Stuck on stock? Tips for inventory management
As the silly season comes to an end, many small business owners turn their attention to the peak sales period. But how do you determine the right level of stock to match the increased demand?
If you’re a business owner that offers products, as opposed to services alone, the whole question of stock levels can be a tricky one. It can be especially difficult if you’re just starting out or if you work in a field that lends itself to peaks and troughs in buyer interest. But even if you have a few years of experience under your belt or have found a niche with relatively even sales periods, Christmas tends to change everything.
Yes, it comes every year. Yes, you know sales will very likely increase (with any luck, dramatically) during the traditional gift-giving season. But so often small businesses – and in fact businesses of all sizes – struggle to get stock levels right immediately before, during and after the 25th of December.
And just to throw another spanner in the works, high sales periods outside Christmas are growing rapidly in Australia. While Mother’s Day has been held in Australia since 1924 and Father’s Day since the mid 1930s (both have touched the billion dollar mark for Australian spending), days once unremarked upon or unheard of in Australia are now gaining traction.
Black Friday, for example, has its origins in the United States and even in that country really only caught on as a major nation-wide ‘day of shopping’ less than two decades ago. It’s now widely recognised as the busiest retail day of the year (the day after Thanksgiving), and has begun to spread to other parts of the world, including Australia.
Valentine’s Day, too, a much older tradition, but one for many years celebrated more enthusiastically in the UK and the United States than in Australia, is now wildly popular here.
Add in events like Click Frenzy and the retail landscape is quite a bit more complicated than it was even five years ago.
So, how can you deal with it all? How do you cope with a wildly successful sale and keep up with demand? Conversely, what do you do if a sale season doesn’t go quite as well as you planned – what’s the best way to approach excess stock?
Here are a few ideas to get you started and some interesting laneways to adventure down for good measure.
Tracking your inventory
It may sound obvious, but keeping track of what you have, where it is and when you’ll have more is vitally important. Even for the smallest businesses, this can be more challenging than it might first seem, especially if you’re working with a manufacturer separate to your business. It becomes more complicated still when you factor in wholesalers, customers returning products, outdated or unusable stock and more.
This blog post from the accounting software company Xero is a really comprehensive guide, covering tracking (as well as forecasting) and the tools that can help you do it. As you’d expect, it dedicates a fair few words to software, but even if you have no intention of subscribing to Xero, they make a decent point about moving away from using spreadsheets, which can be cumbersome, difficult to manage and easy to make mistakes in.
And if you don’t want to try an inventory management system just yet, you can always check in with your eCommerce provider. Shopify, Etsy, eBay, Magento and many other platforms have sophisticated tools and resources available that may be able to help you, whether it be with a few vital figures or a whole swathe of data.
Learning from what you’ve done before
If you’ve been in business for a little while, you’ll have some valuable information up your sleeve that you may not even be using.
Your own sales figures for previous busy periods aren’t a perfect guide to what you can expect next time round, but they’ll certainly be helpful. And if you find there are significant discrepancies between, say, this Christmas and last, perhaps it’s worth playing detective and finding out why. Was there a change in what you offered? Did you make a significant alteration to your website in the interim? Were you getting a lot of new or different feedback from your customers – what was it telling you?
And if you haven’t had enough time to make a meaningful comparison? Well, there’s always trial and error. If your first big sale is coming up, you’re unlikely to get everything perfect on your first go. That’s the error part and it’s not a problem at all as long as you learn from the trial. Take some time once the promotion is over to stop, report, analyse and reflect on how the sale went. You’ll very quickly figure out what works well and what doesn’t for your business. After that, it comes down to determining which areas you need to tweak and fine-tune for the next time. And the time after that.
Concentrating on what works… and sells
Once you’ve got even a small amount of information on a promotion period – or even if you know from observation that you have a specific product that sells particularly well – it’s worth always going back to it. Focus your sales and promotions on the items and the stock (as well as the processes) that you know your customers like.
Is there a chance something will go wrong and you’ll end up with too much of one widget? Of course, but at least you know you won’t have a problem selling the surplus. Is there a chance buyers will grow tired of the tried and true method you’ve developed for promoting a certain line or variety? There is, but it’s unlikely everything will all turn sour at once.
Experimenting is important, but once you’ve found a winner, concentrate on it.
More tips and advice
- Always have enough stock to meet demand – as this article in Entrepreneur says, too much stock can be a problem, but running out of product is disastrous.
- If you don’t manufacture a product yourself, drop-shipping might be worth considering. If you’ve never heard of it before, you can read all about it in this StarTrack blog post.
- Find a mentor. Think about other business owners in your physical or digital network that you have a friendly relationship with. If there’s one with a little more experience, it might be worth striking up a conversation and getting some advice on how they handle sales and promotions.
- Engage in competitor research and use tools like Google keyword search volumes to find out what customers might be looking for at certain times of the year.
If you’re bit further down the track with your business, or if this article has got you thinking about some slightly more complex inventory management ideas, we recommend this blog post from Shopify.