QUESTION: We’re constantly struggling to get rid of hard to sell, excess inventory. Do we just accept our losses and take it off the sales floor or should we continue to take up floor space to try and sell it?
The RETAILMaven ANSWERS: It is essential the merchandise flow in smoothly and out smoothly. Retailers spend more time and energy bringing it in than they do trying to move it out. That is where the flow gets stopped. First the merchandise flow stops and then the cash flow stops.
There are 2 big mistakes that retailers make about this. First, they aren’t aggressive enough with the items when they are new. Second, retailers don’t use the science of markdowns to move more products out and keep more cash in their pockets.
Let’s say you received 6 pieces of an item 2 weeks ago and they are all still on the floor. Right away move them around. If they were merchandised on the wall, then move them to a floor fixture. No matter how big or expensive the item, don’t be afraid to put them around our front counter to really highlight them. Educate your team on what you SPECIFICALLY think is fabulous about this item and why you ordered it. Point out the features of it and the talk about the benefits that it offers your customers. When your team is educated correctly, they can teach your customers about it.
The science of markdowns is about using markdowns strategically to generate cash and get the inventory out. If all of the 6 items are still there one week or so later, mark them down 20%. Take early markdowns. You can leave it right where it is. It will be a surprise to the customer who finds it. A small markdown early in the season is often enough to get the inventory moving. It is better to take 20% off an underperforming swimsuit in March will move it faster than taking 75% off of it in August.
Markdowns have to keep moving. If that item is still there 2 weeks later, mark it down to 25% and move it in with other sale items. Check it again in 2-4 weeks and mark any remaining pieces down to 50% off. The final markdown comes in another 2-4 when you mark what is left down to 75% off.
Using these tips will keep your inventory flow constant and your cash flow good.
Let me know how it works for you!