critical that you understand your current Merchandise
Turn rate at least at a store level and ideally how key
departments in your stores perform.
We defined annualized turn rates as
Projected annual sales/current inventory on hand at retail
Now that we have an current snap shot of inventory turns,
a few very simple practices can incrementally improve
inventory turns and not only enhance our bottom line,
but improve immediate cash flow as well:
Ask staff what specific products are turning poorly.
Their feedback is valuable, especially if you do not have
Point of Sale inventory data.
Walk the store and visually inspect all your merchandise
for shop worn or damaged merchandise.
Review all high ticket items for inventory age. The
majority of your inventory dollars may be tied up in
your higher ended products.
Review the average price point of your store. If you
have multiple locations, compare average price points
to affluence levels of the communities they reside in.
If you have stores with high price points in stores of
lower affluence levels and vice versa, consider adjusting
price points in harmony with the community's level of
affluence, disposable income and earning level.
Examine your overstock position. Segregate products
that are overstocked in your warehouse or back room area.
Review stock in comparison to market trends. It's obvious
that merchandise clearances follow seasonal timelines.
However you may find merchandise that no longer supports
other business trends. For example, licensed merchandise
of celebrities that are no longer hot or mainstream will
evolve to slow turning stock. Any fad merchandise should
be flagged for markdowns.
Once you've taken these steps to focus on the lowest
turning merchandise, get your action plan together and
improve your turns.
TAKE ACTION TODAY
1) Schedule and advertise an Inventory Clearance Event
and sell off as much marked down slow turning merchandise
over a one week period.
2) Consider adding a free slow moving product to the
purchase of a higher priced slow or fast turning product.
3) Create a clearance area in your store where customers
can return weekly to seek bargains and convert dead stock
to cash.
4) Consolidate slow moving merchandise to one store and
create a bargain area. If you own multiple locations,
this would typically be the store in your least affluent
community.
5) If you have high levels of slow turning merchandise
launch a sidewalk sale in warmer weather, and conduct it
indoors in colder seasons. You can transfer the reducing
stock of the sidewalk sale to your other locations until
it is depleted.
Inventory turns should be reviewed on a monthly basis.
In these competitive times, this is an excellent practice
that will clear up dead stock and free up cash and generate
ongoing customer traffic. Progressive retailers will need
to demand more of their merchandise turns and become more
ruthless with products that fail to turn below the store's
established average rate.
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