JCK Las Vegas: Reduce Toxic Inventory

In a Thursday morning presentation, Phil Holden shared with retailers his tips for reducing toxic inventory—items that are aged, returned, or discontinued. Among the suggestions from the president of the Gordon Co. in Fort Lauderdale, Fla.:

* Stagger shipping dates of orders to accommodate high-volume sales periods and prevent backlogs of excess inventory. “Order less and as quickly as possible,” Holden said.

* Establish quarterly, annual, and semiannual objectives for aged inventory. “The industry standard for inventory turn is once a year, but turn should really relate to gross margin.”

* Know your top and bottom 20 best-selling SKUs.

* Consider brass-and-glass samples instead of costly live goods. “It’s a way to decrease the amount of dollars that are tied up in live inventory,” Holden explained.

* Exchange slow sellers with vendors.

* Invest in a good point-of-sale system; ARMS is one example of a popular jewelry industry system.

While Holden said that periodic sales can be a beneficial means of cleansing inventory, he cautioned against hosting so-called anniversary sales because consumers learn to expect them and postpone purchases. “[Consumers] know you’ll host another sale again next year, so they’ll save for it,” he observed. Instead, conduct a one-time sale. “People are responding to anything with a clearly defined start and finish and that has some value to it.”

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