Craig Kirchner: Over-Inventoried-The Killer

Before moving into the new season or reviewing the results from the one winding down, we should be looking at sales per category, margin and did our buy plan keep our space well merchandised without being over-inventoried. Having too much inventory is the key margin killer in most shops. There are basically three ways to be over-inventoried and any of these situations will keep your shop from realizing its potential.

A – Over-inventoried in total number of units

Obviously this translates to dollars and has put as many retailers out of business as has lack of business. Pro shops that have backrooms full of unopened boxes or tubs of stock from previous seasons have almost no chance of making any margin.

B – Over-inventoried in total number of vendors

Having too many lines or brands of apparel almost always does justice to none. It is also most often the reason for too many units and usually comes about as a result of not understanding the space and the number of turns involved for the shop as well as not having the ability to say “No”.

C – Over-inventoried in a particular category

Owning too many units in a particular category not only limits your ability to make money in that category but also hurts your potential in some other category either by cramping its space or limiting its open-to-buy.

I visit many shop managers who have difficulties providing the type of service level I suggest because of the cuts they have had to make to the shop operations budget. Over-inventory plays a role in this. Consider a scenario I have seen many times.

Throughout the year, it may become commonplace to move residual merchandise off the shop floor to create room for new product. At the end of the season, there is now a room full of merchandise totaling almost $30,000 that is doing nothing for the retail effort. Now consider, that a full time shop staffer starts at around $30,000/year. If that employee turns out to be an enthusiastic retail salesperson that takes some ownership of the space, the business revenue and ambiance could be dramatically improved and you start to get some idea of the killer that “more goods than needed” becomes.

A healthy inventory level does not ensure success at retail but it does create the most promising opportunity to create that success. There are plenty of other factors that need to be addressed such as having a staff dedicated to service and salesmanship. However, concentrating on maintaining a proper level of inventory as well as your buy plan is key at this time of year to put yourself in a strong position for the season.