To run a successful store, it’s vital that you regularly manage your inventory and with these simple keys, you can save time and money and therefore, become more productive.
The following article was produced from a STRIVE Webinar, presented by Joanna G. Brumsey CPA from Wall, Einhorn and Chernitzer.
CURATE YOUR INVENTORY
No matter the inventory you carry, it’s important to evaluate the number of SKUs and the number of items that you are stocking, especially if they are similar. It can feel counterintuitive to offer your customers fewer choices, but it has been proven that by reducing the number of SKUs you purchase, you can increase revenue.
In the early 2000s, Iyengar and Lepper conducted a study called “When Choice is Demotivating”. They took two test groups who had to choose from either a 6-variety jam display or a 24-variety display within a grocery store. They found that 60 percent of the customers passing the 24-variety display stopped at the booth; in contrast, only 40 percent stopped at the limited variety display. However, a surprising 3 percent of those stopping at the 24-variety display subsequently purchased the jam versus 30 percent of those who stopped at the limited variety display.
While utilizing a decreased inventory, you can strategically position items to push customers deeper into your store. For example, you can implement a “loss leader” scenario where an item is priced at cost or below to attract customers to the store and to specific areas in the store so that they will purchase the higher dollar items. Ideal candidates for loss leader would be your slow moving inventory. Utilizing this inventory can create space for new items, increase loss prevention and generate traffic to high-ticket items.
MANAGE INVENTORY LEVELS
Another factor to consider, is the seasonality of individual items. This is more than fall, winter or spring seasons but can include back-to-school, national holidays and different sports. For example, a florist can recognize their success in the run up to Mother’s Day and can therefore prepare for sell-out inventory. However, in the run up to Superbowl Sunday, they will cut back on their stock as this is not a historically strong season for florists.
KNOW YOUR SUPPLIERS’ BUSINESSES
In terms of purchasing your inventory, it’s essential that you understand your supplier’s business and that you source quality over price. A fundamental question to ask yourself is, “What are their business ethics?” and, “Are they adhering to the Consumer Product Safety Commission Standards?” For example, if you sell paint and you discover that your supplier is using lead in their products, a lawsuit may ensue which will negatively impact your business and your cash flow.
Therefore, you may wish to consider purchasing inventory that holds special certifications like Forest Stewardship Council or perhaps developing your business to become a “LEED certified retailer” like Starbucks in which they initiated a program that takes consumers on a visual tutorial through their store and you can see how they’ve used their recycled garbage or how they use low emission building materials.
IMPLEMENT STRONG INTERNAL CONTROLS
When your inventory arrives from the suppliers, there are some basic operating procedures that can save you time and money. Implement sound receiving protocols where one member of staff inspects inventory for damage, compares inventory to the purchase order, and ensures these protocols takes place prior to accepting delivery.
Once the inventory has been signed for, consider electronic tags on high dollar items to reduce loss. Additionally, some retails find utilizing fake cameras effective as a deterrent against theft. Also, consider implementing an incentive plan for your employee who is responsible for maintaining internal controls in addition to implementing regular audits for your inventory.
UTILIZE A POS (POINT OF SALE) SYSTEM
Naturally, your POS (Point of Sale) System is an effective method to track inventory. Through this you can set reorder points using historical purchase order and sales data, automatically calculate inventory turns, produce dashboard reports and flag old inventory. There are many attractive choices for the small business owner including Square, Quickbooks and Shopify.
While online shopping continues to grow, brick and mortars must keep up with their trends so not to be overtaken. While some seem negative about the future of retail, there is much that a brick and mortar can provide to a consumer that online outlets do not. For example, you can enhance a shopper’s experience by offering a class using products that you sell, like Michael’s (with crafting) or a florist. And display predominantly items that consumers may want immediately and don’t want to wait for shipping. Put items on display for consumers to have a tactile experience with and feel the need to purchase immediately.
Show Your Expertise And Increase Your Influence With A Strive Webinar
Are you an expert in your field? The STRIVE webinar series is intended to help our members learn new strategies and tactics to help build their business. Each webinar will be hosted by “subject matter experts” who understand the nuances of retail. If you would like to give a presentation based on your expertise (and receive a discount on your membership renewal fee as a thank you), please contact Kylie Ross Sibert at email@example.com or call (757) 455 9323.
STRIVE Lunch and Learn Retail Webinars are held the third Wednesday of each month, from 12:00 PM – 1:00 PM. You can participate from the location of your choice and there is NO charge to members.
About Joanna G. Brumsey, CPA | Shareholder
Joanna G. Brumsey is a CPA and graduate of Wake Forest University. She is a shareholder in Wall, Einhorn and Chernitzer, P.C. in Norfolk, Virginia. She provides assurance and advisory services to companies in the manufacturing, distribution, retail and franchise industries. Joanna serves as the leader of the Accounting and Auditing department, as well as the leader of the Manufacturing and Wholesale Distribution and Retail and Franchise Service Teams. Joanna also has extensive experience with budgeting and forecasting, financial modeling, litigation support services, and due diligence investigation of targets. She was recognized by Inside Business Magazine as one of the “Top 40 Under 40” individuals in Hampton Roads; she was a “Women in Business” honoree recognized by Inside Business; she was a “10 for 10” honoree by United Way of SHR, and she is a multi-year recipient of Virginia Business Magazine’s “Super CPAs” award honoring the top CPAs in Virginia.