Sally Furrer: In Retail, It Rarely Pays to Be Patient

Aged inventory is like plaque in your arteries — it restricts your cash flow. To boost turn and start generating cash flow, you must manage inventory aggressively.

If you have too much aged inventory, your clients have basically told you they don’t like your merchandise, and you need to get rid of it.

There are a lot of suggestions out there on what to do with aged inventory. Some entail marking the product up, or re-merchandising (add adding a center diamond). With some exceptions, my issue with these types of approaches is that they prolong the problem. I prefer to take action.

Getting the right mix requires inspiration and hard analysis.

Aged inventory is like plaque in your arteries — it restricts your cash flow. To boost turn and start generating cash flow, you must manage inventory aggressively.

If you have too much aged inventory, your clients have basically told you they don’t like your merchandise, and you need to get rid of it.

There are a lot of suggestions out there on what to do with aged inventory. Some entail marking the product up, or re-merchandising (add adding a center diamond). With some exceptions, my issue with these types of approaches is that they prolong the problem. I prefer to take action.

SHORT-TERM ACTION

• Return to the vendor based on an agreed-upon portion of your sales, or each time you place those replenishment orders ask if you can return one piece for every three ordered.
• Incentivize your staff by paying them cash out of the spiff drawer on each piece. This can be very effective.
• Take all stock that is over 12 months old and have an “Everything in the Store 50/60/70% Off” sale event” — but first put all fast-selling or new stock in the vault.
• Donate it to charity.
• Use it to barter with (event catering, flowers, music, etc.)
• Dead stock is anything more than three years old. Look at scrapping this product. With today’s gold prices you may be able to recover your cost. (Ed. Note: Notice next door that Don Greig defines dead stock as older than 2 years. You have to decide what works best for your bottom line.)
  

  LONG-TERM ACTION

• Renegotiate with your vendors to return aged inventory (12 months and older) based on an agreed percentage of your sales — 20 percent seems to be OK with most vendors.
• Stock balance between stores: the cost far outweighs dumping old stock
• Mark it down — no matter how unattractive it is, at a certain retail price it will sell.
• At 12 months take your first markdown. Continue your markdowns at six-month intervals. After you have marked something down three times consider scrapping it.[
• Keep in mind that bridal sales are not always effective. For many there is a stigma attached to buying a discounted engagement ring. Quietly lower the price or spiff it.

  About the Author

  Sally Furrer is a merchandising consultant with 20-plus years of jewelry industry experience. E-mail her at sallyfurrer@gmail.com, or visit http://sallyfurrerconsulting.com. Meet Sally at The SMART Jewelry Show, at Chicago’s Navy Pier from April 21-23, 2012. To register, go to smartjewelryshow.com/register

  This story originally appeared in the March 2011 edition of INSTORE