What to Do With
Slow-Moving Merchandise
Every shop, gallery, or store selling decorative items runs into the problem of having slow-moving merchandise. Unused, dated, end-of-line, discontinued, and unsalable merchandise is the bane of all businesses no matter what the products are. Here are twelve ideas for you to consider. Rather than the problem being a negative, trying to solve it will open up many opportunities for having a more profitable business.
Close-out sales — usually done after holidays
Today, there is so much merchandise being sold at reduced prices (even when the reduced price is not really a reduced price) that few people look down on sale goods. Many customers look for sales in order to buy something they thought about but didn't buy at full price.
Some stores like to start the sale immediately after Christmas so the goods are gone before January 1. Some prefer to wait until the week after New Year's Day or later in January or early February. The sale does not have to be limited to Christmas goods. General merchandise can be put on sale during the same time. Some stores have found that with event goods (last year's Valentines, Mother's Day, Father's Day, etc.) it is best to put these goods on sale about 30 days after the event.
There is nothing wrong, or it does not say that putting goods on sale means they were faulty when sold at full price. It may indicate that the buying was faulty. The thing to be wary of is re-buying what was sold on sale.
Selective temporary retirement
This relates to #1. Where it differs is that these goods are perennials, ones that would be reordered the next year anyway. The justification for not putting them on sale is that the saving on freight offsets the interest on the money lost because the goods sit on the shelf. Keeping these goods from one year to the next may be advantageous if the prices increase the next year. This hold-over method calls for keeping a very tight inventory control with very good "rate of sale" information (which differs from total sales). It is wise to re-ticket and price these items when they are reintroduced.
Trade-back agreements
Some suppliers offer trade-back agreements. This gives the store the opportunity to exchange slow moving merchandise against an order of faster selling items. Usually it is on a 2 or 3 to 1 basis, (i.e., for each dollar returned, the store buys $2 or $3 worth of new goods). If a supplier does not offer a trade-back program, a store might try to work one out with the supplier. Suppliers may subtract 10% or 15% from the trade-in amount to cover repackaging and handling costs. There are several "arguments" or justifications for such a trade-back program. One, the store will, most likely, order more than the amount needed; two, the supplier will get more reorders later of the better selling goods; three, the store will be more loyal to the supplier because the store has a better selection of better-selling items.
Buying less
Oh my, what an easy thing to say, what a difficult thing to do. Many buyers believe or are told by their management that the savings gained by ordering and shipping larger orders are a justification for the large order. Some suppliers, in order to encourage larger orders, will offer an extra discount for orders over X amount (determined by quantity, weight, or dollar amount) or pick up part or all of the freight charges. Whatever saving may be realized is offset by having goods in stock longer than necessary and leads to leftovers.
Experienced buyers find it is best to buy small quantities of an item until such time as it is proven that it can sell. There is nothing wrong with giving a supplier a "Russian order" — one-of-each. Vendors may not like it, but a buyer's job is not to please the vendor, it is to please their customers and their business. When the latter two things happen, suppliers will also be pleased. By ordering smaller quantities one can control some aspects of what has to be put on sale.
Moving goods around
It is not unusual to find that some goods haven't sold because of where they are placed. Moving goods around has, on occasion, made a slow seller into a good, if not great, seller. In retail stores, different things sell better at different times in different places. Some spots are dead for some items at a particular time; the same spot may be a hot spot for others at another time. Because the layouts of stores differ, what is a hot spot for one store may not be a hot spot for others.
Hence, rearranging merchandise may lessen the number of things that need to be put on sale.
Another plus factor for moving items around is that handling items brings to mind goods that, because they have been in one place for such a long time, have become part of the fixtures.
Grouping — putting like things with like things
One aspect of having leftovers is that they are treated as leftovers. It does not take more than a few minutes to find a store's leftover area. This melange of items is not a way of showing off the items to their best advantage — something every store owes to the goods they buy. Grouping items from various suppliers or lines can be by design, color, use, shape, price, material, or a combination of any two themes. Pulling things into groups separated by space makes each group important.
Grouping is best when there are 8 groups of 5 items rather than having 1 group of 40 items or 40 individual items. As items are sold out of a group, the group can be reorganized. When merchandise is in one big group, nothing is important because customers' eyes get lost in the multitude or variety. Trying to give each item its individual space also means that because all are important, no one is more important than the others. Making groups with a common theme abates the leftover look.
Signage — something that allows customers to know what the price is without having to turn it over to see the price
Tickets should be placed logically: aligned with an edge or rim or to the left of a handle, and always right side up. Many items remain unsold because the price was not where it could be seen easily. Customers hesitate to ask because they don't want to be embarrassed if the price is too high for the situation they are looking to fill or they don't want to waste their time if it is not up to their standards (often determined by the price). And, looking for a someone to ask is seen as a waste of time.
