How increase sales in retail for Inventory

How to create outlook signature

my name is kyra burke and i'm a retail professional with over 25 years experience in the retail industry i've worked in all facets of retail from fashion to health care and food and beverage today i'd like to discuss with you how you can use infantry management to improve your retail business we will cover what is inventory management and why it matters and we will discuss the ways that you can use the management of your inventory to improve your retail performance we will cover the relationship between sales and your inventory and how to find the opportunity how to use merchandise planning to optimize your inventory mix again to find and exploit the demand for your business we will discuss analysis and how you can use it to create new demand and sales potential we will discuss the important area of cash flow management and how you can improve it through your inventory management controls and importantly we will discuss setting yourself kpis to ensure measurement of your performance and keep yourself on track and lastly we will discuss getting your foundations right everything else is irrelevant if the information you're working from is not accurate so let's get started so let's start with what is retail inventory management it is the providing of products that your customers want to buy in your retail business using levers of pricing and promotion to sell them on profitably and the maintenance of inventory levels that meet your customer demand that also manages your cash flow good inventory management will comprise of the best practice from people processes and technology so why is it important well ultimately it is the core of your business it is what you're selling and what the customer is paying for it will be the biggest influence or revenue that you have so getting it right is extremely important you get it right it will equal to sales you get it wrong your cash will be tied up in inventory and you'll have no sales customers have high expectations and if you don't have the product that they want they will go elsewhere and they're unlikely to come back to you therefore practicing good inventory management leads you to what you're constantly striving for in a retail business repeat customers if you want your hard-earned customers to come back to you for your products and services you'll need to be able to meet their demand quickly and good inventory management allows you to do this by having the right products on hand at the right time for your customers another very important factor about inventory management is that it's likely to be your biggest expense and until your customers have purchased stock from you and paid for it your revenue is essentially locked in and this is revenue that you require to operate your retail business so today we're going to cover the different ways that you can use the management of the inventory within your business to improve your current business performance so today we're going to talk about how you can use your inventory management to improve your business performance to drive your sales to reduce the amount of markdown and loss you incur in your business due to obsolete stock and how to significantly improve your cash control one of the most important things to understand about a retail business is the relationship between sales and inventory there are only three real ways to impact sales performance the first is to attract more customers and bring them into your business the second is to increase the spending power of each customer while they're in the business and the third is to improve the frequency of how often they come to the business combined these three areas will always drive retail sales performance and the key to success in all of these is retail inventory even if you have good marketing tactics it's still hard to sell bad product so your retail businesses products will be how you achieve this they will attract customers into your business influence the spending while they're there and improve the frequency of how often they come to you as a retailer you will be using your products to create levers to attract customers into your business among them will be using traffic drivers and promotional activity and once you've attracted customers into your business you will be using the opportunity to cross-sell and increase your sales performance your service and your environment will help create the experience but ultimately it is the products that you're selling a great lever is to try and understand what the customer wants and give them more of it and you can do this quite easily by looking at your sales penetration reports if you look at your reports and you can see that there are products or categories that are over performing versus the inventory you've purchased for them you can see that there's demand for that product and can increase the range and availability for your customer a simple example is if you sell apparel and you have a sales contribution of dresses within your business of 10 and you have a sales contribution of knitwear in your business as 10 you look at these two categories and you think that's fantastic there's two strong categories for me i'm doing well however when you analyze them and you see the penetration your sales for dresses has been driven off ten percent of inventory but your sales for knitwear has been driven off five percent of inventory the knitwear in this example is working extremely hard to contribute to the sales performance due to the disparity of inventory between dresses and knitwear there must be less styles less categories and less depth of precision available for the customer but the demand is so high it's contributing to the sales performance by reflecting that customer demand in your inventory mix and you're buying you will see the positive impact on the sales performance the sole purpose of retail is to understand what the customer wants and to give it to them sales and inventory are intrinsically linked understanding that and adapting that into your business decisions will drive your business performance in a positive manner so let's talk about retail merchandise planning it's a great way to improve your business performance and drive your sales so what is retail merchandise planning it is the systematic approach to buying selling and managing your retail products to maximize your return on investment it makes your products available at the right place at the right time at the right price and in the right quantities to meet your customers demands if the products you order and display in your store and on your website don't align to what your customers demand if you're out of stock of popular items or you order the wrong merchandise you're essentially planning to fail being good at retail merchandise planning will ensure numerous benefits for your business you will have fewer markdowns of excessive product you will have increased revenue due to the right products being available you will be able to increase your inventory turnover you will decrease the amount of inventory you're carrying you will have fewer out-of-stock situations and unsatisfied customers and importantly you will see an increased return on investment due to strategically ordering the products that generate the most revenue for your business when we talk about retail merchandise planning there are five key components that need to be considered the first is the product this is the basic component of any retail merchandise mix you have to ensure that you have enough merchandise to fulfill your customer demand and it's likely that you will have some variation of a seasonal trading pattern regardless of the type of products that you're selling so when you consider the product you will need to consider your basic items that you carry all year round and they need to be in stock consistently