The Common Inventory Problem That’s Killing Your Bottom Line and ROI
Your inventory is slow-moving. Products are getting carried over year-to-year. As a result, inventory levels are consistently rising.
And your bottom line is suffering.
Why is this happening? It’s likely you are struggling with a common retail inventory problem – one that can be solved after you’ve identified it.
Put simply: your store has become disconnected from customer needs.
Let’s look at a few signs that you struggle with this common inventory problem…
Salespeople are selling you merchandise.
Let’s say a sales rep calls you to say they are running a promotion for 15% off of a particular product.
You think, “Great! 15% off. I can make more money from the sale of this product.”
But who is this product for? Is it a good product? Is it a desired product?
When a manufacturer’s sales reps are guiding your store’s purchasing decisions instead of customer need, you run into problems.
You don’t know who your current customers are.
Do you know exactly how far your customers are willing to travel to get to your store? Their age, income level, and gender?
I’ve found that many retailers only do this kind of investigation when they launch their business.
But that’s a mistake. It’s important to stay on top of changes.
And you may be surprised by how much demographics have changed. Mobile internet has revolutionized how people find businesses.
This can mean that people 20 miles away are driving out to your location. Or it can mean that people just a few blocks away aren’t even aware you exist.
It just depends on how you rank in those mobile search results.
Don’t work with incorrect assumptions about your customer base.
And I know you may be panicking about the idea of going through this process. The headache! The cost!
Don’t panic. It’s easier than you think. Technology has made the process much simpler, quicker, and cheaper.
And when you know exactly who you are buying for, it can help ensure that your merchandising matches your target audience’s needs.
You allow yourself to go down a slippery slope.
It starts with ordering a product no one wants to buy.
So you cut the price a little to try to entice shoppers. Few of them take advantage of it… so you cut the price again two weeks later.
This retail store marketing strategy sets you up for long-term troubles.
Here’s why. Your customers will know this is what you do. They’ll know that this current deal is not the best price.
And they’ll want to wait until you go even lower. Ouch!
In retail, a good mantra is: the first loss is the best loss. Always cut the price substantially when you liquidate.
Your entire team isn’t aligned.
In some cases, part of your team may be very well-aware of customer needs. But the problem arises when they aren’t communicating with other parts of the organization.
Ask yourself: is everyone – from merchandising to sales staff to internet retail store marketing –working together towards common goals?
Let’s say you run a promotion on a particular product online. Is your sales staff trained on how to sell that item when someone comes in looking for it? Are they trained not to guide them to another item?
The goal is for everyone to be a team player – and to be informed about who the customer is and what the evolving store goals are.
You buy what was popular last year – or even last month.
This is a common problem in established businesses. Particularly those that have been around for 10 years or more. They aren’t used to the pace at which things change today due to technology.
You are marketing to an audience that’s constantly evolving. Don’t look to the past for merchandising decisions. Look to the future.
Here’s what I mean.
What are the current search trends? For many products, people research well in advance before actually making a purchase.
And you can see what people are researching easily.
You can use Google to figure out the popularity of search terms related to your business. If you have a website, you can see what pages they visit and how long they spend on them.
Imagine if you knew exactly what Christmas toy would be the hot buy this year – well in advance? That’s the type of power this kind of thinking gives you.
You’ll see what people are interested in right now. And that’s a powerful thing.
You’re only selling online on your website.
If you offer internet sales, it’s likely you have a website. Hopefully you’re using some kind of shopping cart software to make the process easy for consumers.
But many retailers make the mistake of stopping there. Their products are available online. Project complete.
But are people able to find your website?
If you are implementing SEO best practices, maybe you’re ranking for a few keywords and getting some amount of traffic. Maybe some of your in-store customers make purchases online, too.
But there are thousands and thousands of other people you could reach. And even if you rank well on Google, you’re likely missing out on them.
That’s because, when it comes to product search, there’s a bigger game in town. Yes, bigger than Google. And that’s Amazon.
A recent survey found that a whopping 44% of consumers visit Amazon first to locate a product.
It’s the place consumers associate with online shopping. And there’s a reason for that.
So, am I telling you to compete with Amazon? Of course not! You can become a seller on Amazon.
And actually, you can offer your product on dozens of online marketplaces and shopping channels. It’s not that difficult to set up with a product data feed output by your shopping cart program.
You’ll be opening yourself up to a very wide audience – and that can help address those rising inventory levels fast.