Inventory is one of the biggest headaches in the retail business. Failing to manage your inventory correctly is a surefire recipe for wasting money and diminished profits. Still, it’s hard to blame small businesses for having trouble in this department because of the many skills required for effective inventory management. You must be able to negotiate with wholesalers, make accurate sales projections, and maximize the use of your supply chain. Working with big wholesalers is intimidating enough on its own, especially if you’re a smaller business that doesn’t buy large quantities of products.
But with the right management strategies and resources for additional business funding, small businesses do not have to make hazardous sacrifices solely because of their size. Here are 5 tips for managing inventory for your retail business:
1. Always Pay On Time
When leaders of young retail businesses hear this tip, they probably think to themselves: “What kind of person expects to run a business without paying vendors by the due date? It’s not like they’re asking to get paid tomorrow or even next week.” Sooner or later, however, these business leaders find out that some of their competitors not only don’t pay their bills on time but actually owe their vendors money for orders they never paid for at all. If this wasn’t the case, wholesalers wouldn’t offer discounts for advance payments or credit extensions for a solid track record of timely payments. Eventually, you’re going to have to do some sort of negotiating with a key vendor, and it will be a lot less unnerving when you have a strong payment history to support your request.
2. Don’t Rely On Just One Or A Few Vendors
Retailers are frequently advised to not depend on just a couple of vendors for their inventory needs. Your business would be in serious jeopardy should one of your vendors fail to deliver an order on time or go out of business, which happens all the time. Yes, vendors that have earned your loyalty should not be taken for granted. But that doesn’t mean they shouldn’t have to continuously compete with other vendors in order to maintain the partnership.
Smaller retailers that do not have backup suppliers should at least make sure they have a plan for protecting their finances in the event of a crisis. Companies like United Capital Source are able to quickly approve and distribute various types of small business loans following one of the aforementioned scenarios. We can provide a cushion to make up for the lost revenue or simply distribute funding at a date that allows you to make an advanced payment and ensure an important order is delivered promptly.
3. Use Inventory Management Software
At first glance, inventory management software seems like it’s only for bigger companies with more complex supply chains. This might have been true in the past but nowadays, more and more smaller businesses are using inventory management software to maintain an accurate overview of what they have and what they need. Inventory management software can also tell you which items are selling the quickest and slowest. And thanks to a wider array of options, you can use software that doesn’t overwhelm you with information and instead offers just the right level of support.
4. Think Of All The Ways You Can Save Money
Young retailers tend to make the mistake of thinking that discounts are only accessible to bigger companies that buy in bulk. They forget that the size of the order isn’t the only factor that can affect the total price. One example is an advance payment, or paying upfront. Many wholesalers offer discounts in exchange for advance payments, even for smaller orders. Though this might only be possible with the help of a business line of credit, merchant cash advance or other business loan, the long term benefits greatly outweigh the amount you’d owe your business lender.
If you can’t get the vendor to come down on the price of the order, you can ask for lower shipping costs or quicker shipping, which technically makes the order cheaper since it’d spend less time on your shelves. Another strategy is offering to give the vendor more business. Retailers that buy from multiple vendors sometimes transfer all of their business to one vendor in exchange for better prices or terms. Speaking of terms, your vendor may be more willing to let you pay your bills in a longer time frame (60 days instead of 30, etc) instead of lowering the price. You’d be saving money here too, because you’d have a chance to plow more money into your business before making a payment.
5. Know What You’re Talking About
Since the majority of the advice featured above involves interacting with vendors, it’s important to be prepared before launching into these conversations. You should re-familiarize yourself with your vendor’s pricing structure, your own track record of payments, and your sales projections. Business partners sometimes need to be reminded that you are a loyal customer who understands what kind of costs and discounts are available. With the right inventory strategy, you’ll put the ball in the vendor’s court and make them want to contribute to your success.