"Entry Exam" for New Items in Your Stores

Question: "We must keep bringing in new items. But, how do we keep from being over-bought?" 

Answer: "Very carefully!"

Ahh, the appeal of new items. Or, your customer's ever-growing "wish list" items. But, when you are also trying to control inventory, and keep turns up, the challenge is, "Really, which should you buy?" 

• As many retailers are only too aware, if you are not vigilant, you may experience bloated inventories, which can cascade very quickly into cash flow problems.

Here are 6 key questions for you and your buyers to ask yourselves as you consider new items. We think of it as an "entry exam" for merchandise. It's a very quick way to identify which items actually deserve to be in your store.

#1. Can my customers get this item at other stores in my market area? 
If yes, it probably has no pulling power.

#2. Is this a good margin item, or is it subject to a lot of price competition? 
Slow turners with weak margins are double trouble.

#3. Does having this item in stock help me sell other higher-margin merchandise? 
If not, you may not need it.

#4. Can I get faster delivery on this item than I am now getting? 
If yes, you may be able to cut back on your stock.

#5. Do I order larger quantities of this item than I actually need in order to take advantage of price breaks? 
If yes, you may be coming out on the short end when you figure in all your carrying costs.

#6 Do I have an emotional attachment to this item that reflects my personal taste rather than a business-like response to my customer’s desires? 
If yes, get rid of it!

Go here in the Library for Owners at The Retail Owners Institute(R) for more useful and practical insights and tactics about protecting your store from inventory bloat. See how quickly you can achieve greater control of your inventory!

New items? Oh my, yes. 

Too much or too many? Not any more!

Chasing Sales to Raise Cash? Oops! How to Avoid that "Fateful Fallacy"

If you ask retailers, "What's the best way to improve cash flow?", almost every one of them will answer, "Raise sales!"  

Consider this retailer, who contacted us a few weeks ahead of his largest vendor putting him into bankruptcy:

"There's something wrong here. My sales are up in all three stores, and we had our best profit in years. But, I can't pay my bills on time."

That owner suffered from not knowing that profits and cash flow are NOT the same.

Plus, raising sales in an attempt to solve a cash flow problem may actually worsen cash flow! (Sadly, that's exactly what happened to that now ex-retailer.)

How to avoid this fateful - and potentially fatal - fallacy? Follow these 4 steps.

1. Understand the cause-effect connections of the financial levers in your business.
2. Focus on the controllable variables in your retail business, especially inventory.
3. "Turn on your financial headlights!" Use The ROI's online 3-in-1 INTEGRATED Cash Flow Calculator.
   Use it to play"what if...?" with different sales plans, margin assumptions, and turn rates. 
   See in advance which combinations will get you the outcome you want.
4. And remember, in a crisis, if you have to choose between profits or cash, always choose cash!   see more