Whenever the term ‘selling’ knocks our mind, the cliché statement elicits ‘Jo dikhta hai wo bikta hai.’But with the proliferation of number of products in the market and the consumer buynamics (buying dynamics), apart from selling what sells, the retailer needs to be aware what he is able to sell. In short, selling is more or less like sailing; facing smooth as well as rough times due to the ever-changing waves of consumer shopping trends and art of buying, procuring and reselling.
Nowadays, the phenomenon of growing number of consumer products with low rate of sales per retail outlet is evident in various sectors: apparels, electronics, spare parts, appliances and even some food items. In terms of sales velocity these products might fall into three categories: slow movers, very slow movers,….and deadly slow movers. For example, in electronics segment the music CD players have become slow movers due to the availability and affordability of portable music players (iPod, MP3 players etc.).
It brings forth that the low-volume SKUs (Stock – Keeping Units) have become a serious problem as it is yet not 100% possible to determine accurately the needs of the local and diversified customers and due to which most of the goods are not moved from the store as planned.
This takes an account of a convention that most sales and inventory practices in consumer products industries are based on high sales volumes. Every store should draft an effective strategy for managing low-volume SKUs, i.e. every store should in principle carry the full range of products, even if in very small quantities.
It may seem counter-offensive to the general strategy of having rich assortments but its effectiveness could be comprehended for small retailers with a coherent approach.
Small retailers need to plan sales conservatively and maintain lean inventories to keep from slashing prices down the road. Since heavy inventories lead to excessive markdowns and reduced margins – which becomes a chronic problem.
There's not much that a small retailer can do about inventory levels at this point beside reducing prices and liquidate and move on to the next season. Yet this can become a vicious cycle and eventually owners need to find a way out.
The low sales volume SKUs might turn into a “Dead Inventory” over a period of time and the vendor may not be considerate enough to take back these products.
Selling dead inventory is not like running a clearance sale. Dead inventory is different than clearance merchandise; it's generally older and lacking a current demand. If any layer of dead merchandise is found out that customers aren't responding to, pull it back and bring something else forward, then bring the first layer back forward at a later time at a greater discount. If retailer attempts to move it merely by taking an additional markdown without remerchandising it, as usually done with clearance merchandise, he only reinforces the merchandise in the customers mind and it may not be desirable even at that new, lower price.
eBay, one of the resorts - eBay has emerged as a viable avenue for retailers to sell off dead inventory, but not everything necessarily can be provided on eBay. If the retailer is sitting on highly identifiable, branded items with an established market position, even if those items appeal to a very specific customer, eBay may work for him. The typical eBay shopper is sophisticated and well informed. They are usually looking for something specific, and they understand the value of what they are looking for, so the retailer has to price the merchandise sharply.
Thus, the objective for any small retailer should not be to maximize sales, but to maximize profitability and cash flow. Carrying too much inventory can decimate both. Inventory is a double-edged sword, the necessary evil of retailing. A retailer has to have it, but too much of it can rob him of the cash flow he needs to cover the expenses. Managing inventories around well thought out sales plans, avoiding chasing the last sale should help him to see an almost immediate improvement in profitability and cash flow. Therefore, stocking small quantities of the consumer products at each store and centralizing replenishment are useful decisions in reducing inventories without raising costs. A little of everything can go a long way.
References:
2. 'To Boost Sales, Stock a Little of Everything' Q2 2010 — Supply Chain Quarterly, AT Kearney Research and Publications
Abhinav Prajapti
GLCRMM1012
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