When you’re starting your business in either retail or wholesale, maintaining your inventory is critical for your business to succeed. When it comes to inventory management, you need to make sure you have the right amount of products, at the right place, at the right time, and at the right price. However, figuring out what’s right for all the different facets of inventory management can be challenging.
A healthy inventory means you’ve managed to strike a balance between your inventory costs and your customer demand. While stocking extra inventory serves as a great buffer for surges in demand, stocking too much can become a strain on your finances, especially as products expire or become obsolete. With a well-managed inventory, you’ll be able to direct your resources into growing your business instead of pounding away at a spreadsheet.
When you’re ready to take your business to the next level, you can look to improving your inventory turnover, cash flow, and experimenting with new sales channels.
Improve your inventory turnoverYour inventory turnover is the number of times your inventory is sold and replaced over a specific time period, usually a year.
Generally, your inventory turnover reflects whether you’re managing inventory efficiently and effectively while matching your customers’ needs. And the higher your inventory turnover, the better it is for your business, as this reduces the likelihood of your products becoming obsolete or expiring due to sluggish sales.
To improve your inventory turnover, you can start encouraging your customers to place preorders for popular items without worrying about them selling out. Opening preorders lets customers purchase the products they want even before you place an order with your suppliers. Through preorders, you’ll know exactly what your customers want and how much you need to order to meet the demand for these products. You’ll then be able to plan more accurate forecasts and move inventory through the business quickly.
As a retailer, preorders guarantee a certain amount of sales and revenue since you’ve already sold the goods before they even arrive at your storage facility. However, if you choose to run preorders, remember to make it really clear to your customers that what they’re purchasing is on preorder so that they’re prepared for longer waiting times.
Improve your business’s cash flowA healthy inventory means you shouldn’t have more products than you can sell. By finding the optimal order quantity for your business, you’ll be able to reduce your expenditure on the upkeep of excess stock. At the same time, you won’t have to worry about running out of stock or expediting shipping. Knowing your optimal order quantity for all your products can give you a better idea of what products to invest in.
For a start, you may want to choose to focus on items with high turnover rates instead of products that only sell sporadically, which translates to better cash flow for your business.
After trimming your excess expenses, you should be able to free up resources that were previously tied up with slow-moving inventory. With better cash flow, you can start thinking about investing your saved resources in other sales channels. For example, if you mainly sell on Shopify and you’ve been thinking of branching out into wholesaling, you can start focusing on making that idea a reality.
Try new sales channelsWith better cash flow and a higher inventory turnover you’ll be able to focus on growing your business through new sales channels. If you’re selling retail, you may be interested in trying wholesale. Similarly, if you’re selling wholesale, you may want to consider branching out into the retail space.
If you’re worried about keeping tabs on your inventory across different sales channels, inventory management software lets you do just that. For example, if you’re selling retail on Shopify but you’d like to have a custom wholesale platform to sell to retailers, you can maintain visibility across both channels with real time updates. Whenever you sell an item on any channel, your inventory levels will be automatically adjusted to reflect the sale.
In addition, you’ll also have access to the business intelligence insights to help you identify the best channels to invest in. You’ll also know your bestselling items, your best performing salesperson, insights into your customers’ purchase patterns.
Ultimately, your inventory is the backbone of your business and by keeping it healthy, you’ll be able to enjoy the benefits outlined above and more. Instead of spending hours trying to make sense of all the numbers on the spreadsheet, try our inventory health check! After completing the health check, you’ll receive custom recommendations on how to improve your inventory management and grow your business.