Small retailers dominate Indian neighborhoods. Everyone knows their friendly ‘kiraana-waala’ who provides a regular supply of daily goods. It is important for small shopkeepers to follow best practices in inventory management. In a world of changing trends, most goods go out of fashion quite soon. Inventory Management is particularly important in the retail industry as there is a need to meet customer demands.
Counting- The First Step In Inventory Management
1. Set A Date: One must check inventory on a regular basis. Follow a good schedule of checking inventory so that you get a good idea of what is being purchased by your customers. A complete inventory check is generally carried out at the end of the financial year.
2. Sort and Count: Divide the merchandise in your store into different product categories. This will make the counting process systematic.
3. Spot Trends: Use this as an exercise to account for every piece of merchandise and display it where it is easily accessible. Periodic inventory management in retail will allow you to spot popularity trends.
Tips For Inventory Mangement for a Retail Store
- Do Not Buy Too Much: Smooth talking salesmen will try and convince you to buy more merchandise. They will seem to know about every customer trend and try and create demand. It is easy to get convinced and purchase more merchandise than you require. Do not fall for such gimmicks and instead, purchase judiciously. This is an important principle of inventory management in retail.
- Clear The Old Stock: Keep a track of old stock and come up with strategies to sell it first. Selling old stock will also allow you to recoup your investments. The positive cash flow that will accrue from such sales will enable you to purchase the latest merchandise. Good inventory management necessitates regular clearance of old stock.
- Discount and Sell: Suppose you have old stock that has been lying around. It’s not of a perishable nature and it has been on your shelves for nearly a year. A famous retailer once came up with a scheme. They created a Rs.500 box. Any item that had not been sold was kept in that box, regardless of its initial price. The customers would come into the shop and make a beeline for the box. And not surprisingly, all items in the box were cleared out. This is an example of a good strategy in retail inventory management.
- Use FIFO: This refers to an inventory management concept known as ‘First In First Out’. In order to make this system work, you need to make sure that the shipment of merchandise arriving first is displayed before the next reorder of the same items. If an item has been around for too long, you can mark down the price by 10%. Example: Suppose one buys a large quantity of milk. This milk could perish if not consumed within a certain timeframe. The oldest stock will be pushed to the front of the display so that customers purchase it first. This is a good example of ingenious inventory management in retail.
- Do Not Buy Overly Specific Products: There are some products which are in fashion for a short period of time but may not generate sustained sales. It is best to exercise caution while considering such products as the demand for them may die once customer interest fades. One should only purchase such merchandise in a quantity that can be sold. Good inventory management involves buying specific as well as general products.
- Understand Customer Buying Patterns: One of the benefits of being a small retailer is first-hand interaction with the customer. It is necessary to be flexible and keep a track on what kind of a product is preferred by customers. Do not fall into a predictable routine of ordering the same products from your supplier, if the products are no longer in demand.
These are some basic principles that should be followed for inventory management in retail. Good inventory management practices are the key to success as a small retailer.
Want to read the latest posts on social media? Then follow us on Facebook, Twitter, or LinkedIn!
If you want to know more about inventory management click here.