Having the right inventory is all about asking the right questions. Too many businesses are functionally on autopilot. Their inventory is their inventory because it’s always been that way, or because whoever is in charge of purchasing got a discount on it, or because a customer requested it years ago.
The store layout has never changed, the same items occupy the same shelves, and prices are only updated when costs force the issue. Change is virtually unthinkable, which means stagnation is definitely unavoidable. But it doesn’t have to be that way!
Purchasing and stocking decisions should be guided by strategy and numbers, not whims, discounts, and inertia. Below are the key questions every inventory manager needs to have answered to ensure their inventory is intentional and set up for profitability.
1. Which products should I stock?
The correct answer to this question in a general sense is, “whichever products can make me the most money in the shortest amount of time”.
Notice it isn’t, “whichever products can sell the fastest”. It also isn’t “whichever products have the highest margin”. There is a balance here and yes it will require some light math. It may be worth it to go for the cheapest items with the worst margins because those sell quickly and consistently. It may be the most expensive items with fabulous margins because you don’t have to sell as many.
A simple way to A/B test is to sell them both at the same time and then calculate which one made you the most total profit at the end of that timeframe. More on A/B Testing later on.
2. How should I stock my inventory?
Did you know the first place people usually go when they walk through a door is to their right? What’s on that shelf? Is it an eye-catching color like red, yellow, or purple? Is there a clear “theme” (same brand, same purpose, same color, etc.)?
You want to draw people in. You want shopping to be pleasant and feel natural. The way your inventory is laid out has a lot of say in that process. Take a look at your floor plan. Shelf placement determines where people go. Your shelves should be in a natural flow as much as possible.
Walk through and see if there are barriers. Do you have to keep changing directions? Are shorter customers able to reach that top shelf? It may be time to re-arrange.
3. What can be improved?
The merchants who thrive are the ones who are constantly looking to get better. In retail, there are several ways to learn what does and doesn’t work.
Beware of customer feedback. It’s helpful, but don’t overreact to it. Look for clusters. If you have several customers all saying your store is too cold, it’s time to turn up the thermostat.
Check out the competition. What are they doing that works? What are you doing better? Remember, business is business. Learn from those around you. Develop relationships with other merchants, both in-person and online.
Don’t be afraid to use trial and error. Use A/B testing to refine your operation without causing chaos. Track the reporting, do the math, and let results guide your decisions.
To help you track those results, Shopventory offers plans for as low as 79¢ per day. Right now, you can sign up for a 30-day full-featured free trial of Shopventory with no credit card required. We also back Shopventory with a 30-day money back guarantee. That means a total of 60 days risk-free!
You can start a trial today to start answering the important questions and optimizing your inventory!
Please take less than a minute to let us know what you think of the blog!
We've put together a brief 40-second survey.
Know a business owner who could use regular tips like these?
Why not share this post with them?