From The Co-Founders


Tips, Tactics & Strategic Insights and Commentary
from The ROI Co-Founders, Pat Johnson and Dick Outcalt
Outcalt & Johnson: Retail Strategists LLC; Retail Turnaround Experts

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Getting in Shape for Musical Chairs?

The playing field has shifted dramatically under the feet of retailers. 

Merchandise orders placed months ago are now proving to be "too much stuff that consumers no longer want so much of,"  as was reported rather colloquially just 3 days ago.  All this was summed up this way: "Retailers with slower inventory turns might find current conditions especially difficult to navigate." *

Now, look at the chart at the top of the page. Without being dramatic, it may be a lifesaver for your business this year. 

Let's explain. It's an incredible quick reference guide to your sales @retail compared to your inventory @retail.

  • For instance, for a category that should be operating at, say, 3 turns, you compare the expected sales for the next 4 months (or 17 weeks or 120 days) to the inventory @retail on hand for that category. 
  • Quickly you will be able to see whether that category is over-inventoried.
  • Sure, it's a rule of thumb. But it can be taught and built into your entire management team, helping you avoid having excess inventory, whether or not we have a recession.

So, what to do right now? Focus everything on this retail-stock-to-sales ratio comparison pointed out above. If you have more than enough inventory on hand in one or more categories, here are some ideas of what you might do. 

Seize the "Special Sales" opportunities

  • Take advantage of the upcoming Memorial Day weekend, plus the "Dads and grads" themes of June to have promotional events.
  • Take sharper markdowns, sooner. 

Buy less, more frequently

  • Resist the lure of "special prices" for buying more (your suppliers are trying to raise their turns too, you know.)

Buy more of your "basic merchandise" and less of the discretionary items. 

  • Consider using some of the online wholesale marketplaces to find more specialty items, many of which offer lower minimums and shorter delivery times.
  • But, again, be ready to resist the offers of "special deals" from those marketplaces. 

Managing and controlling the inventory is the #1 responsibility of the owners of retail businesses. It is both an art and a science, and distinguishes retailing from all other kinds of businesses. 

But, it also is what can soak up all your cash. And in these uncertain economic times, when the drumbeat of warnings of a recession could become a self-fulfilling prophecy, your operation needs to be as lean and nimble as possible. 

Like a game of musical chairs, when the music stops, you need to be able to move quickly to find a chair. 

"Stores Have an Inventory Problem", Jinjoo Lee, The Wall Street Journal, May 20, 2022.

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