Taking Stock of Inventory

It’s time for jewelry retailers to rethink how they manage their inventory, said Abe Sherman, chief executive officer of Buyers International Group.
During a Wednesday seminar, Sherman outlined the problems with the way jewelers traditionally look at their stock and presented new ways to manage their inventory. These include streamlining inventory, creating more turn, buying merchandise based on category and price point, and stocking products that better reflect the marketplace.
Sherman said margins among jewelers nationwide have declined 5 percent over the past 10 years. The decline has been gradual, so it hasn’t created a panic among retailers. However, the numbers over the span are becoming significant. Combine this with the current decline in consumer purchases, and it means trouble for many jewelers.

“Margins are small, so turns have to increase,” Sherman said. “Where do we increase our inventory? We think it’s an advantage this stuff never goes bad, and we keep it. Well, that’s a mistake. We’ve all been taught that inventory is an asset. Inventory is not an asset. It’s a liability.”

He said that for most of the stores his firm consults with, anywhere from 45 to 55 percent of their inventory is at least a year old, which he defines as non-performing inventory. He said it’s important that retailers get rid of this product and replace it with merchandise that sells. “The question is going to be, How do we do that? Do we scrap it?” he asked.
In some cases, Sherman said, scrapping it may be the best option. He noted, however, that re-merchandising is often the best alternative. That means selling the merchandise not based on what it cost the retailer when it was purchased, but what it’s worth today.
In addition, Sherman said retailers have to purchase merchandise that better reflects their customers’ taste and income level. A store that sells luxury merchandise may not be the best fit in a family-oriented, middle-class community.
“When we look at merchandising, the last thing we are going to look at is the product,” he said. “We want to plan this by understanding the category and the price point. If your jewelry is disconnected from where your customers are, you’ve got problems.”

Finally, retailers need to have a clear idea of what is and isn’t selling and should stock more of what is selling and fewer items that are not moving. Again, in many instances this means moving to lower-cost merchandise.