As a retailer, your inventory is your biggest asset and needs to perform well. In my experience working with hundreds of independent specialty retailers, I’ve noticed that most owners get caught up in the hustle and bustle of running their stores. 

It is understandable because managing a store is hard work.

Building a solid business foundation and developing strategies that are in sync with your future goals is essential. Simultaneously, as a retailer, you must ensure that your shelves are stocked with items that sell in the market, leading toward consistent growth.

The key takeaway? You need to know your numbers. Your store will likely thrive when you can step back and focus on your broader goals and vision. 

Importance of Managing Inventory Turnover

Inventory is like the heartbeat of any retail business. Keeping a tight grip on a company’s inventory performance can either make your business thrive or not. That’s why I always preach the power of effective inventory planning and management.

Some retail companies get it; they track their inventory like hawks, contributing to their success. Others might not realize just how important it is, and things can start to fall out of place without warning.

So why is the inventory turnover ratio so important? Let’s examine some of the benefits.

Benefits of Inventory Turnover Optimization

Accurate Order Fulfillment

Imagine this, you’ve got your point of sale software tracking inventory, keeping tabs on what’s on your sales floor, or in your warehouse. This can help you avoid the headache of excess stock or insufficient best-selling inventory that meets market demand.

With the right process, you can avoid running out of stock of key items, keeping your customers happy and returning for more.

Better Planning and Ordering

Balancing supply and demand can be challenging, but inventory management through the right software can be your safety net. By closely monitoring your inventory levels and trends, you can avoid unnecessary inventory increases that tie up cash flow, or missing sales due to insufficient stock. Also, you’ll save space and cash by only ordering what you need.

Happy Customers

Nobody likes waiting forever for their stuff to arrive or hearing that dreaded “out of stock” message when they want to purchase their favorite items from a store. With a solid inventory process, you can speed up order fulfillment and keep those customers smiling. Happy customers mean repeat business, so it’s a win-win!

A Well-Kept Stockroom

A good inventory management system doesn’t just keep your business running smoothly; it also keeps your backstock area organized. Also, an organized stockroom keeps the anxiety at bay. Not only does it save you time and money, but it also aids in smoothly fulfilling orders.

Financial Freedom

If you feel strapped for cash, you may be unwittingly keeping too much cash tied up in excess inventory; proper inventory management will help overcome this issue. By tracking your stock levels proactively, you can improve cash flow and make smarter decisions about your inventory investments.

Inventory Management Through The Lens of An Independent Retailer

Running a small business is fulfilling and exciting but comes with challenges. As an independent retailer, you must know that a lot is happening behind the scenes that customers do not see.

Managing cash flow is one of the biggest challenges independent retailers face. Unlike bigger businesses, they often don’t have a consistent revenue stream, so they must be strategic about ordering inventory and paying bills.

This means managing the inventory turnover, calculating the average inventory, and understanding the seasonality of your business which are metrics to keep top of mind. Let’s embark on an examination of your inventory that will give you insights into which merchandise is contributing to the store’s profitability and which merchandise is not.

As a retailer, your inventory is your biggest asset. It must perform well for your business to succeed. I’ve been leading, guiding, and supporting independent retailers for 15 + years and I have discovered keeping your “finger on the pulse” of your inventory performance is an important step in keeping your business viable. To help you, the indie retail, I have developed a tool to do just that!

It is the Inventory Realty Check workbook. Its strategy is to walk the retailer through an easy step-by-step process to inform you if you’re on track, off the rails, or somewhere in between.

Simply click the link and download the workbook today.

The Process

Gaining insight into inventory performance involves three basic steps:

•   Take time to know where you’ve been; review the store’s past performance.
•   Understand where you are now.
•   Develop a plan to improve, enabling you to make progress and grow your business.

Where You’ve Been – Know Your Numbers

Every retailer tracks gross revenue for a good reason; they need to know if they are generating enough revenue to keep the doors open. Knowing how the business has performed in the past can give you an orientation into the peaks and valleys of sales enabling you to schedule marketing plans, buy inventory, and adjust staffing accordingly.

A few essential numbers that you need to track:

• Last Calendar Year
• Current Year-to-Date
• Average Monthly
• Best Calendar Year Ever
• Best Month(s) of the Year

Understand Where You Are

Top Performers

Identify the top-performing products. Top performers are the items in your day’s inventory that keep your customers returning for repeat purchases. They are also the items driving sales, attracting customers, and generating revenue.

Managing the entire inventory so that the shelves are stocked with products in demand will help your customers make better purchasing decisions, have high inventory turnover, and result in consistent cash flow.

