by : 

Jacki Smith

 

 

 

 

A customer walks into your shop and says, “I’m looking for a particular book/necklace/candle. Do you have it?”

You look at an order sheet—for an order you still haven’t placed—with that very item on it, then at your pile of bills. You think of your dwindling account balance and reply, “I don’t have it in stock at the moment, but I can get it for you.”

Keeping your store stocked with a healthy inventory while also paying your bills on time is a huge challenge. But when your shelves don’t have enough product, your sales are too low to generate capital to allow you to buy more product, resulting in a never-ending negative cycle.

Big-box stores have big budgets, teams of buyers, and consultants who scout trends to keep them ahead of the selling curve. You, on the other hand, do all of those things yourself, instinctively, without a set plan or even a budget to work with. Because your instincts are good, you’ve managed to stay in business, but to really thrive and grow, you have to develop specific buying strategies and establish a product mix that works for your store, then monitor inventory needs weekly, if not more often. ?

Know your store’s identity

Is your store’s identity clear? Is it a gift shop with a spiritual bent? A bookstore with a tea room and meditation classes? A home décor store with conscious living and fair trade as your hallmarks? Establishing a specific identity is an essential first step toward building an inventory of products with a healthy turnover rate. Once you know what your store stands for, you’ll know which products make up the foundation of your inventory. From this central hub of products, expand outward with related categories, like the spokes of a wheel, to give depth to your selection without ending up with products that don’t move off the shelves.

Heatherleigh Navarre, owner of the Boston Tea Room in Ferndale, Mich., knows her core business is psychic readings and tea. She focuses on these elements—tarot and oracle decks and, of course, tea—then branches into related areas. Complementary (secondary) items include crystals and other divination systems, handcrafted gift items, and jewelry that her customers can browse while waiting for their readings. When faced with larger buying options, like books, it’s easy for her to choose inventory related to her store’s identity. This approach has worked so well for her that the two stores she has stocked from scratch were both profitable within 18 months.

Jane Hansen, from the Eye of Horus Metaphysical Store in Minneapolis, Minn., has adopted an acronym for good business practice: SMOWS, or “sell more of what’s selling.”

“I read about SMOWS in a magazine article, and it resonated with me,” Hansen says.

The philosophy is simple: Pay attention to what sells in your store, and sell more of it. “It” might be a category, such as candles, or a philosophy, such as Buddhism, but whatever “it” turns out to be, when you find the type of products that rotate at a good clip, stock up on those offerings until you have enough inventory in the overall category to keep your customers satisfied while you are waiting for your restock order to arrive.

“I tried to follow the advice of lots of experts,” says Janet Cromer-Vincent, owner of Jan Ross New Age Books and Gifts in Phoenix, Ariz. “But what worked best was listening to my own instincts.”

Cromer-Vincent recognized that her store had to be a go-to place for followers of any spiritual path, and she altered her inventory to cater to the mainstream with many sub-categories. When she attends trade shows—and she goes to a lot of them—she notes what’s new, what’s trending, and what will appeal to her customers, and buys accordingly.

Spot the trend

Speaking of trends, those can turn on a dime, but if you’re paying attention and are able to get in on a trend just as it’s peaking, you could capitalize on a buying frenzy. And that could mean a healthy profit for your store.

Don’t forget to check trends outside the spiritual market, says Lorien Carrillo, owner of Sacred Mists in Napa, Calif. “I check what’s popular in the mainstream—television, movies—and read up on how these trends will play out at least three seasons ahead.”

Carrillo also studies the sales trends from the previous year and the last quarter to determine buying trends and locate the holes in her inventory.

Hansen pays careful attention to the 80/20 principle: 20 percent of your product generates 80 percent of your sales. “That 20 percent is a moving target because it’s driven by trends,” she says. “So you’ve got to watch it closely.”

To test the trends in her store, Hansen will bring in a sample of a line, then note what her customers are drawn to. Once she establishes their buying trends, she expands on that line, a few pieces at a time, to keep it exciting and generate a “what’s next?” interest.

Test your products

Deciding what to order, and how many of each, can make for a very long and confusing ordering session if you don’t know what will sell. Naturally you want to order the right number of products that will move off the shelves but won’t leave you emptied out if one of the trends you are following booms.

You can find out if a product is going to be successful by ordering three and watching how they sell. The first item sold might be a fluke. The second one sold might fulfill an unusual need. But if a third sells, that’s a trend. Once you’ve crossed the three-sold threshold, increase the reorder amount to four or six.

When bringing in new product, Navarre starts with a small but deep offering from a vendor to test its viability in her store. She chooses four or five of the vendor’s bestsellers, purchasing at least three of each. As each product proves itself, she buys more and more from that vendor, testing other products until she finds a good balance. She even does the same with books, carrying several titles per category and watching what her customers buy so she can expand her next book purchase successfully.

