What Are You Doing About Aged Inventory?
It’s all about the bottom line. The more merchandise the store sells the better the bottom line. Or so it seems. A couple of things can really get in the way of that philosophy delivering value to a jewelry store. One relates to higher costs and the other is diminished revenues. Higher costs come in the most obvious area . . . labor, but sneak into the equation through unsellable merchandise. It is estimated that many jewelry stores have inventories where over half of the total inventory being offered to customers is aged inventory. In many fashion industries, inventoried items are considered aged after three to six months. It is not uncommon for retail jewelry stores to let merchandise sit in a case for a year or longer before they consider it aged inventory. Consider the negative effect on shopping experiences when shoppers recognize the same old inventory.
Selling by season can really help retailers address aged inventory in a more proactive manner. Developing promotional programs to move merchandise by season adds interest and excitement to the inventory and supports the need of sales associates to become more competent in selling merchandise. Every piece of jewelry in your store deserves a story. If your sales associates don’t have an impressive story for every piece of jewelry consider why not and understand that this may be the beginning point for recognizing why some pieces have become aged inventory. How many pieces of jewelry are in your inventory right now that some of your sales associates cannot effectively present and demonstrate and sell? The old saying “You are only as strong as your weakest link” certainly applies to your sales associates competencies to effectively sell every piece of merchandise in your inventory.
The monetary cost of aged inventory is seen through the need for more working capital due to the lack of cash flow. Consider what has been happening every month as more and more inventory is becoming more aged. There is an increase in the unsellable merchandise being presented to customers. Many stores have items that have been in inventory for years and that sort of jewelry too often does not appeal to today’s more value oriented consumer. For the merchandise that is not supported with strong demand by your store’s customers consider readjusting the list price to arrive at the right price point . . . even if the margin is less than you planned to generate with the merchandise. Make the product sellable. Provide extra commission to sales representatives to move certain featured merchandise. Don’t forget to provide lots of recognition and acknowledgement each time a sales associate sells an aged inventory item. You want to do everything in your power to encourage this sort of behavior because it has a lasting effect on your business. Maybe not today given the reduced margin the sale might require, but in the ability of your company to remain healthy through positive cash flow. By changing the list price stores can avoid the “discounted price” concerns that owner have about offering discounts. Just re-price it to sell now. There comes a time when cash flow is more important than margin . . . Is your store there yet?
What sort of promotions do you have planned as we enter into the industry’s heaviest selling season? Use sales promotion to create reasons for shoppers to shop your store now. Don’t wait for Black Friday. Start going through your customer database and creating reasons to contact customers now . . . before they buy other holiday gifts.Creative merchandising is all about selling the idea and letting the merchandise sell itself. Be more creative in your approach to sales promotion and merchandise display. When is the last time you invested in creating more appealing displays?
Lastly, get the aged inventory out of the same case and put it with matching jewelry with similar design qualities. You will be surprised how much more appealing aged items look when these pieces are positioned next to more popular items with similar design characteristics. There is a bit of implied acceptance that begins working in the favor of the store’s display. Sort aged inventory by material type, design, shape, color, etc. to find the best matches to display next to hot selling merchandise.
The bottom line is this economy is going to be this way for a while and taking the same approaches that have caused your aged inventory to continue to grow will probably not produce the results many stores need right now. Retrain the sales associates, re-price the merchandise, re-set the displays, reanalyze commission structures and realize better cash flow. What are you doing about aged inventory? Let us know.
Larry McCoy commented:
No customer wants to walk into your store and see the same thing they have seen, over and over. Price points are going to be lower than they were three years ago. So make your inventory fit. Take out half or all the fine side stones and replace them with blacks, which seem to be popular. Lower to price to fit what they will buy even if it winds up being cost. If you don't follow the economy trends you won't sell. If its over three years old do the same and for sure mark it at cost. Old inventory didn't sell then and it won't sell now. Everyone is spending less why would it be any diferent with jewelry? Main point is do something to get rid of it so you can replace it with something that will sell.
Tim Malone commented:
That's a good way to look at aged inventory from a financial orientation. However, there is another approach that may uncover aged inventory to be even more costly than previously thought.
Consider the negative perceptions generated by inventory items that look (and are often merchandised) as old unsellable merchandise. When shoppers review store inventory and become consciously aware of the undesirable merchandise they can often adopt a negative view of the store, brand and products. This can be very negative to brand equity and lead to negative word of mouth referrals.
It is time to consider both the financial and customer considerations that should drive more well planned approaches to aged inventory.
Alan commented:
The simple way of putting it is:
Every day the store has a piece in stock it costs them more as the money if, sold, could be used to pay off a loan or put in the back earning interest.
