Getting to grips with good product management

With consumer spending down, inventory control has become an even more critical discipline for retailers.

Christian Retailing Editor Andy Butcher discussed this important issue in our latest online Retailers Roundtable with:

• Eric Grimm, business development director, CBA
• Robbie Halstead, president, Kingdom Retail Solutions
• Lorraine Valk, co-owner, Banner Books Parable Christian Store of St. Joseph, St. Joseph, Mich.

Listen in on the whole conversation at retailers-roundtable.christianretailing.com.

CHRISTIAN RETAILING: With so many other demands on their time, some Christian retailers might be tempted to put off dealing with inventory control because it is so demanding. How would you respond?

ERIC GRIMM: This is a discipline that should be ongoing. ... It's being able to follow customer demands very closely and do it by even product or customer type throughout the year. If (a) retailer doesn't have a pretty solid inventory strategy in place now, they should get one in place and start working on that on an ongoing basis.

LORRAINE VALK: The most important aspect of the bookstore is managing that inventory extremely closely. That is the one area I have heard that has sunk some people's ships when it just gets out of hand and it feels uncontrollable, so I monitor it every day.

ROBBIE HALSTEAD: You need to get it right at the very beginning of the year, then from there begin to exercise the disciplines and how to maintain it daily, weekly and monthly as well.

CHRISTIAN RETAILING: How can a store keep in tune with what is happening on a day-to-day basis as well as looking at the bigger trends?

GRIMM: Cycle counting is a technique that allows retailers to manage their inventory on an ongoing basis. The best practice (for that) is four times a year, but it is not uncommon for retailers to do it on a monthly basis. In fact, some of the larger companies like convenience stores will do cycle counts monthly and that means counting everything in the store.

You'll find that the stores that have sales increases or flat sales are stores that have a pretty good handle on their inventory. Profitability in a down cycle or down sales is really tied to inventory technique and inventory management.

CHRISTIAN RETAILING: What would you say to retailers who feel overwhelmed by the prospect of tackling a full inventory?

HALSTEAD: In the last two or three months, I have gotten about 15 phone calls from stores who have been open anywhere from three to 15 years who have never really done effective end-of-the-year inventory. It's really just breaking the store down to smaller pieces to be able to dissect it.

It's one thing to do books and music, but when you get down to the gift categories and all those areas, it can be extremely overwhelming. I tell folks to break it down into smaller pieces. If you have a display of one type of product, then that becomes a category in your inventory. If it's Willow Tree product you have, then Willow Tree should be a category and you count that as one unit and go on from there throughout the store.

CHRISTIAN RETAILING: How do you find the time it requires?

VALK: Just sheer determination. We break the store down into different departments. Even the books are broken down into different areas, and certain people are responsible for doing monthly inventory so it's not so overwhelming ... but it's a priority at the same time.

Every day I pull a report from everything that has sold the day before. I use my computer as a tool, but I don't always trust the data that it gives me. ... It's usually 200 items per day, but that gives me a real good idea as to what is selling, what is being replaced. Every day, first thing in the morning, I think it's the best time to just spend 10 to 15 minutes going through and making sure to replenish quickly the things that sold and crossing off the things that are ancient.

CHRISTIAN RETAILING: There is an intuitive part to it, in addition to looking at the numbers?

HALSTEAD: Absolutely. I would never trust (software) completely to run my store. ... But I would use the data as much as I could to help me. It's got to be a balancing act between knowing your store, knowing your customer base and what's moving and not moving.

CHRISTIAN RETAILING: Is it important for all the staff to be aware of the priority of inventory control?

GRIMM: It's a critical part because when you think about how the overall system works, simple things like scanning product in the sales transaction and being sure the product is measured by the SKU becomes a critical discipline because it's that bridge between what's out on the floor and what's in the machine. There are a lot of disciplines like that you don't think of in terms of inventory, but (they) relate directly to inventory.

CHRISTIAN RETAILING: Is inventory control just for the owner or manager?

HALSTEAD: It's for everybody. But it's got to be driven from the top down for this thing to work, and if it's not, then you find that (the) store just doesn't have the inventory control that they should have.

CHRISTIAN RETAILING: How did you come to embrace the importance of inventory control?