Worst Performers

Once you have highlighted your top performers, you must identify your worst-performing products as a retailer.

The worst performers are those specific products affecting your cash conversion cycle by limiting it and occupying valuable shelf space.

Develop A Plan To Improve, Make Progress, And Grow

Once identified, you must develop a plan to liquidate the slow-moving items as fast as possible and reinvest money in the best-selling items. Too much inventory as well as obsolete inventory may be taking up valuable shelf space, restricting the cash flow, or not meeting customer demand. It’s important to evaluate why these products are underperforming and consider ways to improve or remove them from the inventory. When you do this consistently, your inventory turnover will improve!

When you complete the Inventory Reality Check Workbook, it can be an indicator to tell you what’s currently going well, what needs improvement, and what needs to be eliminated. Once you know what needs to be done, you can quickly convert inventory to sold items.

A Closer Look

The final step can include examining the overall business operations more closely. This may involve examining pricing strategies, marketing efforts, customer feedback, and operational efficiency.

As a retailer, you need to see which products are most profitable, which are overstocked, and which are understocked. Making such improvements can improve overall performance and profitability. Download the Inventory Realty Check workbook today. Upon completion, you will know which products contribute to cash flow and the areas where you have too much inventory.

Making the Right Buying Decisions

Once you’ve got a handle on your business numbers, it’s time to move accordingly. You want to know which products are hitting the mark to keep that upward sales curve. Similarly, understanding which products are not working is essential. You need to cut your losses and stop investing in products that don’t bring revenue to the business model.

By identifying untapped growth opportunities, you can cut extra business expenses and focus your efforts on areas that have the potential to boost your sales, meet customer demand, and ultimately increase your profits. This is the essence of transforming potential into tangible profit.

A Clear Strategy that Works

A solid strategy is like a roadmap that guides you to success in the retail world. It brings customers through your doors and keeps them returning for repeat purchases.

Serving your customers with excellence, managing your inventory to minimize excess stock, and leveraging the power of your team can help improve cash flow and ultimately lead your business to profitability and keep it there.

Creating a distinctive shopping experience that values and appreciates your customers can go a long way toward retaining them and helping you get positive reviews that attract more business.

When you gather data-driven insights, you are better positioned to make marketing strategies that can help drive sales, increase cash flow, and increase your store’s profits. Upon completion of the Inventory Realty Check workbook, you will have data. You will know which vendors and merchandise categories produce a healthy profit margin.

Keys to Success in Retail

To excel in the competitive retail landscape, it’s important to focus on sustainable growth strategies such as:

1) Implementing An Efficient Inventory Management Plan

By keeping tabs on inventory, you are better positioned to develop purchasing and pricing strategies to sell inventory for the highest price in the shortest period.

2) Nurturing Relationships With Staff And Vendors

Staff and vendors are great resources for achieving success in retail. Strive to build and nurture the relationship by giving them access to all the support they need.

3) Creating Memorable Customer Experiences

Retailers don’t just calculate days of sales or focus on the turnover of inventory ratio. They create shopping experiences that make their customers feel valued and appreciated by having inventory that they are interested in. Happy customers equal good reviews.

4) Collect And Use The Data To Gain Insights

By collecting and using data effectively, you, as a retailer, can gain valuable insights and make informed decisions that drive sales and profitability.

5) Firm Understanding Of The Current Cash Position

Understanding your store’s financial health and cash flow requirements is vital to long-term success.

Check out the blog, Breakeven Volume: When do I start making money? To gain insight into the revenue requirements and profitability for independent retailers.

Conclusion

Are you ready for the insights and information completing the Inventory Realty Check workbook can bring, but as a store owner you may not have time to complete it?

It is easy to put off tasks that will benefit your business in the long run because there’s always so much going on. If this is true for you, I have an offer for you!

Get a Free Inventory Evaluation

Whether your business has been open for one year or ten, the savvy indie retailer always looks for ways to improve, make progress, and grow their business. 

It doesn’t matter where you are in your journey of entrepreneurship. Whether all of this is new to you or if you’ve been at it awhile, an objective Inventory Evaluation will provide:

• Outside eyes to see the potential in the business.
• Determinations about any obstacles to manifesting that potential, any red flags that require immediate attention, or what additional resources may be necessary to help you, the owner, build the desired value. 
• Outside eyes to confirm that you are taking the right steps toward the solution.

Want to learn more about open-to-buy, identify any roadblocks in your business, and address them as quickly as possible? Click here to schedule a strategy call with me.

To Your Improvement, Progress, and Growth!

Audrey