That's a fair – and an important – question. Inventory turnover is a measure of the number of times inventory is sold within a period of time, usually a year. There are a number of ways to determine your inventory turn figure, but the easiest way is to simply divide your last year’s total retail sales by your year ending inventory at retail value.
Retailers with a better turn rate achieve that rate because they closely control their inventory. They are empathic about delivery dates so that the product arrives at the store when it needs to be there. And they are pit bulls about managing the inventory on hand and about reducing the selling price when necessary to recoup as much of their investment as possible. Here are some things to think about:
So, how do you control inventory? Sell it at regular price in a reasonable amount of time or at a reduced price to clear it out – it’s just that simple! The only markdown exception is basic merchandise that you must stock every day of the year. Beyond that, reviewing your entire selection of items at least once a quarter is mandatory. With very seasonal items this review needs to happen at least once a month.
We recommend that you adopt a bin ticket system: a sticker with a date code that you place on fixtures so that each item has a designated home, and so that you will always know when each item in your inventory arrived. It’s an easy way for you to instantly know which products are selling and which ones are not. You will also want to encourage your store associates to keep the sales floor neat and tidy. They are not just cleaning, they are organizing the inventory. Face it: shoppers are expected to play with the merchandise. They move things around and leave them in places where they are not supposed to be. Don’t let misplaced items account for lost sales or the repurchasing of something you already own.
Adopt KIZER & BENDER's Dot System
Have you ever been on the sales floor, looking for a certain product, only to find that that merchandise has sold out and has been for weeks? Or maybe that shelf on the sales floor is empty, but there’s a load of what’s supposed to be there in the stockroom. Aside from those bin tickets that tell you what’s supposed to be in that empty spot, you need a backup plan.
Adopt the Dot System! Stop by your favorite office supply store and buy a bunch of small red and green adhesive dots. (Avery Labels makes the perfect size.) Place a green dot on the bin ticket if there is more of this product in the stockroom; add a red dot if there is no more of this product available in the stockroom. Instruct your associates to check the stockroom when they come across an empty shelf, and a bin ticket with a green dot – they need to refill that product ASAP. Once there is nothing left in the stockroom they can replace that green dot to a red one. The Dot System will quickly alert you to areas on your sales floor that need your attention.
Okay, we know what you’re thinking: “Why do I need to do this? My point-of-sales system tells me all I need to know.” Now honestly, if you scan your POS reports on a weekly basis then you're good to go. But there’s a BUT coming here, and it’s a big one: You still need to do physical cycle counts to further control your inventory. This is important because non-selling products are expensive to stock; they tie up dollars that you could re-invest in merchandise that will turn (sell).
Let’s say you have $500 at retail in items that have sat on the shelf for a year with no sales, throwing off zero profit. Nothing. Nada. Zilch. If you sell these items by taking a 30 percent markdown you would get back 70 percent of those inventory dollars or $350. Now, if you reinvest that $350 in new and in-demand merchandise (that’s $750 at retail markup) and then turn this merchandise two times in one year, your sales would be $1500. Those bin tickets and little sticky dots will make you a better investor of your own money.
Encourage Sales with Daily Goals
Having a daily goal will help your keep your associates focused on selling. Set aside a few minutes each morning to complete a Pre-Opening Checklist that outlines everything that’s planned for the store that particular day. This checklist should include the daily overall store sales goal, departmental goals, item of the day, in-store specials, classes, sales events and promotions – anything and everything associates need to know about what’s going on in the store that day. The closing manager can fill out a Store Closing Checklist of tasks that need to be completed before the store reopens the next day. Drop us an email and we’ll be happy to send you customizable templates for both checklists.
Hold a Daily 10 Minute Meeting
Call it your Daily 10. Gather associates on the sales floor each morning for a short meeting before you open for business. Take 10 minutes to talk about what you expect form them that particular day. Talk about product, techniques, applications, customer requests, policies, trade shows, industry news, associate experiences, and upcoming events – whatever makes sense that particular morning. Clear and consistent communication will keep everyone in the loop and on their toes.
Everyone Needs to Add On
We call it Gimme 5!, a daily exercise that’s geared to increase sales. Hold up an item and ask associates to call out five items that could be added-on to this item to increase the sale. Add-on selling is good for you and it’s good for customers – you’ll up your average sale and customers won’t have to return to the store to pick up the additional items they needed to complete their project, but forgot to buy. And if you come across the rare item that had no add-on potential, recommend whatever is on special that week.
Manage Your Markdowns
Now, about those markdowns… Do you take markdowns in a timely manner? Kick the dogs to the curb before it’s too late? Good for you! Remember, as tough as it sometimes is, the first markdown, the one that makes merchandise more appealing to customers, is almost always the cheapest one to take. Be vigilant about keeping a close eye on your sales floor. If you wait too long you’ll start eating into the real money you have invested and your profit margin dollars will disappear.
You are in business to make money. Smart inventory control, plus a focus on selling, keeps your cash less tied up and opens opportunities to keep your assortment fresh. There are many schools of thought on inventory control, how to determine turn rates, flow of items and more – so many that we could never cover them in just one post. But no matter how the calculations are made, remember that the most devastating damage is caused by a lack of inventory management.
To View Original Website: http://www.kizerandbender.com/
To View Original Website: http://www.kizerandbender.com/