Managing your inventory is a monumental task. And one that must be done well to achieve growth and success. The trick, of course, is to find that happy medium of just the right amount of stock for each product you carry. Understocking can mean missed sales opportunities and unhappy customers. Overstocking ties up capital and previous retail space. But how can you find the right balance for each one of your products? Let’s look at a few retail inventory tips for small business inventory management, including how your retail point of sale can help grow your business.
- Focus on Expanding Your Product Range Without Overstocking
- Watch Out for Seasonal Trends That Will Fluctuate Your Ordering
- Pay Attention to What Customers Are Asking For
- Use Your Promotions Strategically to Move Through Inventory
- Take Advantage of Your Customer Loyalty Program to Improve Inventory
- Pay Close Attention to Overstock and Out of Stocks
- Monitor Your Inventory Consistently
1. Focus on Expanding Your Product Range Without Overstocking
Offering more products is an easy way to increase your customer base. As long as you keep your brand consistent, a larger selection of inventory is great for business. By optimizing the ordering levels and stock pars of existing inventory you can free up space for these new products.
A great way to improve your inventory management is through a great POS reporting system. Tools like ABC retail analytics will grade each product based on profitability and revenue, allowing you to take more educated action on your future stock orders. Once in place, you’ll have the steadiness and efficiency that will allow you to order some new items.
2. Watch Out for Seasonal Trends That Will Fluctuate Your Ordering
Pay attention to all trends and patterns in your sales data. Use all relevant retail key performance indicators (KPIs) to help guide you through this process.
Depending on your type of business, these ebbs and flows may be weekly, monthly, or seasonally. For instance, a QSR or bakery have high turnover rates and have definite rushes and downtimes each week. A retailer who sells landscape equipment, however, will have a very different sort of inventory management. Sales will peak only a few times each year, so ordering has to be done very differently.
To assist with this, you can set automated ordering in your point of sale system. You can also implement stock notifications so that you take action quickly.
3. Pay Attention to What Customers Are Asking For
This can come on several different levels. It may sound obvious, but technology brings some new tools to this game.
First and foremost, listen to what your shoppers are asking for in your brick and mortar store. If someone asks about a certain product, discuss with your management team and consider adding that item to your retail inventory.
Analyze your competitors’ products, too. Your competition should be carrying very similar items, so if you notice a few things that you don’t have in stock, you might want to include these. Don’t be afraid to snoop around and do some recon on your neighbors.
Use your website or eCommerce store to your advantage. If you have an internal search feature, check out what your shoppers are searching. You can also use Google search queries as part of this strategy. See what items are being searched in conjunction with your brand.
4. Use Your Promotions Strategically to Move Through Inventory
Discounts, sales, promotions, and bundled packages are great ways to push products that need to move. Start by selecting the items that you need to sell. Look for items that are overstocked and examine why they aren’t selling. It might be the product itself, your pricing, or your branding. Using your inventory management system and retail sales metrics through your POS system makes this fast and easy. Determining the root of the problem will allow you to structure the promotion more appropriately.
Once you set up the promotion, monitor is closely. Too often, small businesses set up sales that are too generous and end up losing a lot of money. It’s important to move through overstocked items, but not at the cost of your bottom line.
5. Take Advantage of Your Customer Loyalty Program to Improve Inventory
Typically, loyalty programs offer cash back or storewide discounts. But there are ways to structure your loyalty benefits that can help optimize your inventory.
One option is to offer a greater amount of loyalty points for certain products. Pick an item or two that you need to move and attach several times the number of loyalty points awarded for a purchase. This rewards your loyal shoppers while also improving your stock. Don’t let your rewards program come at the cost of your profits.
Other clever loyalty programs feature discounts on only certain product for their members. Amazon’s membership loyalty at Whole Foods is a great example. Each week they feature a new couple of products that are on sale only for Prime members. Like the example mentioned above, this keeps members happy while allowing the store to control inventory.
Finally, be sure not to include your best sellers in your loyalty system. Ideally, you never want to give away items that the customer would buy anyway. This is essentially a lost sale. And will hurt your profits.
6. Pay Close Attention to Overstocks and Out of Stocks
As we mentioned earlier, overstocking certain products will cost you money. Most estimates average overstocks to cost about a quarter of the original value of the item. The ways it can add up costs are numerous:
- Storage – Remember that your retail space is real estate that you either bought or are renting. Therefore, it’s important that you think about shelf space and storage areas as costing money. Items sitting on those shelves without selling are dead weight.
- Spoilage – If you sell perishables, overstocking means that they will be wasted. Even if the product itself doesn’t spoil, there are other ways of deterioration that can lead to product waste.
- Shrinkage – Too much on hand makes retail theft even easier, whether it’s internal or otherwise. Shrinkage is already a huge problem in retail, so don’t make it any easier. Use your POS to minimize retail theft.
- Spending – Too much money spent on inventory of a certain item means that you can’t spend that money elsewhere. This could include ordering a new product, performing basic maintenance, marketing, or upgrading your store, to name a few.
Understocking items is unfortunately also costly. Stockouts can damage your reputation and trust from your customers and is the easiest way to lose shoppers to a competitor. It’s important to remember that the price of stockouts is nuanced.
Of course, it costs you the sales that would have been made – calculate this by taking the average daily sales of the item and multiply it by the number of days it was off your shelves – but it also can have long term consequences. These can range from lost customers to halted production lines. No matter how you cut it, it’s important to have control over your inventory.
7. Monitor Your Inventory Consistently
Lastly, find a routine that works for your business. Make sure you’re checking your inventory at regular intervals. There are many different types of inventory systems available for businesses. It’s not important to pick a certain one, it’s important to stay consistent and regular.
And the most important tool available to help you accomplish this is your POS reporting and analytics. Remember that a point of sale can do much more than simply calculate change given and hold cash in a drawer. With a modern solution, you can discover ways that it can grow your business and increase your profits. Find out more by clicking below and register for your free trial so you can see the benefits for yourself.