GREENSBORO, N.C. — Although manufacturers and market centers reported strong order-writing from the summer show season, there was a noticeable difference in traffic as some retailers decided to lighten their travel plans and buying trips due to a surplus of inventory. It’s the latest hot topic in the gift and retail industry: over-stock.
Retailers across the country were forced by supply-chain issues to double up on their orders last year with the hopes of receiving at least 50% on time. Now, the orders have arrived, and both the shelves and stock room are chocked full.
So, what’s a retailer with too much inventory to do? Here, retailer and author Carol Schroeder offers advice to answer the single question on almost every retailer’s mind.
“Having too much inventory can damage your business in several ways,” Schroeder wrote in her latest Savvy Store Solutions column in Home Accents Todays’s sister publication Gifts & Decorative Accessories. “In addition to having to pay interest on loans or credit cards to finance the goods you have in stock, there is also what is sometimes called the lost opportunity cost. That means that you may miss out on making a profit on new goods that are hot sellers because past purchases are taking up storage and display space, and tying up funds.”
If this is the situation in your shop, Schroeder says you’re in good company, noting that even Target is struggling with being over-inventoried this year, and according to the New York Times it is blaming the situation on inflation and a shift in consumer habits.
“One of the reasons for Target’s dilemma is that the retail giant had large quantities of goods in demand earlier in the pandemic on order, and supply-chain issues delayed shipment,” Schroeder continued. “By the time the goods arrived, shoppers wanted something else.
“Fortunately independent retailers are usually in a good position to react quickly to changes in shopping habits. In order to best take advantage of this flexibility, it’s important to stay tuned into your customers, ideally by spending some time on the sales floor every week. Tracking sales by category will also help you sense what is currently in demand before you order new merchandise.”
Schroder recommends adding a cancel date to all orders to make sure that you don’t receive merchandise when you no longer need it. “This is especially important with seasonal goods, and you can’t assume that the vendor will not automatically ship your order when the goods arrive in their warehouse,” she continued. “We always stipulate no back orders under $50 unless the supplier pays for the freight in order to prevent odds and ends from trickling in. This also helps prevent unduly high shipping on small orders.”
If you do find yourself with too much money and shelf space tied up in inventory, Schroeder says you need to take action quickly to clear out older goods.
“Some shops do a storewide percentage off sale. But it’s more strategic to go through your store to see what needs to be marked down, usually based on how long it’s been in stock. Think about how much each item will need to be discounted in order to move — some merchandise may need a smaller cut, which helps to preserve your margins. Advertise your sale as ‘20% to 50% off,’ and set an end date that creates a sense of urgency.
“Inviting your frequent shoppers to come for a preview day at an additional 10% off can generate some excitement about your sale. Keep your message upbeat, emphasizing that you need to make room for new arrivals.”
Schroeder also recommends going through your open orders to see if there are any that you can cancel or delay. “Keep in mind that it isn’t ethical to order goods you can’t pay for in a timely manner — and that credit card debt can cripple an otherwise successful business,” she said. “If money is tight, consider placing some small orders that are shallow (i.e. just a few of each item) instead of deep in order to give your merchandise selection a fresh look after your sale is over.”
Refreshing the store with new display ideas is also effective. “Moving existing merchandise around to make it look new is often quite effective, along with changes in your visual merchandising. Keep an eye curbside for treasures that can be repurposed into free new display fixtures. In addition to updating the look of your store, consider additional special events such as signings and tastings to keep customers coming in — and your inventory moving out.”