The Retail Owners Institute® has developed a retail strategy for "Inventory Management Going Forward."
As we often do, it was recapped as an unassuming chart (see above) identifying the Five Stages of Merchandise Mix Management, from "Before COVID-19" to the "New Normal?"
Total Inventory Levels
We assume that consumer discretionary spending will plummet initially, and be slow to recover.
We assume that not only is consumer spending likely to be tentative, spending on discretionary items will be impacted the most, especially initially.
WHAT DOES OUR GOING FORWARD CHART CAPTURE?
A strategic retail framework. A point of reference, a template for your own inventory strategy going forward.
Where to Start
First, during this interval of "Contemplative Time," make your own "Going Forward" charts.
Remember, no specific numbers, no definite timetables. Just Big Picture ideas: What might your merchandise mix look like at each of these five stages?
Here is where your work with The ROI's 3-in-1 Cash Flow Calculator is really helpful. (go here for special free access during these times)
Given your "best guesstimate" entries for monthly sales and margins, the 3-in-1 Cash Flow Calculator can tell you how MUCH inventory (total) to have, based on sales expectations.
And by the way, it also shows you what that means about cash!
Free • 3-in-1 CASH FLOW Calculator
NOW, BACK TO FOCUS ON THE MIX
Just what IS “basic” merchandise or the "never-outs" for your store?
Just to teach the concept: take an apparel store that has been selling lots of blouses. One particular style is available from the vendor in six colors, all of which the store has heretofore carried.
This example uses a particular merchandise item. The same exact principle should be used for merchandise categories. Optional, discretionary categories, although fun and interesting, will need to be held back for the duration.
We know this is not an easy project. Very time consuming. We're sorry, but it is essential.
BACK TO THE 3-IN-1 CALCULATOR
Impact on margins
True, reliance on more basics and “expanded basics” versus the discretionary items means that margins are likely to be lower during these initial recovery phases.
TAKE THAT, UNCERTAINTY!
Well, there you have it. A plan you can have confidence in. And that is the very best way to deal with that fog of uncertainty!
Plus, you have a plan of action for going forward, starting NOW
Reduce inventory by a targeted amount (eBay? Your own e-commerce? Other outlets?)
Reduce the “right” inventory (eg, the discretionary items), so you are best positioned for the Re-Opening Phase
Make preparations for the Re-Opening
In other words, with a strategic plan you can have confidence in, you can get back to thinking about retailing!
How great is that?! Have fun!
Each of us, our households, businesses and communities are in different stages of shutdown due to the coronavirus.
While we cannot speak to when this will end, we do have some ideas for dealing with the "fog of uncertainty" that hangs over us all.
That's a sign of the times, isn't it?
While retailers are more accustomed than most folks to cope with change, 2020's unrelenting flexibility tests have been a challenge. Forget about five years. Retailers have to be ready for the next five months! It's back-to-school and then Holiday.
The only certainty about the next five months is that they will probably feel like the past five months. Yet you still must run a retail business. And that means you still must buy and sell merchandise.
The opportunities – and the pressures – are mounting.
As your stores are able to re-open after the coronavirus shutdowns, how they look tells a powerful story. And for you, a great opportunity.
This is no time to try to go back to normal, back to business-as-usual. Nor to simply have all kinds of protective shields in your store. While necessary, how welcoming is that?
Instead, this actually IS a second chance to make a good first impression! Take full advantage!
About a year ago, as the pandemics were beginning to hit their stride, we introduced a framework for retailers to "rethink your merchandise mix."
As depicted in the chart above, we cautioned that once the lockdown was over, as customers resumed shopping, retailers should be prepared for (1) reduced sales totals overall; (2) significantly re-balanced merchandise mixes, initially dominated by "basics/never-outs."
Further, we anticipated that the merchandise mix would continue to change as we re-emerge from the effects of the pandemics. And we urged retailers to take this overall construct and adapt it to their own situation; to develop their own customized strategic response.*
Now, one year later, here's how this can become "news you can use" to quickly produce your Big Picture buying plan. Especially in the spring of 2021, some practical answers to "What to buy?" , "How much?" and "When?" are likely to be very welcome.
As more stores are able to reopen, and more shoppers are willing to emerge, what will they encounter?
Time to move on from Covid, and get our minds back on retail. Focus on the merchandise. And the customers. And the results. In other words, it's time to put the fun back into retailing!
So, here are a few of The ROI's "attention to detail" reminders that you may want to have at the ready for your next staff meeting. A refreshing change of pace for everybody!
Still less than $1 a day! 👀