you may have seasonal products that you will need to keep in stock at the right time at the beginning of each season and there may be some impulse items or trend items depending on what you're selling and these will come in for a short period of time be it christmas easter and be fast ticket items the second thing you need to consider is the range and this refers to the variety of products that you will have to sell and it's important to ensure that you have a wide range of products not too wide that you have a lot of slow selling items but enough that there is choice for the customer and adequate options available the third element is the price if you don't get the pricing right with your products you're not going to be able to sell them and it's a delicate balance there is no one size fits all with pricing the fourth element to consider is the assortment and this is the combination of the products that you will sell and how they are put together and the final component is space management and this is crucial for your retail business as you will have a finite amount of floor space to display your products and this is what's going to drive the sales volume and profitability for your business your floor space will be a composition of all of your products those that are there to drive traffic into your business your best performers which will drive good sales and high margin for you red and brother products that you are expected to have within your business that may not necessarily contribute to the most amount of sales but they are a business expectation and without them you will lose footfall into your business the benefit you can bring to your business by using merchandise planning to optimize your inventory mix is a balance between optimizing the benefits and minimizing the amount of mistakes that you bring into your retail format this means that you can ensure that you have the right amount of products and range an assortment that will attract customers into your business and drive the sales performance this means ensuring that you have the right quantity for the forecasted sales to meet the customer demand for that designated period but also ensuring that you don't have excessive quantities that will require markdown ensuring that you have the minimal amount of slow sellers within a business it's impossible to get everything right but maximizing the opportunity and minimizing the amount of mistakes in the creation of the inventory mix that is right for your business is how you find this success the third area i'd like to discuss with you is how to use analysis to improve your business performance analysis provides you with the insight you need to understand the customer buying behavior so that you can accurately forecast and plan for your future demand you can use analysis across all aspects of your business but the insight into your product and how you manage your inventory will have the most amount of influence on your business performance what are you selling what are your best selling products what is driving the most amount of unit sales what is contributing to the most amount of cash sales what is not selling within your business how is this changing season to season where is the most growth coming from within your business it may not be the top selling product and it may not be the bottom selling product but it might be the fastest growing selling product and this allows you to see potential opportunity and to expand categories and product range when you look at your pricing segments what's contributing most to your sales and what categories and areas are not selling when you're planning your buying for the following seasons or the following years you're looking at your sales history the analysis of this sales history is what allows you to form the most appropriate plan for your business when you're trying to optimize your inventory sell through to ensure that you have minimum residual stock at the end of season analysis allows you to manage the markdowns while optimizing the margin for your business when you take time to complete detailed analysis on your business you will have two major impacts on your performance one it will help you to meet demand it not only helps you to meet the current demand but it also allows you to look at the historical data alongside the current data and to find patterns and areas for exploitation and by doing this this allows you to create new demand alongside this there is the other key benefit which is to minimize the losses to your business it allows you to have improved margin performance and to reduce the amount of obsolete product within your business the fourth area i'd like to discuss with you today is how to use your inventory management to improve your cash flow some people think that cash flow refers to movement of cash in and out of your business but i think the most important aspect of it is when it comes in and out of your business as a retailer one of the biggest impacts on your business will be buying inventory and the biggest impact on your cash flow will be the paying for that inventory and today i'd like to discuss the two key objectives when you're discussing finance inventory and your cash flow management the first is to finance yourself in the most cost effective way and the second is to optimize the cash retention in your pocket for as long as possible by procuring your inventory at the cheapest rate to your business and having the longest selling period before you need to pay for your goods will substantially improve your cash flow management so how can you impact this so let's discuss the most common ways for supplier payment the first is to use extended payment terms most commonly these are used for 30 60 and 90 days and this is when the supplier agrees to send you goods and allow you to pay for them at a delayed time frame usually 30 60 90 days there are variations on these whereby you can receive discounts for prom payment another common form is to use a line of credit and this is a preset amount that a financial institution usually a bank or a credit union has agreed to lend you you can then draw down on that line of credit when you need to use it up to the maximum amount and you'll only pay interest on the amount that you borrow another common form of payment is to use a letter of credit and this is especially common with international transactions a letter of credit is a letter from the bank guaranteeing that a buyer's payment to the seller will be received on time and for the correct amount in the event that the buyer is unable to make the payment the bank will be required to cover the full or remaining amount of the purchase in all likelihood you may be working with multiple types of credit this may be a line of credit from the bank that you're using giving you your company credit card to pay for the inventory but also using extended payment terms with your suppliers regardless of the method that you're using to buy your inventory the objective has to be to keep as much cash in your pocket for as long as possible and to keep the cost of borrowing and cost to your business ultimately as low as possible another area for opportunity to review with regards to your inventory and how you can manage your cash flow is to review the lead-in times on your inventory purchasing transportation times greatly vary between air freight shipping sea freight shipping and road transportation choosing the method that best suits your business to ensure that your stock arrives at the optimum time for your business is important if your stock arrives and you don't have the capacity to sell it either due to a full shop floor inappropriate season regardless of the reason you will be losing a variety of competitive advantages the big impact will be on your cash flow if you need to pay your supplier upon receipt of those goods even if it's 30 60 90 days down the line before