Stay full

Never let your bestsellers sell out. An out-of-stock bestseller costs you money every day in lost sales. If a customer comes into your store looking for a bestseller and you don’t have it, they’re likely to leave without purchasing anything at all, preferring instead to wait until they can get what they were looking for in the first place.

Make sure your shelves stay full in general, as well. It may be tempting to cut some underselling products, but don’t let your store get too bare. A full and vibrant store invites sales; an empty store invites nothing.

Navarre brings in six to 10 new lines every year but doesn’t necessarily eliminate the same number of products to make room for the new. “Cutting too many products is a death knell,” she says. “Sometimes I’ll buy more than I can afford, but an empty store, or a store with too few products, is worse. I’d rather have too many products than too few.”

“I always purchase enough of a line to make a statement on display,” Carrillo says. “My rule of thumb is to buy at least five styles in a line, with at least three or four of each item.”

Carrillo also has the advantage of stocking for online sales. While she employs different strategies for her online store versus her brick-and-mortar store, she can offer an item online before stocking it in the store to see if it generates interest.

Spotlighting a new product on your website, as well as in newsletters and in special displays, helps establish whether the item will be a hit or not, Hansen says. “If a big push doesn’t create a flurry of purchases, I won’t reorder.”

Price for profit

Price reasonably, but don’t put yourself out of business, Carrillo advises. “You’re not doing yourself any favors by trying to undercut the prices of your competitors or trying to be the spiritual discounter. All you are doing is ensuring you won’t make a profit and won’t be able to last as a retailer.”

The industry standard right now is a two-and-a-half times mark-up on non-published items, while books and CDs are limited to a 40 to 50 percent margin. With the rising cost of doing business, that extra half point usually makes the difference between squeaking by and actually being able to pay yourself a salary. Stones, crystals, bulk incense, and some jewelry can bear a mark-up of three to four times over the wholesale price, so don’t be afraid to structure your prices accordingly.

You should beware of sticking to the standard too rigorously, however. Adjust your prices to appeal to customers by either keeping them below the $20 impulse-buy price or raising the price to appeal to buyers who look for quality items.

In addition, when establishing your mark-up on an item, don’t forget the hidden costs—the shipping you have to pay when ordering from a wholesaler, advertising, rent and utilities for your space, product loss due to theft, even your bags.

Know what to keep and what to kill

All products have a lifespan. At first, when new products come into your store, it’s like Christmas—your staff is giddy with the shiny new things, and your customers catch the vibe and want that item before it hits the floor. Walt Szymborski, manager of the Candle Wick Shoppe in Ferndale, Mich., jokes, “Sometimes we talk about just re-boxing the items we get in the store every day to make it look like we’re pulling out brand-new product.”

But sooner or later that new-product excitement wanes, and you have to determine how long you’re going to give each product to prove itself. Ricki Blanchard, owner of Higher Self in Traverse City, Mich., gives a product six months to sell through. Hansen allows two to three months. Navarre retires products that look old, tired, or overdone.

“I’ll rotate out slow sellers,” Cromer-Vincent says, “but we’ll always keep some items in stock, because there would be holes in our product mix if they were eliminated. That could include a slow seller in a vendor’s product line or higher-priced items like statues that help round out our décor.”

Strike a balance between overhead and inventory

Every retail store experiences the tug-of-war between paying overhead and buying product. When you’ve got only so much money to go around, what gets covered first? Paying your staff is most important, of course, but that doesn’t always mean you’re included. After paying their employees, some shop owners opt to order product before drawing their own paycheck.

“To level the playing field of what bills get paid, I try to use net-30 vendors instead of pre-pay vendors,” Blanchard says. “That way, all the bills become equally important.”

Carrillo has a savings account specifically for funds to purchase products. “I have it set up where $50 is automatically transferred into it every day. That might not seem like much, but it quickly adds up to $250 a week, $1,000 a month, and $3,000 a quarter.” This account allows her to take advantage of a deal or be able to buy in quantity for a large discount.

Set sales goals

Sales goals don't just keep the lights on; they’re also the profit you need to pay for the product sold, pay that day’s portion of the overhead, and pay staff.

You can set goals for overall sales, specific segments of your inventory, even certain days of the week. Hansen sets sales goals for the day, week, and month, and also sets goals for an average sale. Navarre sets high sales goals for a weekend, with a cash prize at the end for everyone who participated in reaching that goal. Blanchard says she doesn’t set goals for her staff any longer because she knows they always put forth their best effort.

Sales goals also can tell you if you are undercapitalized in inventory; you can’t turn over inventory you don’t have. For example, if you plan on selling $250 a day ($7,500 a month), you’ll need at least four times that amount in inventory at the beginning of the month to be able to meet that goal. Then you need to buy product to replace what you’ve sold in order to sell the same amount next month.

All retailers stress about money, but it’s how you approach your challenges that matters. Educate yourself about trends and industry standards, don’t be afraid to purposefully invest in product, pay attention to what works for you, and watch your success—and peace of mind—grow accordingly.