How to buy, fine-tune, and swap your inventory so it tells the right story for your store.
Question: How do you know when your inventory management approach isn’t working? Answer: when your open-to-buy budget has more forecasts than the Weather Channel; your point-of-sale (POS) software has got you on autopilot, restocking only fast-sellers; or shipping dated inventory back to vendors is par for the retail course.
Time and again, jewelers continue to make these elementary mistakes. As market week in Las Vegas approaches, industry experts encourage retailers to walk the shows with an eye to developing a merchandising plan that tells an “inventory story,” be it bridal, diamond, and color fashion jewelry or price-point–friendly silver and beads.
“It’s not about having the right jewelry—it’s about having the right inventory software,” says David Peters of Jewelers of America.
In the past, the open-to-buy budget served as the guiding principle behind any sort of merchandising effort. But Buyers International Group founder Abe Sherman has seen retailers move away from this traditional buying approach for one major reason: Open-to-buy budgets begin with forecasted sales by category and by month, then roll over each month with a gross dollar amount that dictates how much to spend on new inventory but offers very little, if any, information on the kinds of products to stock.
“A merchandise plan gives buyers an actual plan to work from, which, when rolled up, creates the budget,” Sherman says. “It’s the reverse of an open-to-buy, which starts with a gross dollar amount. Retailers need to plan from each category/price point and build a budget.”
The first step in creating a merchandising plan is easy, says Sherman: Step away from your store’s POS computer and walk over to your displays. Remove the inventory in a single category from the showcases. Then group the merchandise together by price points to see the inventory the way a customer sees it.
“When planning to expand a grouping, start with a current supplier that you do well with. See if they have other merchandise that complements your present inventory but does not duplicate it,” Sherman says. “If your styles are looking too similar, it’s time to have someone else help with the buying and/or expand your vendor base.”
For the next step: Go through the entire store to see what the inventory looks like when grouped by category and price. This will allow you to identify gaps in price points that need to be filled in.
The final step is taking the generic inventory that’s already been paid for but hasn’t sold for a year (a common benchmark) and using it to fill those gaps. Whatever price points remain unfilled form the basis for a new merchandising plan.
Want to break into bridal? Or silver? Or beads?
© JCK Events 2011 Bridal is a product category many retailers want or need to expand on, but with rising diamond and gold prices, it’s difficult to do. To avoid overcommitting on prices and brands, many retailers are embracing alloy and cubic zirconia prototypes.
“This opens up a lot more opportunities for retailers, especially now as younger customers are trained to deal with retail choices that force them to wait,” says David Peters, director of education for Jewelers of America.
Sherman agrees but offers a caveat: “Jewelers must also stock a good selection of live merchandise and be able to demonstrate the quality differences from one line or brand to the next.”
To determine the best mix of inventory, Peters preaches the benefits of software solutions that help retailers identify—and reorder—proven sellers. “The days are gone when a retailer could sort through their inventory and buy at a show,” Peters says. “Today it’s not about having the right jewelry—it’s about having the right [POS] inventory software to provide actionable data so retailers can reorder fast-sellers faster.”
Buyers International Group’s Abe Sherman urges jewelers to
create a merchandise plan before coming to Las Vegas.
Retailers are also turning to software solutions such as The Edge to determine their own store’s steady sellers as well as to benchmark how inventory they carry is doing in other markets. In addition, the program tells retailers how inventory they don’t stock is selling in other markets.
But don’t let the software do all the heavy lifting, cautions Sherman. “Retailers sometimes leave the buying up to their computer,” he says. “This works for restocking purposes but will not replace the buyer who is ever-vigilant, looking for the next hot seller or trend.”
The (Expiration) Dating Game
Once the inventory has been ordered, Peters suggests establishing an inventory timeline for every piece of jewelry in the store. “This should begin the moment it is inventoried,” he says. “But the timeline doesn’t mean anything if the retailer doesn’t strictly adhere to it by establishing a ‘kill date.’ If that piece hasn’t sold in a year or 18 months, it’s got to go.”
At the Centurion Show in Tucson in February, Peters led many roundtable discussions on creative ways to purge old inventory. One popular strategy: Donating dated jewelry to local charity auctions. It can help take trendy cause-marketing efforts to new levels.
Inventory swaps among jewelers with similar store profiles provide another opportunity to fine-tune your merchandise mix. Lucian Lee, owner of Hale’s Jewelers in Greenville, S.C., and Daniel Moyer, owner of Moyer Fine Jewelers in Carmel, Ind., both dabbled in inventory swapping years back. It can be effective, they say, but it’s hard work. You must perform a careful inventory check. And you shouldn’t show up with single pieces that you’re hoping to unload on your unsuspecting peers. Rather, take a big-picture look at collections or larger portions of inventory that aren’t selling well and bring a group of pieces to trade. Of course, you may end up with a few gems…but a successful swap is no substitute for an effective merchandising plan.