by Marc Weiss of Management One®
Retailers spend more money on inventory than any other single expense. It follows then that managing inventory is the single most critical part of a retailer’s success. If inventory arrives at the right time in the right amounts, then there is the opportunity to capture market share. The old adage of having what the customer wants at the right time still prevails. Peaking inventory is vital and there is a science to it. Peak too early and the goods get stale, peak late and you miss when demand for product within a season is at its pinnacle. That results in lost business to your competition and getting them back is expensive. Turning it too fast may mean under assorting and turning too slow could impact profit by increasing markdowns. One of my favorite sayings is “Retail is detail, the sum of doing a lot of little things right.”
We sweat the demand curves too. What is the potential in a particular category? Here experience and great logic pay dividends. Forecasting demand by class is a science best delivered through an objective source. A common misconception is to base demand on last year. This can seriously impact your potential for growth. Classes change from season to season and year to year. The advantage of a database that looks at other variables and can correctly predict future sales is one of the 3 components in developing a great cash flow model.