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50 March 2017 | beautystorebusiness.com Managing your own inventory is a multi-tiered task that takes customers' opinions, needs and wants into account. Understanding customer demographics and knowing when to stop buying more inventory are vital components of inven- tory control. Knowing the numbers is vital to the company's success, as is an analysis of the brand and its representative products. One strategy Rush uses to select inventory is continuing to stock the proven performers with regular for- ays into smaller, perhaps lesser-known brands' offerings. Both popular and new products need company and sales sup- port, backing and packaging that reflect Beauty Collection's values and mission. Carefully selecting products ensures that customers leave happy with what they need—products that truly do what they promise to do. "We have six locations in Southern California," Marla Rush says. "We have to be on top of what's selling in each store. We use NetSuite software to keep track of it all. Items that might be turning over quickly in, say, our Malibu location might actually be slow movers at our Calabasas store." (Both affluent areas in Los Angeles, Malibu caters to a laid-back, natural beach crowd, and Calabasas, to an upscale sub- urban one.) To counteract the effects of sluggish stock, Rush explains, "We have been known to move items or brands that aren't moving that quickly in one store to another store—sometimes it's just a regional thing" and those products may turn over faster in the new location. "Customers are fickle and we are always aware of customer feedback," Rush adds, noting that it's not a smart move for stores to completely run out of items, because customers will very quickly turn to the next available item in your store or even worse, stop buying from your store if a favorite item is out of stock. Rush understands that some busi- nesses languish and even go out of business due to an overabundance of inventory, which is why she and her staff are constantly analyzing statistics and inventory turns for the chain as a whole and for each location in the chain. "It's important to know your target market for your brand" when analyzing what will go into inventory, she says. Interestingly, Rush finds that social media is a key component of the inven- tory purchase strategy. "We monitor social media constantly," she says. Spe- cifically, they look for product feedback to better learn what customers want. "Customers will tell you what's missing in your store! They're on social media telling you what they want. They want technology, innovation and they want products that deliver," explains Rush. When looking for new inventory, she says selecting products or brands that represent the company's culture and philosophy is crucial. Image courtesy of Beauty Collection. Beauty Collection Maria Rush "We monitor social media constantly. Customers will tell you what's missing in your store!" —Maria Rush EXCESS INVENTORY SIGNS YOU HAVE IT AND EQUATIONS TO CALCULATE IT The cost of inventory is often the largest expense on a small retailer's income statement. There is no question that mismanaging this number can make or break your year. The quick way to determine surplus inventory is by simply looking around your store and noting which sections are fuller than others. • Do you have products in your store that are more than a year old? • Are you having an excessive amount of sales? • Is there a section in your storeroom reserved for seasonal products that didn't sell during that season? In the long run, holding on to inventory in hopes that it will eventually sell at full price is costing you more money than selling it at a discount and purchasing better-selling products. Along with the obvious method of doing a store walk-through, using retail equations can provide a better understanding of your inventory perfor- mance. Data from your point-of-sale system can help ensure accuracy when using these equations: ( The higher the number, the better for SPSF ) Try sectioning your store into four quadrants and crunching your num- bers using this equation. If one segment is coming out to be much lower than the other three, do some investigating to determine which prod- ucts may be reducing your store's efficiency. ( The lo he number, the better for DIO ) This equation is used to determine how long it takes to turn inventory into sales. Your average inventory can be found by adding your beginning and ending inventory cost for a 12-month period and then dividing by 2. Keep in mind your DIO will vary depending on your industry. Compare your number with similar retailers to see where you stand. Example: If your number comes out to be 91, this means your store sells its entire inventory within a 91-day period and you average four inven- tory cycles per year. THE BOTTOM LINE Managing your excess inventory will increase your store's success. It really can be as simple as that! Source: Reprinted with permission from retailminded.com. Original retailminded.com blog post by BoxFox retail technology. SALES PER SQUARE FOOT ( SPSF ) ANNUAL SALES TOTAL SQUARE FEET OF STORE DAYS INVENTORY OUTSTANDING ( DIO ) AVERAGE INVENTORY/ COST OF GOODS SOLD 365