Inventory an Issue?

Throughout the year, we hear jewelers express their concerns about how their inventory has grown and especially how it has aged and now become ‘old inventory’.  The question remains, “What do I do with the product that hasn’t sold?”

It seems jewelers fall into several categories on this issue.

  1. “I have only had it 5 years, it will sell eventually, and there is nothing really wrong with it.”
  2. “The situation is really not that bad, only ____ percent of my inventory is old (what is old anyway?)  And what percent is really too much?”
  3. “OK, it’s a problem but what do I do about it?”

The answer to the problem truly is based on the situation and needs to be examined on an individual basis.  How much is too much, what have you done in the past and therefore what technique should you apply to now change it?  In either case, the first step is to recognize the situation as a problem and then commit to do something about it.

Retailers are always amazed to see exactly what old inventory is truly costing them on an annual basis.  It is eye opening when you consider the interest cost or the opportunity cost, which can be calculated at prime plus two.  Some retailers have even said, “The inventory has been paid for so it really does not matter at this point.”  Every day that “old or un-sellable” merchandise sits in the case it costs you money.

Inventory issues are just one (although the most visible) symptom of a problem.  The problem is lack of planning or not sticking to an existing plan.  With a plan that directs you throughout the year, you stay on track and make modifications when necessary.  A plan needs to be complete and address all the issues that play into the success of your business, when one area fluctuates you can make modifications to compensate.  So when it comes to old inventory you can deal with it before it becomes too old, systematically deal with it as it does, and avoid overspending so there is not an overwhelming amount of older product at any one time.

Many retailers are still ‘digging out’ from the Christmas buys of 2007 which has slowed down turn rates over the last year.  Not to mention slower traffic it’s no wonder sales are down.  We know with 100% certainty that product that is less than one year in age turns significantly faster than older product.  We also know that 80% of sales come from 20% of merchandise in a typical store.  Your goal is to increase the amount of newer product and lessen the amount of older product thus increasing turn rate and increasing profits. 

The four things you can do with old inventory are:

  1. Redesign – take the old merchandise and redesign it into a new item that is more salable.
  2. Reduce – put the old merchandise on sale to move it out of your store
  3. Return – ask your vendor to take it back in exchange for new product, even if you do three to one, the key is to have salable product.
  4. Redisplay – move your merchandise around in the store will create new interest from your customers, also clean and put a fresh price tag will help.

 

If you proactively attack your dated inventory you can turn old tired inventory into vibrant new offerings into your store.  Even in a slower economy you can have a major impact on your success by reducing old inventory, it’s all in the execution and how dedicated you are to making it happen