This post was contributed by Ruoshan Tao, an Inbound Marketer at TradeGecko, an inventory management solution provider that helps SMEs grow.
If you’re a retailer, you’ve probably come across at least one of the thousands of articles about consumer habits during the holidays. After all, it’s an important time. According to the US National Retail Federation, the holiday season can represent as much as 20-40% of a retailer’s annual sales.
If you’re well-prepared—and we know that many of you are—you probably have a rough estimate of how many sales you hope to make. You’ve probably stocked up on popular holiday items to ensure that you don’t experience stockouts during this critical time.
Nevertheless, with so many stories out there about stockout disasters that happen to even the biggest retailers, SMEs have a tendency to deal with uncertainty by overstocking goods. After all, cash flow is the lifeblood of any business – and making that one extra sale could be the way that you keep your business going.
Missing out on sales because of stockouts is a scary thing – but this doesn’t mean that you should overstock. Remember, keeping stock in your warehouse carries a cost of its own, both in terms of the cost of additional warehousing space, and the amount of capital that gets tied up in the inventory.
Demand forecasting is a good way to plan your purchasing. Use your own historical sales data as reference, and be sure to look at macroeconomic information and industry-specific trends.
But maximizing the top line is just one part of running a successful business. Keeping your costs low to ensure profitability is just as important. Optimize your purchases and sales so that you carry the right amount of stock, even if it means that you lose out on a sale or two, will keep you profitable in the long run.
In fact, Black Friday weekend sales fell by 11% this year. If you’re overstocking just for the sake of doing it, it’s time to reevaluate your strategy.
So, what’s the best way to manage your inventory during the holiday rush?
With so much uncertainty, the one thing is that well within your realm of control is that you should know exactly what’s going on in your business – purchasing information, sales information, the works.
For starters, visibility is key. For many early stage retailers, using spreadsheets is a no brainer. You might do reconciliation of sales and inventory data periodically, typically weekly or monthly. And for lower volume transaction businesses, it can be a fairly reliable system.
In the case of the holiday rush however, sales happen at a much faster pace. To be able to make good decisions on the fly, it’s essential that retailers have real time access to inventory information. An even more sophisticated system should alert the relevant decision makers when stock levels fall below reorder points.
Know exactly what and when transactions are taking place and automate whenever possible. With so many different avenues of communication with both suppliers and customers, it’s important that you consolidate and aggregate all this information and have a plan of action if things do go wrong.
Use technology to streamline processes
Every business owner knows that a ‘streamlined process’ is best – but what does the term even mean?
Retailers are the link that connects suppliers to end consumers. Streamlining a retail business consists of managing these linkages so that they run as seamlessly as possible. With so many Cloud solutions available, one of the most important choices you have to make as a business owner is to choose the right software.
Standalone solutions are important, but with integrations and add-ons, you can now purchase a whole suite of solutions that are designed to work seamlessly with one another – with each solution provider focusing on the thing that they do best. The Shipstation-TradeGecko integration for instance, connects your order information with fulfillment and shipping without having to manually transfer this data.
At the end of the day, know your business inside out and pick the solutions that are right for you.