Stores are now beginning to use point-of-sale or bar coding price stickers (tickets). Although they help with sales figures, they are large and unsightly. They can take away from the perceived value of an item, especially if it is of high quality and/or price. Because the price stickers are large, people think that removing them will be difficult (which is true), or doing so will damage the goods. How many sales are lost because of this? Way too many! Small, "come-clean" price stickers are readily available.
The other format is to type a price list (no more than 5 or 6 items) on a tent card or card in a card holder. With good signage, customers can ask about goods without the previously mentioned fears of being embarrassed or of wasting their time.
Along with good signage, relevant printed materials should be available to go with the purchased item(s). Store personnel may be familiar with the merchandise; very likely, customers or the recipients of a gift will not. If not available from a vendor, stores should develop such materials. Which can increase sales at very little additional cost.
Market Trends — very often some goods become less desirable because the market has changed
Watching for market trends takes time and effort. Trade shows and trade journals offer good methods for seeing trends — what is new, what is old and what has been repackaged. There are two aspects to "new." One is what the vendors have to offer that is new. The other is looking for something that hasn't been seen in past shows and is just emerging at this show. Learning and seeing trends requires lots of reading and attending shows for more than two years. After the first show, buyers are able to distinguish what is new and what was shown at the last show.
Inventory control — and not automatic
inventory control!
When working with products the important thing is "rate of sale"(when and how much was bought and sold) rather than total sales of an item/line. Why is this important? Every item cycles differently. That is true with items that are related by category, size, price, color, etc. I like hand counting because it keeps the mind aware of what is and is not selling. These systems can be as simple as a tally count. I do not like computer inventory controls for small businesses because people get so caught up inputting figures into the computer that the merchandise becomes numbers (SKUs) rather than goods that have a personality. So far, I have not found a computer inventory control program that gives rate of sale or merchandise cycle. I've been told that there is such computer software but I've yet to see it.
I believe in counting inventory on a rotating basis where everything is counted a least once a month or every 6 weeks, and as new similar items are received the records are corrected. Merchandise needs to be handled. Many slow selling items are left in the back room, behind something, in a cabinet, because they do not have to be accounted for until one takes an inventory for accounting purposes. Too late. Too often goods get sold and not replaced from understock or the tail end of a line gets left where it was, a lonely beauty sitting in oblivion.
Donations — to civic and charitable not-for-profit organizations
They are always looking for ways to raise money. Many have auctions or other events where they offer their members and friends a chance to help the group raise money by buying or bidding for things. Leftovers can be moved out by offering them to such groups. Besides being a good method of getting leftovers out of stock, it can be a form of public relations or advertising. An accountant can tell you if it is deductible at your cost or at the cost of what the organization sells it for. In addition to looking for things to resell, some groups are looking for prizes or awards for honoring special efforts of their members or special standout in the community, another opportunity for eliminating leftovers.
Alliances with other stores — better known as "buying groups"
Stores in close proximity to each other but not in competition with each other often get together to buy and swap goods. Buying together may give the group some advantages not available to the individual stores. The real benefit for these alliances is that one store's slow seller may be another store's good seller. By trading such information, stores can swap goods or buy from each other, lessening the leftover problem. Also, through meetings with other stores one may discover why or how the other store finds that it sells what one believes is their poor seller or leftover.
One group of stores I know of has a program where if a store requests an item they pay the other store 10% to 25% over cost to make up for the supplying store's logistic and storage costs. When a store wants to get rid of something, they offer it to other stores in their group at 10% to 20% less than cost, thus enticing other stores to buy it in order to make the extra markup. This format works in reducing leftovers.
Liquidators
Most give about 10 cents on the dollar. Many will offer less; few will offer more. Liquidators usually need larger quantities. It may be possible that if a group of stores with like items/lines wishes to put their inventories together, they may have a better chance to sell to a liquidator. In the giftware field, I see very little goods going to liquidators.
The problems of having leftovers are more than just taking up good shelf space and the aggravation of seeing old merchandise. Leftovers decrease a store's profit. Profit, one has to realize, comes from the turnover of merchandise. The best-selling items sell first so that without the ability to reorder these, increasing turnover fades and the store is left with the less-than-desirable goods. Each day a store owns an item it costs them more money — money that could grow in the bank or invested in faster moving merchandise.
In 1725, Daniel Defoe (of Robinson Crusoe fame) wrote one of the best books on business I've ever read called The Complete English Tradesman. Here is what he had to say on the topic. It is just as applicable today as it was in his time. "Some tradesmen are fond of seeing their shops well stocked, and their warehouses full of goods; this is a snare to them, and brings them to buy in more goods than they want. It is foolish as well as a fatal error, whether it lies in their judgment or their vanity...a well-experienced tradesman had rather see his warehouse too empty than too full; if it be too empty he can fill it when he pleases, if his credit be good, or his cash strong; but a thronged warehouse is a sign of the want of customers, and of a bad market, whereas an empty warehouse is a sign of good demand."