To adapt to the changes in today’s retail landscape, it is important to back your business decisions with data. Knowing the right inventory performance metrics to evaluate and what they mean will allow you to make educated business decisions to improve your store’s inventory performance.
Make sure you’re evaluating these 3 important inventory performance metrics:
Look at your Sell-Through – This is the percentage of sales to the inventory investment available for sale. The formula measures how much or what percentage of your total available inventory was sold during a given period. For instance, if you had two items for which you had received 10 pieces of both and had sold 6 pieces of both, the sell-through percent on both items would the same at 60%. But if one of these items had been in your store for 12 months and the other item in the store for 1 month, the second item is much more profitable for your business than the first, even though the sell-through is the same.
Evaluate the Return On Investment (ROI) of Your Inventory – For every dollar you invest in a product, how many are you getting in return. ROI analyzes inventory levels, sales, and profitability by comparing the investment in inventory required to generate those gross margin dollars. A high ROI indicates that you have the right amount of inventory, at the right time, for the right price. A low ROI may indicate that you are missing out on sales opportunities and leaving money on the table in the form of old inventory or excess markdowns.
Understand the Gross Profit Margin (GP) of classes/SKUs/vendors – GP measures the percentage of your total sales dollars that are profit dollars. The GP percentage is relative to the cost of the item as well as the selling price. A higher GP percentage indicates that you are selling your product as close to the original retail price as possible. A lower GP percentage may indicate excessive markdowns for products driving down profitability.
Without the data, it is difficult to accurately know your success. The more insight you have, the better equipped you are to make informed decisions so that you can be a profitable retailer.
It’s almost that time again… all the kids are heading back-to-school in August and you have an opportunity to end summer with a bang by hosting a back-to-school event! Now is the time to start planning. Not sure how to start? Here are 3 tips for hosting a profitable back-to-school event.
How to host a back to school event?
1. Promote with a purpose
Use your customer list to invite loyal customers to your back-to-school event. Make the coupon or invitation specific to your customer segments (2-4 customer groups). If you haven’t already, consider a Frequent Buyer program to maintain customer loyalty.
Start promoting the event 2 weeks before to ensure you give your customers enough time to mark their calendars. Connect with customers through their preferred communication channels (email, text, social, etc.). Examples include having an event hashtag on Twitter, creating a Facebook event to share on your page followers, and posting a photo to Instagram with the event details. Post about the event on social media during business hours for optimal visibility (consider Hootsuite to automate the posts).
2. Utilize data on inventory transactions
Analyze the previous performance of your products. What products sold well last year? Which ones are stale on your shelves? Do some sell no matter what? Use this information to arrange your store. For example, move the stale product to a prominent display or out onto the sidewalk. Stock up on well-performing products or consider moving them to the back of the store. This means your customers will walk past other products to find what you already know they will purchase.
3. Consider an additional POS
Long lines are discouraging, so enable a temporary POS to get through a spring sale or just a couple of busy months to ring out customers quicker. This will reduce tension and frustration in the store, providing a more pleasant shopping experience. It will also allow you to sell more in less time.
Now you’re equipped to host a profitable back-to-school event. Want ideas for other events to bring in customers? Well, the good news is, we’ve put together a calendar of monthly occasions that you can add to your marketing plans to attract more customers.
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