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Crafting Optimal Inventory Strategies for Fresh and Expanding Retail Outlets May 27, 2023 (0 comments)

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Philadelphia, PA--When embarking on a new retail venture or expanding an existing one, devising solid inventory strategies is paramount for success. Merchandising planning teams should consider various options when developing an approach.

[Image via Pixabay Commons]

For brands anticipating the launch of their inaugural store, the time is both thrilling and taxing, according to Lacey Rotsaert, head of planning and merchandising solutions at cloud-based merchandise planning platform, Tooli. It's an opportunity to explore the market and perceive customer response. Her report on Total Retail looks at optimal inventory planning strategies:

1. Formulate the perfect product mix hypothesis. The initial store operates as a testing hub for consumer demand, necessitating the prediction of an ideal mix of core and fashion products. Over time, future decisions can be driven by data points derived from store performance.

2. Foster rapid inventory turnover. A swift inventory turnover can enhance profit while mitigating risk, improving cash flow, and preventing capital blockage in sluggish or excess inventory. Identifying trends and demand can expedite inventory movement, allowing for improved customer service and agility in adapting to market shifts. For most new brands, a target of maintaining four weeks of supply is advisable. Regular sales analysis in the initial weeks ensures timely restocking.

3. Apply the 80/20 rule. This approach optimizes profit while minimizing risk. It suggests that a retailer's core best-selling products, comprising just 20% of the total, generate 80% of sales. Thus, when opening a new outlet, ensure ample stock of these best-sellers and integrate fashion products for variety and appeal.

4. Like-for-Like Categorical Distribution: Your brand's grouping method for products, whether by color, fabric, or other, can help determine the ideal inventory mix. For instance, the new store's inventory should reflect this ratio if a brand's sales are generally split 60/40 adult/kid products.

5. Like-for-Like Geography Using Online Sales as Proxy: Online sales analysis can provide insights into consumer trends within a particular geographic area, which is useful for selecting similar products for a new store in the same location.

Learn more in the report on Total Retail.

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