"Existential Question Facing Retailers: How Much Inventory Is Too Much?"

One little pig built his store out of straw.

He believed that the best way to survive in retail was to focus on top line growth. And lots of inventory.

But…the winds of competition blew his store away.

The second little pig built his store out of sticks.

He believed that the way to prosper was to focus on high initial mark-up, skimping on operating expenses.

So…the winds of competition blew his store away too.

Meanwhile, the third little pig built her store out of brick!

The Clock Is Ticking…

Christmas is two weeks away.

Time to focus on the “science” part, the numbers part, of “the art and science of inventory management.” The march has begun toward a vital, critical touchstone – your 12/31 targeted ending inventory level.

On that date, you must have appropriate inventory levels and mix for the months ahead – plus the cash to pay for it!

This is the moment an “ending inventory enforcer” must step up. 

Except for the lingering sugar high, Halloween is well behind us. Retailers know what that means: on to the Holiday Season!

Of course, for most retailers that brings a major focus on sales. But, savvy retailers are especially focused on the targeted ending inventory on December 31. 

Those retailers are carefully watching sales reports, and are poised for action. 

Each week, they identify "What's not selling yet?" And they do something about it! Move it around on the floor? Display it differently? Pair it with merchandise that IS selling? Lots of choices!

What About Markdowns? 

What are we waiting for? The customers are here now. Do we really want to wait for January clearance sales?

This Is Outrageous

An article in the Retail Dive Brief* on August 5 jumped out at us with some fright. (We’ll get to what concerns us greatly in a moment.) Here's what was shared: As reported by Max Garland, Amazon Merchants who use Fulfillment By Amazon are advised to send their holiday inventory to Amazon during August and September, to arrive no later than October 19, a week earlier than last year. (And six weeks in advance of Black Friday.) And Garland cautioned, "Sellers who miss the October inventory receiving deadline may have tough luck finding space at Amazon’s fulfillment centers." But merchants need not worry. (And this is what concerned us.) Amazon can assure that "sellers will have enough room for six months of inventory on average." 👀

Use This Four-Day-Fourth To The Max!

Get "Freedom" From Old Merchandise

Find out how revolutionizing it can be to have freedom from old merchandise!

This year, the stars align. The 4th of July is on a Thursday!

We see it as a gift for retailers from the calendar gods. Four days, Thursday through Sunday. What a great opportunity for a true blow-out sale event!

The Most Dynamic Management Tool for Retailers

What is the "return on investment" of a retailer's largest investment? The GMROI calculation is the tool for the job!

GMROI – Gross Margin Return on Inventory Investment – indicates how much Gross Margin you get back for each dollar “invested” in inventory over a year. 

No other formula, no other calculation, simultaneously impacts both Gross Margin and Cash Flow. No wonder we consider GMROI as the #1 measure of inventory productivity.

And since inventory represents between 65%-80% of a retailer's total assets, it deserves a lot of management attention.

Let's start with a little "window shopping." Check below for the GMROI Benchmarks for just a few retail segments. 

• Yes, there's a lot of variation. In 2023, for instance, results for just these 6 segments range from $1.90 to $7.50. You'll likely see similar variations between departments in your stores, which is one of the advantages of GMROI. Which ones are most productive?
• Now look at each of these sets of Benchmarks charts individually, and their GMROI over the last 5 years. A few ups and downs, eh? Just not the same ups and downs for everybody. Note: GMROI's that are going up are sure preferable!

Is This Why Many Retailers Fail?

Maybe you've also noticed it. The recent articles about how retailers now have their inventories "more in line" after the glut of excess inventory caused by "supply chain disruption."

Okay. That's good news.

But, what jumps out at us is the frequent reference to "just-in-time" inventory management.

• Really? Tell us, What is the formula for calculating "just-in-time"? 
• What time is "just-in-time"? Is it 2 turns on the inventory? Four turns? Six turns? Twelve turns? Or what?!?

Look, if you can't measure it, you can't manage it. And, if you can't manage something, by definition (and experience!) it is out of control.