Mastering Inventory Balance: Boosting Retail Growth and Customer Satisfaction

20 JUL-AUG10

My suspicion is that few folks reading this article seldom if ever ponder this issue. Given that all merchants today are searching for alternative methods to grow topline revenue inventory balance should not be overlooked.

Over the past few years retailers have taken the scalpel to all but the most essential expenses labored over methods to improve inventory turnover scoured markets in search of new and unique products and relentlessly hounded vendors for promotional goods to boost margins. Merchants are quick to complain about late deliveries product quality unmotivated salespeople even weather conditions yet I can’t recall a store wondering about the one thing they can readily control: the balance of the inventory in their stores.

Harmony & Proportion

Of the several definitions found for the word “balance” the meaning that I find to be most apt is “to bring into harmony or proportion.” Nothing functions at its best when out of balance. When the steering wheel on your car vibrates at a certain speed most likely your wheels are out of balance. Not addressing the issue results in an uncomfortable ride not to mention unnecessary tire wear which ultimately will cost you more money. Golfers are reminded to stay “in balance” if they are to derive the maximum result from each swing. If you work too much play too hard drink or eat too much have too much stress or do pretty much anything else to excess your life can become out of balance as well. The consequences of an out-of-balance life run the gambit from possible physical and emotional issues to relationship and financial problems.

Balance is also important for a retail store. It is impossible for sales volume to be maximized unless all classifications have the correct levels of inventory the ideal mix of styles a well-thought-out combination of vendors and a selection of price points from which the customer may choose.

Symptoms versus Causes

One of the more readily apparent

Symptoms of a Store Out of Balance

A lack of overall sales growth is a key symptom of a store out of balance. The causes of the imbalance require some detective work to unveil. Oftentimes an out-of-balance operation can be disguised by financials that appear to be fine on the surface.

A few months ago I spoke with a store owner whose overall merchandising statistics looked fairly healthy. Store turnover was at or slightly above industry norms initial and maintained markup numbers were acceptable and operating expenses appeared to be spot on. The retailer’s concern was that for the third consecutive year volume had not grown; in fact it had slipped a few percentage points.

I offered to review the classification sales data for the preceding year and within minutes the problem became obvious. Two of the store’s largest contributing classifications were turning much faster than the highest industry benchmarks. Sales in these classifications were outperforming and the first-of-month retail inventory levels and potential sales were being missed.

The store was literally starving these important classes. You might be thinking that this should be obvious. The reason that it is not is due to the fact that most retailers are consumed with primarily looking at sales figures—and any increase is a good increase no matter how it comes. Four other categories were turning substantially slower than they should have been thus tying up dollars that could be spent supporting the growth classes.

Ritchie Sayner: Is Your Store Out of Balance?

Ritchie Sayner

The consequences of an out-of-balance life run the gambit from possible physical and emotional issues to relationship and financial problems.

Continued on page 21

• NSRA has joined Constant Contact’s Business Partner Program to provide NSRA members with easy-to-use email marketing and online survey products to keep in touch with their customers—and encourage repeat traffic in their stores.

Constant Contact® Inc. templates and

Tools for Email Management

Tools allow customers to quickly and easily create professional-looking emails manage contact email lists measure email campaign results from clicks-to-open rates and review “who joined” email lists.

NSRA’s Partnership with Constant Contact

Before signing the agreement with Constant Contact NSRA became a customer testing the company’s information-providing services. According to NSRA president Chuck Schuyler Constant Contact does the job. “We’re in business to help independent store owners find effective ways to grow their businesses” he says. “Our own experience with Constant Contact’s ease of use and affordability demonstrated that the Business Partner Program could be a great addition to our member services.” NSRA uses Constant Contact for its twice-monthly e-newsletter NSRA OnLine as well as for occasional emails to inform member stores of breaking news and special events.

Ease of Use

Using Constant Contact is highly intuitive with self-directed online guides to lead users through the set-up. Once a store has established an initial template adding and changing content is easy to manage—and may be an ideal responsibility for an employee who routinely stays in touch with his or her network via email IM or other social networking vehicles. Member Services director Tanja Towne notes that the tech-savvy generation that has grown up using computers and cellphones has skills that are especially well-suited to help stores get the most out of Constant Contact tools. And NSRA members looking for ways to build business commitment in youthful employees or family members may find this an attractive “on” ramp.

Explore NSRA’s Constant Contact partnership at http://nsra.constantcontact.com.

Monitor Activity Regularly

A plan was put in place to regularly monitor the sales activity and place reorders in a timely manner. In the classes that were not performing up to par the oldest merchandise became the target of the most aggressive markdowns followed by broken sizes discontinued styles and colors and vendors that the store had elected not to move forward with.

Underperforming lines were also eliminated from the assortment plan

The store’s merchants worked diligently to avoid duplications in future buying. What followed shortly thereafter was not surprisingly a very healthy increase in sales volume. Since most retailers are often too close to the situation to see the best solution it is usually a good practice to have a trained outsider review your class data and make recommendations. Rarely is there a situation where bringing the harmony and proportion back to the inventory does not lead to increased sales and better cash flow.

Ritchie Sayner is vice president of business development at RMSA Retail Solutions which works with retailers to improve performance. For a complimentary review of your store’s inventory balance contact him at rsayner@rmsa.com.

nsra.org continued from page 20 of Yellowstone National Park. It is surrounded by national forests and wilderness areas.

Keep Success in Perspective

Hide & Sole has many of the elements of success: great products and service and effective marketing. “We don’t have a nice looking store” at least at the moment Sproull admits. He has outgrown his current space and thinks the business would benefit from improved lighting and an upgraded store front. He’s been able to keep his rental costs low and is concerned that the larger space he needs won’t be as affordable. But he’s pleased at the need of expanding.

“As an owner every day you see things that are going well and hundreds of things we could be doing better” Sproull says. “You can always do more training more marketing improve systems and operation manuals but there are only 24 hours in a day so it can get frustrating some days.” He measures success not just in dollars but in quality of life.

“I base our success on how you’re viewed in the community and we win awards and our community likes us” he says. Those measuring sticks reflect an owner who believes in what he does.

For more information visit www.hideandsole.com. continued from page 19

New Member Service

Use “Constant Contact” to Make E-Marketing Easy

Ritchie Sayner

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