What is your inventory telling you?

As a business owner, your business is your baby. You want and need it to be a reflection of exactly what you dreamed that it would be. However sometimes this control extends a little too far and on occasion all the way to the stock room!

For retailers many of the early purchasing decisions are based on personal preference. Would I like this product? Would I buy it? Whilst passion and our own likes and dislikes are important to us, they are not necessarily in harmony with your customer’s demands and sometimes it is necessary to make some tough decisions with regards to our inventory strategies. It is crucial to develop good processes for making decisions on what to restock, what to promote and what to ditch from the inventory altogether.

You may be asking yourself, ‘how do I know what I need to stock’? The answer lies in some of your data and we are going to look at how this information can be used to help you make cost-effective inventory decisions.

What should I be buying?

In the first year of trading it can be very difficult to know what to stock. Analyzing competitor websites can be somewhat useful, but really it is the sales data from your own store that is the most effective.

Many Point of Sale systems, including our own, have analytical capabilities that can make this job much easier. At the touch of a few buttons, you can see what is selling and what isn’t selling at all, plus everything in between!

For more retail stores, the effect of seasonal changes is huge. Being prepared to stock more or less of certain items will help you plan your inventory management and buying decisions. For example, you could look at the sales figures from the previous year and see that you were restocking sticky tape weekly in the approach to Christmas. This information can help you make the decision to make one large order rather than multiple ones, which take additional time and effort.

How should I be promoting my inventory items?

Your sales data is also an invaluable tool when it comes to deciding how to promote your stock. By understanding what your customers are buying you can tailor your marketing strategies accordingly. A particular customer type may shop for specific items at certain times of year, for example men are far more likely to go shopping for engagement rings in the weeks leading up to Valentine’s Day. However if your sales figures do not show an increase in engagement ring sales during this time then your marketing strategies for this event are clearly ineffective.

Using your sales data you can make the connection between customer types and products, giving you the opportunity to maximise your marketing efforts to hook your target demographic.

How often should I be re-ordering?

Re-ordering doesn’t always have to be time consuming thanks to new technological capabilities offered by many POS systems. However, ensuring that you get your buying patterns right will help keep your stock fresh and organised.

Sales data is a key component of identifying reordering schedules and establishing buying patterns. Using this data you can analyze what items sell quicker or which hang around on the shelves for a long time, then adjust your inventory re-ordering schedules accordingly.

It is also important to keep a note of items that you may be asked for that you don’t stock. If these become regular requests then you need to consider sourcing this product for your regular inventory, as fulfilling customer demand is vital for repeat business.

What about inventory shrinkage?

Sometimes known as phantom stock-outs, this refers to inventory items that are marked down as lost or stolen. Whilst this is obviously not a positive thing for any business, many items that are recorded in this way often appear later having just been misplaced.

POS systems with centralized inventories, such Hike POS, are extremely beneficial for these scenarios as they can keep track of stock whether sold levels whether sold online or across multiple stores. This means that stock is much less like to be recorded as being lost or stolen in error. However, if certain items do regularly fall into this bracket then you can look at putting additional security measures into place to help minimise loss.

What should I do about frequently returned faulty products and non-selling stock?

It is just as valuable to analyze what stock is unprofitable as what is selling. If certain products are regularly returned as being faulty or unsatisfactory, then it is definitely time to consider sourcing an alternative product. Not only will this save you time, money and administrative costs, but it will also help keep your customers happy!

Whilst it may seem easier just to restock everything in your inventory, we highly recommend that you take the time to create a system whereby you grade the popularity of your products. This will enable you to see product trends and help you decide what you should definitely re-order and what should definitely be scrapped from the list.

Consumer demands are constantly evolving and it can be tricky to keep up with the fast-paced changes. However when it comes to inventory management, using and understanding your business data to make decisions will help you keep both your customers and your bank manager happy!