How Retail Firms can Increase Their Sales Through Inventory Control

Retailers can increase their sales revenue during the vacations through inventory control. Controlling inventory is especially vital during an economic downturn when consumer spending is low. For lots of small retail businesses, the vacation duration is one of the most vital sales periods of the year and can actually make or break business.

If business stocks up with too much inventory, they can unintentionally cut into any profits that they make due to costs connected with too much inventory. Right here’s the best ways to have sufficient inventory, however not too much, without cutting into your sales revenue, even in a recession!


Here’s How:

  • Develop a vacation sales forecast.If the most of your sales happen throughout the holidays, then your sales forecast will be various for the holiday duration than for other times of the year due to the fact that your sales are seasonal. The general sales forecast should be done lots of months, or as much as a year or two, prior to the vacation period. Forecasting is one of the foundations of your business. Planning ahead is vital to your company’s success.
  • Respond to changing economic times for your company.If the economy is in a downturn, then you have to adjust your sales forecast to compensate.How much have your sales been down throughout the year?Just how much have your market’s sales been down, specifically your direct competitors’ sales? You can look at the data for the retail industry in general. You can also get more detailed information on the competitors broken down more specifically. This will give you an overall image of your industry’s performance overall in the current economy. If you look at this type of data, it will help you adjust your sales forecast.
  • Analyze the sales for your own company during the economic changes that have occurred.What has happened to your sales during the financial downturn? Do you sell a product or service that is specifically sensitive to a change in economic climate? Is yours a luxury good that people can do without? If so, you may experience a large change in sales. On the other hand, if you sell a product or service that is a necessity that at least a portion of the population, your company may do better in the economic downturn. Based on these issues, make another adjustment to your holiday sales forecast.
  • Have a look at exactly what kinds of inventory you carry.If your firm sells services and not products, then your inventory is different than the inventory for a firm that sells items. Whatever type of company you own, you need to adjust your inventory to meet your adjusted sales forecast. Unless your business sales move counter to the economy, then they are probably lower than usual if the economy is in a recession. Do you expect your sales to continue to be lower during the holiday period? If so, adjust the amount of inventory you will lug. Remember the 80/20 guideline. About 80 % of your sales originate from 20 % of your inventory.
  • Inventory has bring costs. Carrying costs can be significantYou do not want to pay carrying expenses on inventory that you cannot sell because of slow sales. Carrying expenses include things like storage for the inventory, insurance and taxes, opportunity costs on the inventory you have purchases, and losses due to obsolescence or theft. They can range from 20-40 % of the value of your inventory each year, which will eliminate your profits in a hurry. You also do not want to have to try to get rid of excess inventory after the holidays. If you have to deep discount it, you will likewise lose money.
  • You do not want to have stockouts.Even though you don’t want to carry too much inventory, you likewise don’t want to carry too little inventory because you will stockout. Stockouts result in a loss of customer goodwill. The problem with inventory managementis that you have to juggle how much inventory to carry so you won’t be stuck to obsolete inventory however you won’t stockout. There are costs associated with each issue.
  • Follow the money trail and find out which 20 % of your inventory your sales come from.You can start doing that with your acquiring. Look at your bookkeeping journals for acquiring and sales. Exactly what are you buying and exactly what is selling? What is not selling? That should be the inventory that is sitting in your store or warehouse and getting obsolete. There are two relatively easy ways to follow the money trail with your purchasing decisions. Buy a good inventory tracking software package. Use a point-of-sale software program that will make adjustments to your inventory at the cash register every time you make a sale.
  • Divide your inventory up into manageable parts and focus on your productive inventory.Establish a system of classifying your inventory much like the one found inInventory Investment. For that section of your inventory that is productive, which you ought to have the ability to identify from Step 7, pay special attention. Start to consider stopping selling the other 80 % of your inventory that is not productive.
  • Use the Inventory Turnover Ratio to verify your arise from Steps 7 and 8.The Inventory Turnover Ratio is Sales/Inventory. Calculate the inventory turnover ratio for your productive inventory, slow-moving inventory, and dead inventory as defined inInventory Investment. You will probably see the inventory turnover ratio decline as you move from productive to dead inventory. If you find a dissimiliar results, return to your inventory tracking and point-of-sale programs or to your accounting journals and take a look at your purchasing and sales records.


  • Calculate inventory turnover for your dead, slow-moving, and productive inventory as defined in Inventory Investment. It will be an eye-opener!
  • One of the best investments you can make, particularly if you are a firm that sells products, is inventory tracking software. It will make your task so much easier and productive.
  • Using bar codes and point-of-sale technology at the cash register will help track your inventory.

    RMS Consulting is a team of experienced technical and business professionals whose single aim is to deliver the world’s best retail management systems. We understand the needs and deliver cloud-based, multi-channel retail management system that brings together POS, eCommerce, CRM and marketing, merchandising and order management, financials, and warehouse management into a single centrally managed solution. RMS Consulting serves client inside North America specifically USA and Canada while physically serving clients in the cities of Seattle, Toronto, Buffalo, Ottawa, Monreal, London, Kitchener, Windsor, Detroit. Feel free to contact us or Drop us a note for any help or assistance.



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