your customer has had an opportunity to pay you this will negatively impact your cash flow so ensuring that you review the lead-in times with your goods that you review the payment terms of when you need to pay and choose the right method of transportation to ensure that the stock arrives at the optimum time for your business will help your business significantly another area you can look at when you are reviewing your inventory in relation to controlling your cash flow is to look at how you are managing your residual stock at the end of each season the most common methods to manage this are to mark down stock at the end of season or to carry over into the following season and continue selling the product in certain cases some businesses may put the stock away and bring it back out the following season one of the best things that you can do is to look at the total picture when reviewing this inventory what is the total quantity that you have and the value that will be tied up what will be the cost to your business to hold that inventory to either keep it in your retail store or to put it away into warehousing what are the finance costs attached to holding that inventory will it have an impact on your ability to purchase new inventory and is that inventory going to actually drive yourself performance looking at the total picture and considering all factors that will impact your business and your cash flow is important to make the best decision when deciding what to do with your residual stock at the end of a selling period taking a holistic view on all factors when you take decisions will substantially improve your cash flow position and ultimately your business performance i now like to talk to you about setting key performance indicators for your business and how this can improve your performance there's a well-known quote from peter drucker and he is the man who's known to have invented the modern business management he says if you can't measure it you can't improve it and when you think about this quote it should become immediately apparent how true it is because if you don't measure something you don't know the results and therefore you can't possibly get better at it if you set infantry kpis they will measure your performance in a particular area over a particular time period and towards a particular goal setting these kpis will help you to eliminate the guesswork because you've set the clear milestones that you want to hit and on the timeline that you want to achieve them whether it's weekly monthly quarterly or annually using these you will have the data that you need to make informed decisions about your business and what to do next there are many different types of kpis that you can set in relation to your inventory and some of the most popular are sales kpis because these are influenced by your customers actions and let you know how your inventory is being impacted when you do your budgeting plans and you're open to buys and your seasonal launch plans you have an expectation of what you would like to see happen or what you think will happen but when you set these kpis that are impacted by your customers actions they give you the reality of what is actually happening some examples of these can be your stop to sales ratio and this is the amount of stock available for the sales you're currently performing it's also known as your stock cover so for example if you're selling 10 000 units of books a month and you have 20 000 units of books available you have a ratio of two to one of stock versus sales and this means that you will last two months with this current stock at the current sales performance if you have too much inventory you are tying up capital that could be spent better elsewhere conversely if you have too little stock you may run out another measurement that's also used alongside sales to stock ratio is average turnover and the sales to stock ratio relates to how much stock you're selling and the turnover indicates how quickly you're replenishing that stock throughout the period another commonly used kpi is to look at your sell-through rate your sell-through rate is the percentage of your available inventory that's actually sold so if you buy 10 units of an item and it's expected to last you two months that means you expect to sell five units a month if you look at the sell-through rate of that item on the first month and you're currently at eighty percent sell through so you've sold eight you don't have enough stock to last you for the selling period that you planned conversely if you have only sold two units at twenty percent sell through of that item that you plan to last you two months you're overstocked of that item by setting yourself kpis and setting aside time to review the information and see where you are on target or off target allows you then to see problems that are accruing in advance and to deal with them there are many types of kpis that you can set for your business and setting the ones that are right for your business is the only part that matters you can set operational kpis which look at the amount of inventory that you're writing off you can look at your order status and your tracking and fulfillment rates the important element is to choose the right key performance indicators for your business the ones that are critical to your success and to your progress towards your intended results kpis provide a focus for your strategic and operational improvements and they help create an analytical basis for all of your decision making they keep focus on the details that matter most to your business if you don't set yourself kpis in relation to your inventory management you will be missing opportunities if you can't measure it you can see that you're off track or ahead of target or behind target and you're missing out on potential to pull levers to drive your business performance a very important area to discuss when talking about how to manage your inventory is how you maintain the accuracy of your inventory files these are the bedrock of all of your decision making these will impact your commercial decisions your buying decisions your markdown management reviewing yourself through and your product history forecasting your sales performance they will help you impact the future sales of your business by allowing you to have the right stock in the right place at the right time if you have multiple locations it will allow you to regularly move stock around by looking at individual stores performance and product sell through within them there are numerous benefits and the cost of not having accurate inventory records is immeasurable so how can you ensure accuracy of your inventory records one common way is to complete regular physical stock takes this will require advanced planning ensure you have allocated adequate time to the stock counts make sure that you have proficient people who are experienced in completing stock counts and give them the resource and tools that work well with your systems a way to ensure accuracy is to choose the right inventory management system for your business this will include ensuring a point of sale system that integrates with your inventory management software and your hardware you should also ensure that your sops your standard operating procedures with regards to your retail operation and inventory management are industry best practice taking a 360 approach across your business when it comes to the recording of inventory and the management within your business will ensure the accuracy of your files these are the bedrock of all of your decision making and your commercial activity and the importance cannot be underestimated i'd like to thank you for taking the time today i hope you found it helpful and that you can go back to your business and review it with fresh eyes and a view to shaping your inventory management with a view to improving your business performance