This column hasn’t discussed reordering for some time, but it’s a topic that needs reiteration. It’s one of those subjects that seems worth revisiting on a regular basis.
Occasionally, retailers don’t always “hear” the message about reordering their fast-sellers for quite some time – the penny never quite drops; however, when they do finally hear it, and then put it into action, their sales go up and the results speak for themselves.
But sometimes they forget the simple facts and revert to old habits without really recognising their mistake. Hence, this wake-up call.
So let’s go over the issue again.
Pays to be popular
By restocking their best-selling items, retailers find themselves consistently selling stock on arrival, so much so that they often can’t believe the difference that a proper reordering philosophy makes to their businesses.
Despite this, there are still so many other jewellers out there who are leaving profits on the table by not reordering their best-selling items in time.
Retail is a numbers game. As a rough rule of thumb, 20 per cent of a store’s products are responsible for 80 per cent of a store’s sales – a small percentage of stock is contributing a large percentage of sales, so why aren’t jewellers keeping these stock winners on the shelf where they belong?
A store with 5,000 items and $1 million in annual sales would probably consider 1,000 of those items (top 20 per cent of stock) to be fast-sellers. Following the 20/80 rule stated above, these fast-sellers would contribute around $800,000 in sales.
Conversely, this means that the remaining 4,000 stock items are slow-sellers contributing just $200,000, or 20 per cent, of total store sales.
What would happen if these top 1,000 items weren’t reordered as required? That’s right … fewer sales. In fact, fewer everything, mainly profits.
Stores can’t sell what they don’t have, yet many stores are missing out on sales by not reordering those fast-selling items.
Sadly, the typical store can often have less than 10 per cent of its inventory as fast-sellers because they don’t reorder. If a store reordered its best sellers and built the ratio of high-selling items up to 20 per cent or more, there would be a corresponding increase in the dollars of fast-selling items and an increase in overall gross sales.
Excuses, excuses
Shoppers are unlikely to buy what they can’t see, yet time and again, businesses will make excuses for why they haven’t reordered stock – there’s always another bill; tax is due; the staff are bored with that item; the customers don’t want to see it worn by too many people.
Excuses are plentiful but the simple fact is that businesses cannot survive without revenue.
Won’t the bills be easier to pay with more sales? Won’t the company’s tax position also improve?
If staff are bored with an item, then perhaps it’s time to remind them that it is the customers, and not the staff, who determine whether stock items are interesting enough to continue. Let’s face it, are your staff your customers?
The proof is in the sell-through, and personal opinions of stock are largely irrelevant.
Also, when staff complain about stocking the same old items, it might be timely to remind them about how easy it is (usually) to sell these popular pieces, after all, that’s what makes them best-sellers … a lot of consumers desire them. And more sales equals job security.
Ultimately, if a customer wants an item and it’s not available, they’re just going to go to another store where it is available. Watch what happens when competitors pick up those same items and turn them into sales.
Availability
If customers realise that a competitor’s store always has the popular-selling items in stock, guess where they’ll go first? It won’t be long before they’ll be bypassing your store regularly.
Also, is the customer really going to see a certain item on someone else? One store in a town with 15,000 people sold the same diamond ring 46 times, yet no one ever returned to complain about having seen it on anyone else.
If retailers are serious about building their businesses, reordering in a timely fashion is crucial. Without stock, there is no sale.