Monday, December 9, 2013

When to Stop Buying

Christmas is just over two weeks away. Your inventory is running down. You know about the holes on the shelves that you have secretly covered up by spreading things out. You know what you're out of stock and won't be able to get back in before Christmas. You're worried you won't have enough inventory to make the sales you need that final week of the season. You grab your line lists to see who will ship the fastest and what deal they are offering this week. You crunch the numbers and start writing the orders. You get into a frenzy, one order after the other, loading up on anything that will ship right away so that shelves don't look bare. You start to sweat. Panic grips you. One more order...

Stop!

Step away from the computer!

Don't send those faxes or emails!

Take a deep breath and relax. I know that scenario above. Lived through it a few times. A lot of retailers make this same mistake this time every year. We panic. Did we buy enough? We think no and start writing orders for a lot of things that probably aren't going to sell and we get stuck with a bunch of inventory in January and not a lot of cash.

Before you place one more order this week, ask yourself these three questions:

  1. Will this product sell in January? Chances are really good that most of what you order this week will end up being shelf-fillers - products that make your store look full, but don't completely sell through. Even the hot items rarely sell out that last order. But if it is truly hot, it will sell next month. If you know the product will sell after the holidays, proceed. If it is only a holiday-time item, count your blessings that you didn't have any carry-over and move on.
  2. Will this purchase put me over my budget? You do have a budget, right? You do have a projected sales number in mind along with an ending inventory number you hope to hit? You do know how much is currently on order and how much you still need to buy? Without a plan, over-buying is almost imperative. Plan your purchases around your Ending Inventory plus Expected Sales minus your Current Inventory. 
  3. Do I (will I) have the cash to afford this order? If you have been paying attention to your cash flow and, then you know whether you can afford this order. If the cash flow says you can afford it and the other questions are also answered yes, then go for it. But even if your budget says you need to buy more, but the cash flow does not, go with the cash flow. Better to have cash in January than inventory. 

If any of those questions are even a shaky yes, talk yourself down off the ledge, push the pencil away, and go out on the floor and sell something.

-Phil Wrzesinski
www.PhilsForum.com

PS Our customers are the ones to be induced into over-buying, not you. ;)

No comments:

Post a Comment