You know the situation. A vendor has just called and advised they will be in the area tomorrow and would love to show you their new range. You’ve just opened the bank account details that morning and the picture looks pretty grim –you are getting closer to the overdraft limit and you’re due a visit to the bank next month. You know you can’t afford it, but that vendor’s inventory is nice product and you wanted to beef up your selection in that area as the aged inventory has built up and nothing seems to be selling. Buying new product is the obvious answer to trade your way out of trouble.
Stop. This is not a new situation. You have been here before. You bought new inventory. What happened? Well, that new inventory is still sitting there twelve months later and that’s why the bank account is looking as it does. So what do you suppose will happen if you buy more product from that vendor?
“It’s been said the definition of insanity is doing the same thing you have always done and expecting a different result. Yet we do this every week in the way we buy inventory.”
Changing habits is the only way that your business can move forward and offer you more than it does today. If nothing changes, then nothing changes.
The trick is to resist the tendency to be magpies. A magpie is a bird that loves a bright shiny object and can’t help but swoop when it sees the glint and glitter. Jewelers can sometimes be magpies because of an inherent love of the product and desire to see what’s new. This can then easily lead to buying, and it’s that buying habit that is the undoing of most stores.
Rushing in hasn’t served you well in the past. The average jeweler has only 8-20% of their purchases become good selling inventory. That means that your current buying habits are getting you into trouble 80%-92% of the time. It’s time to change.
“Less than 20% of what you buy will ever be popular with your customers.”
So what can you do?
Take a short term outlook. It is always good to add more inventory – and in a perfect world where cash flow isn’t a problem you can keep adding inventory knowing that 8%-20% will stick. But if cash isn’t plentiful, then in the short term you will soon be closing your doors.
To compare, if you walk into the emergency ward at your local hospital with a serious wound and underlying complications, then the first step is always going to be to stop the bleeding. To focus on the underlying wound and let the blood keep dripping will see the patient’s condition worsen.
Before you buy something new, have the items that have sold well been ordered back in? You don’t need to reinvent the wheel. In the same way that your existing customers are five times more likely to buy from you than a new customer, your existing good selling inventory is five times more likely to sell than a new piece. And don’t give me the old “but the customer that just bought it won’t want to see it displayed again.” The reality is they haven’t paid enough to earn the right for that piece to be exclusive. Furthermore, chances are they won’t even see it. They have made their purchase and moved on. Your market is now the next customer to buy.
Ask yourself whether you really need more inventory. Most stores are overstocked. Most stores don’t need more inventory, but instead more of the inventory that performs well – the right inventory. Indiscriminate buying doesn’t solve this. Informed calculated buying does.
You need to stop being the gambler and start being the casino. Put the odds in your favor and make sure you win more than you lose.
David Brown is President of the Edge Retail Academy, an organization devoted to the ongoing measurement and growth of jewelry store performance and profitability. For further information about the Academy’s management mentoring and industry benchmarking reports contact Carol Druan at firstname.lastname@example.org or phone toll free 877-569-8657.