Inventory matters. With your business, you are not only selling the brand but also the product or service as well. The consumer retail industry lives and dies during the holiday season, so it is important to manage inventory. Optimal inventory should be just above “Goldilocks level”. Remember the fairy tale Goldilocks and The Three Bears where Goldilocks only wanted the middle bear’s stuff because it was “just right”? In fact, there’s a Goldilocks principle that says that the preferred state is between the margins – not too little or not too much.
When it comes to managing inventory for the holiday season, it is best have a little more than just enough. As it gets closer to Christmas, sales can increase significantly on the weekends when people are free to browse and shop.
Keeping inventory levels right is vital since it not only controls costs but also serves as a barometer of a business’ overall health. First, pay attention to your top sellers. Whether you are using Square, Shopkeep or some other Point-of-Sale (POS) system, there is a report that will show which inventory items are consistently selling well. Use this data as a guide to determine which items should be increased in your inventory.
Next, look at the bottom of the list to the inventory that is not selling. One thing that may be a quick fix is to change where it is displayed. If you are selling offline, move the inventory in the store next to items that are selling or that are complementary. If you are selling online, you may not be able to change your website as easily, but you can feature items in your newsletter or social media.
Another reason that an inventory item could be under-performing is its price. The most obvious answer is that the price is too high. That can be true; however, sometimes it is because the price is too low. While working as a sales representative for an artisan jewelry designer, the owner increased the price of some pieces and sales actually increased. I think that customers perceived higher priced items to be more valuable. This is an important distinction. Value tends to be more important than bargain for people, especially when shopping for others.
The last reason an item in your inventory is under-performing is that doesn’t fit with the brand of your business. For example, if your business is known for selling vegan leather accessories, then suede shoes should not part of your product line.
It is essential to establish good relationships with vendors. Despite all the technology and apps, small business retail is based on maintaining relationships with all vendors. That way, you can reach out to them to deliver product immediately if you sell out. Vendors can be lifesavers to your business when it comes to maintaining inventory level. Some vendors will even suggest other products to sell and may offer a discount. You have to communicate with them often and let them how sales are going. They may offer advice on what works best.
The accounting of sales inventory is pretty easy with Xero.com. When you add a new vendor invoice into Xero to pay it, you can associate each line of invoice to the inventory item that you are selling. You can also enter unit price and product description as well. If your business needs a more robust inventory management software, check out TradeGecko, which can be integrated with Xero as part of Xero’s Add-On Marketplace. Managing inventory is taking stock of what is going with you business. You can’t afford to ignore it.
Guest author Nichelle Stephens is a blogger, cupcake enthusiast, editor, event producer, and social media strategist. She is the co-founder of Cupcakes Take The Cake, a popular blog about cupcakes. She is also the founder of Keeping Nickels, a personal finance and business accounting blog for freelancers and entrepreneurs.