#business planning “know your market place, stock”

Welcome back. We have talked before about research, but let’s take another look in the context of your Business plan.
Today we will look at stock.
Stock is £money. “Obviously”, I hear you shout. No seriously it is £money both to begin with and at year end stock count. It is both a cost to be paid, and at year end potentially, profit retained, and potentially, taxable. Remember stock is £money.
How often do you see sales? All the time, from the biggest supermarket to the smallest shop, across every conceivable product. Why is that?
Overstocking usually! (there are other reasons which we shall cover another day)
Why do we overstock? Greed! Supplier pressure to take a minimum order! Lack of research/ knowledge! Change in consumer habit/buying power!
Greed – superb margin, you like the product, it cannot fail, you order too much, runs out of it’s sell buy or trend moves on or season ends.
Supplier pressure. I hear this one daily. All suppliers want you to carry their range, the fullest possible range! Once an order is committed, in the case of fashion Winter for Summer delivery, you are obliged to buy the order, even if you still have most of the last order! Supplier commits to production based on pre-sell. You have no choice but to discount last stock, as you need space in stock room and on shop floor. Plus it affects cash flow! Stand up for yourself. Say no!
Change in habits. Ask yourself, is it better to sell out, before the trend moves on, make full margin, regularly up to date shelves, make less turnover, but higher margin, better cash flow. Or…..make a supplier wealthy, sell discounted products, over stock, and have poor cash flow. Constantly be selling last years must have!
Not a difficult one, if you remember it is profit that matters, turnover is to some extent irrelevant.
You cannot spend turnover! Every square inch of your store needs to be profitable, back of store as well as front of store. You should constantly refresh the shelves/ rails, layout. Keep it smart and appealing. Every inch should maximise profit. Why do people give so much space to low profit, reduced margin/ sale items. Space means profit! Should it not be used to maximise not minimise?
Do not dedicate space to discounted. Put more effort into profit retention. Buy better, sell old stock on line, EBay if you have to, but try and keep your store up to date and profitable.
Lack of research. Never take the word of a supplier, he is a salesman, selling on behalf of his Company. You should keep abreast of trends, read Magazines, Newspapers, Trade Papers, attend Exhibitions, Google, Look at Competitors where possible. They often publicise next year colours and in some cases range. When he says you need that in Blue, Green, Pink, Grey, Indigo et al. Say NO! When he says you need 2 size 6, 3 size 8, 4 size 10, 4 size 12, 3 size 14, 2size 16. STOP! Think this has become 18 of each colour way, potentially 70 / 80 items of stock in 1 stock item! Did not sound much when you ordered it 6 months ago! Your stock room is full for sure. Stock is £money, your £money!
I hope this helps?
As always, you can reach me at FYCreatives, Blackpool, 01253477147, or Orvia on 01772422242
Kind thoughts, Geoff Reeves


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