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This post is about buying but here’s a question for you: Do you know what makes a Rolls Royce a Rolls Royce?
Yes they are a totally custom built car. And yes, very expensive. But what makes each car so costly are the redundant systems.
For example, there’s not one set of brakes but three. For a Rolls Royce those backup systems make an incredibly safe ride. That’s why they get a premium price.
For a retailer, redundancy is costly – that’s your money sitting there!
How many redundant products do you have on your shelf?
When I do business makeovers, owners are often shocked when I point out multiple products in a slow category. For example, a toy store that has six different child’s play tea sets. They gasp, “How did so many of THOSE get there?”
Like some evil 
gremlin came in and stocked their shelves with excess product.
I mean really, how many redundant items do you really need?
Is there a new trend you’re riding and you continually sell out? Did Oprah mention it in her magazine? Then maybe. Maybe its OK.
But usually, it’s just sloppy buying habits. Not gremlins.
The danger with multiple products is that they are not “different enough” so you’ll overwhelm your Feeler customers. They’ll shut down.
Because they can’t see any real differences they’ll either decide by price – what’s on sale or the cheapest – or leave. Neither of which builds your personal fortunes.
Four Tips How To Avoid Overbuying:
- Know your stock. Keep your best-sellers in stock by monitoring your POS category reports. Check sales within each category every week, and balance to outstanding orders.
- Cull your stock. Cut those that continue in the bottom 20%- even if you really “love it.”
- Plan your stock. Before buying anything, make sure you know what it will replace. Impulse is for customers, not store buyers.
- Build to your stock level. Come up with an optimal level of merchandise based on your POS reports, your merchandise turn and profitability; then create your open to buy and buy to fill. If for example you found you had 48 child’s tea sets in stock (8 of six styles) but you only sold 1 a month, that would take nearly four years to get your money back. Notice if you just replaced the one style that is selling, you’ll continue to dig yourself in the hole.
This is great, and as true for grocery as for other retail. My only caveat – definitely cull your stock, but if that slow moving it is purchased exclusively by your best shoppers you might want to keep it around if it keeps them happy.
Thanks for commenting Joshua!
I am in the furniture % mattress business for the past thirty years. I call on large and small dealers. They all need the advice in your article. I have been preaching maximizing stock turns to increase profitability for years. Having the required inventory where you need is not easily achieved. To be successful our dealers must find the balance and your Four Tips help them do that!