VALK: I have an unusual blessing that is hereditary. My parents ran the bookstore for 35 years before my husband and I bought it three years ago. They call my mom the inventory police. ... She had always ingrained in me that if everything stays in balance, everything will be OK.

Since we bought the store, the sales have gone down, but keeping everything in balance—the inventory percentage-wise where it needs to be—keeps us healthy. I am just determined to keep inventory under control, and it's a daily battle. It's like gaining a few pounds and, "Oops, got to get the inventory back down there."

CHRISTIAN RETAILING: Are there different inventory management issues for church-based stores?

HALSTEAD: I have worked in megachurches as well as smaller churches, and they have more time to do the work that it takes to get inventory under control (because they are usually not as busy during the week). There really should be no reason why inventory isn't a priority there for sure.

CHRISTIAN RETAILING: What is the essence of good inventory control?

GRIMM: It's more being able to sell more with less inventory. To generate cash flow, you've got to maximize turns in a way so that you have the most of what customers are asking for in the store and not have your inventory invested in products that don't sell or take a very long time to sell.

CHRISTIAN RETAILING: What do you do when you find items that have not moved?

HALSTEAD: If I go into a store that's recently opened or has been open for 6-12 months and they have a product that just isn't moving, in some cases I will recommend some type of special sale to get the product out of there: Buy two, get one free or 30% off or whatever to get it out of there.

I also take into consideration where the store is financially and whether or not they are able to get cash flow in to them to the bills or whether they would be better off just sending the product back full credit to take care of a vendor that way.

VALK: My first choice is usually to send it back. I do it an awful lot through distributors. They are usually really good about taking product back.

My customer base thinks that the clearance table isn't truly a clearance table until it gets beyond the 50%-off mark. ... They want those clearance items to be $4.99 or $5.99, so generally I find it better to return and reinvest some dollars in bargain products, if that is what they are looking for.

HALSTEAD: I just worked with a church that had opened a store two and a half years ago, and their initial inventory, probably 60% of it, was on the shelf. So after realizing it couldn't be returned and knowing the product that was there probably wasn't product that matched the folks who were visiting the church, we did a sale with paperbacks for $3 and $5 for hardcovers.

They lost a ton of money, but they gained some revenue they never would have got if we had not knocked those books down. ... Within 30 days, we sold $550.

CHRISTIAN RETAILING: Can you offer some practical pointers for stores really wanting to get a handle on inventory control?

GRIMM: Know what you have. ... I remember one retailer who decided to inventory all of his gift products and found that he had gift products that had been in the stores for over two years and he never even realized it.

VALK: Number one, the most important moment of the day is to sit down and go through the inventory you sold yesterday, so you have a good handle on what's moving.

(Also), I would say order the smallest reasonable quantity and figure out a quick replacement place to replenish it. Third, you have to commit to some items that will never get turns in your store—like commentaries.

Pick one set of commentaries, keep the whole set even though some of them will never get the turns and then commit to having other departments that are going to get high turns to cover those items you committed to stock even though they are never going to get the turns that you desire.

HALSTEAD: This seems like common sense in our industry, but really pray. Pray about the product you are bringing in, and make sure you believe is going to move for you. ... Really take the time out to seek God in what you are doing and the products you are bringing in.

(Another) issue is a lot of managers are making their stores personal, meaning the product they are bringing in really reflects them—but may not reflect the people that are coming in. So you need to remove the personal, and find out what target audience you are reaching and really make sure that what you have is reaching them as much as possible.

The other part, as I said in the beginning, would be to take inventory and break it down into pieces and not get so overwhelmed. One step, one hour, one day, one week, one month at a time ... just working as best as you can to get it to a place where it becomes a priority, as it should be.

CHRISTIAN RETAILING: Can you recommend any specific tools or helps?

GRIMM: We have a coaching and consulting program (and) a tool called Custom Inventory Accelerator which really helps reset the store. It looks at where you are at now and then begins the process of eliminating those titles that customers aren't wanting and taking the slow-moving stock off the shelf and putting in more faster-moving stock.

Then there are inventory management tools like Above the Treeline.

VALK: There's an older book by Leonard Shatzkin, The Mathematics of Bookselling. I look at it probably every year just to remind myself on how important those turns are to having a bottom line.

• Prev
• Next