From the Co-Founders of The Retail Owners Institute.Tips | Tactics | Insights on the Business of Retailing.
10 Tips to Turn Your Inventory Into Cash – FAST!
Sometimes retailing doesn’t quite turn out as you had planned.
Did last year fail to live up to what you predicted—and budgeted for?
Did you overestimate the popularity of your generous order of a particular product?
Are there areas of your inventory brimming with overstock?
Relax! There is a way out of this mess.
If you find yourself long on inventory and short on profits—whether from overbuying, expanding lines too quickly, or overestimating sales – don’t panic.
You still can whip your inventory back into shape before it devours your profits.
The key is to act quickly—the longer you keep excess inventory on hand, the more it will end up costing you.
But, if you think the only way to reduce your inventory is to run a sale or declare a buying embargo, guess again.
There are less drastic ways to get your inventory under control again.
And The ROI has identified 10 of them you can use right now.
See this practical how-to article - How to Cut Inventory - FAST! - in The ROI's Library for Owners. Use a combination of some or all of those ten strategies to help bring your inventory back to a more manageable level.
Take advantage of this insightful and practical approach to one of an Owner's fundamental responsibilities. Available exclusively at The ROI.
The High Costs of Excess Inventory
As a retail owner, one of your primary goals is to boost profit margins—right?
You know that good inventory management is essential to producing top-notch profits.
You also know that bad inventory management can cause big problems with profit.
However, do you know there is a cause-effect chain reaction on your profits of carrying too much inventory?
Of course you do! Doesn't everybody?
But as pressures grow to raise wages, increase benefits, renew leases, improve technology, and oh yes, pay taxes, many businesses find their profits diminishing.
But retailers have a special advantage. An often under-utilized pocket of profit growth potential. Yes, we're talking about your inventory!
For each $100 of inventory @cost, as it sells, its markup (margin dollars) helps cover expenses and adds to profit.
Even a modest increase in inventory turnover rates per year can yield a dramatic increase in margin dollars and net profits. (For the formula for turnover and more perspective, see the Retail Benchmarks section at The ROI.)
Take a look at this chart.
Sound merchandise management is crucial for the survival and prosperity of your retail business.
For example, say you’re currently keeping about $150,000 tied up in inventory
You discover that a carefully-monitored merchandise management (or “Open-to-Buy”) plan can cut that by 10 percent
That means you’ve just freed up $15,000 in cash for more prudent investment!
Chances are you have slack of at least 10% in your inventory right now! (And remember, the same math applies if your inventory is $1.5 million, or $15 million, or more! How much cash does 10% of that represent?)
The same thing applies to your inventory.
Any "turkeys" in your inventory need to be gone by the end of the Thanksgiving weekend. No matter how low the price needs to be, there are 3 vital days to get non-sellers out of your inventory.
Remember, the week after Thanksgiving Weekend is the time to have NO "turkeys" in stock.
"Big Picture" Tools for Busy Retailers Whether you’re looking for better control of expenses, profit, inventory, or cash, these are the “big picture” tools for you.
The ROI’s online "projecting calculators"
All online.
Nothing to download or install.
Just add your own good judgment!
Built exclusively for retailers, and retail situations.
Dedicated to projecting, not accounting or bookkeeping.
For looking ahead, playing "what if...?".
The forecasts for Holiday Sales are coming out. And they are very upbeat! Sales increases of 4.5 percent are forecast, versus last year's 3.6 percent. Meanwhile, holiday e-commerce sales are projected to grow 18-21%.
"With disposable personal income climbing and consumer confidence staying elevated across the U.S., the holiday shopping season could bring healthier sales for retailers," stated Rod Sides, the head of Deloitte's Retail Practice.
"The good news is retail is thriving, with a proliferation of new, niche retailers."
Pat Johnson and Dick Outcalt, The Co-Founders of The Retail Owners Institute®, have been called "The Zen masters of retail finance!" Since 1999, they have been assembling their proprietary content into a unique self-help website. The Retail Owners Institute is an unmatched resource that assists retailers worldwide with basic financial training, assistance and easy-to-use tools. Their engaging and empowering how-to resources about the financial levers in retailing are informative, fun(!), and retailer-friendly. Their promise: "Everyone will 'get it'!" Pat and Dick are recognized experts in strategic retailing. Working only as a team – Outcalt & Johnson: Retail Strategists, LLC – they have been consulting, publishing, and speaking professionally throughout North America since 1990. They focus exclusively on retail, or wherever retail is involved. They work with CEOs, CFOs, boards and owners of retail operations, as well as manufacturers or wholesalers expanding into retail. And they also are Retail Turnaround Experts.
Since 1999, empowering retailers and store owners to "Turn on your financial headlights!"