How to Get That Over-Inventory Department on Plan (Without Losing Your Shirt)
I recently received an email from Rod Johnson owner of Midwest Mountaineering in Minneapolis. He has been dealing with this dilemma in his operation and thought that some of his ideas might benefit others facing a similar situation. With a bit of collaboration here are some of the challenges he faced as well as potential solutions.
Challenges and Solutions
I’ve been struggling to get our Paddlesport and Ski department inventories down to plan for at least 25 years. Knowing that you’re over plan is only 10% of the battle. When our buyer for these departments quit I decided it was time to step in and do it myself. I believe the reasons previous buyers were not as successful were:
- They’ve built up good relationships with vendors and reps and greatly reducing orders reduces their income. It’s easier for a retail owner to stand firm because he has to pay the bills.
- Salespeople strongly urge buyers to order specialty items that have a slow turn and poor sell-through. Customers can buy these items on the Internet.
- Reps will say this item sold well for you at a good margin. You need to order more. Even though you have very little OTB you must have a basic selection of good sellers for your customers.
- Items that are average sellers shouldn’t be reordered until inventory is down to plan. Items that are slow sellers need to be highlighted and cleared out at 50% off.
- Many buyers are not good promoters and good merchandisers. It takes a good promoter to get rid of the “dogs”. Special sale promotions through a store’s customer email newsletter is a good way. A 75% off “Garage Sale” is another way.
- Reorders are sometimes sold out or have a long delay. Sell what you have. You may lose some sales.
Vendors’ Recommendations
Vendors urge buyers to place two preseason orders per year. Never preseason out-of-season items like camping items and hiking boots in the winter. Place ASAP orders for these items. Cancellations often don’t get done in time if it turns out you don’t need the item.
Inventory Results
Results: our paddlesport inventory is currently only 10% over plan. At this time last year we were 100% over plan.
Additional Strategies
I might add a couple of my own strategies to this list.
- Sometimes vendors are willing to participate with you if they feel their line would be a good fit. Perhaps with some negotiation favorable terms might be agreed to regarding return privileges extra dating or consignment agreements.
- Having a solid merchandise plan which consists of a solid sales and inventory forecast and open-to-buy plan is critical to success in solving over-inventoried classifications.
- By employing the inventory management strategies that Rod has suggested you might be able to improve the profitability of your more challenging categories too.
Nothing ventured nothing gained. If things are not working for you currently change your approach. You can always go back to your old way of doing things if you don’t like the results.
Ritchie Sayner
Summary
Rod Johnson owner of Midwest Mountaineering shares strategies for managing over-inventory in retail focusing on taking a firm stance on ordering promoting slow-selling items and collaborating with vendors for favorable terms. His approach reduced their paddlesport inventory from 100% over plan to just 10% over plan.
“Nothing ventured nothing gained. If things are not working for you currently change your approach.”
Real-World Examples of Inventory Management
Here are some real-world examples of how businesses have successfully managed their over-inventory challenges using strategies similar to those discussed in the article.
- A small outdoor gear retailer in Colorado partnered with their vendors to create a consignment agreement for slow-moving winter gear. This allowed them to return unsold items at the end of the season reducing their inventory costs and freeing up cash flow.
- An electronics store in California implemented a “Flash Sale” strategy through their customer email newsletter offering discounts of up to 70% on overstock items. This not only helped clear out excess inventory but also increased foot traffic to the store leading to additional sales.
- A boutique clothing shop in New York City used detailed sales and inventory forecasts to better align their buying decisions with customer demand. By focusing on best-selling items and reducing orders for average sellers they were able to decrease their over-inventory by 50% within a year.
