Improving cash flow may be the most important issue facing our industry over the next few years, followed closely by the need to fuel consumers’ drive to purchase. Everything we do is affected by our ability to generate cash, but the seasonality of our business, coupled with a slower turn on inventory, has put tremendous pressure on all segments.

Inventory, as a rule, is an asset on the books. However, if it isn’t liquid at close to a cost price, it becomes a liability and a bottleneck to cash flow. Inventory must be reduced. Yet, oversaturation (too much product in the system, from manufacturer to distributor to retailer) coupled with distribution (no clear idea of where and how best to distribute products to a market segment) are two very big problems. And there are more manufacturers from more origination points, all vying for business. There’s too much inventory in the pipeline chasing fewer sales.

Retailers have four methods to dispose of one-year-plus merchandise. The retailer can, if the vendor agrees, return merchandise. There may be some exchange ratio of two to four times valuation of goods. This gives the retailer a net increase/liability of merchandise.

Another way is to discount products, put them in your estate case, and keep lowering price. But that makes you look like a discounter, and customers will realize your markups and profits.

A third way (very labor and time intensive) is to break a piece into its components and make a new one.

The fourth is to get closeout companies to help you liquidate or buy your old inventory. You may cash out, but at what loss from cost factor?

A fifth way that’s being developed is Web based. It creates communities for niche markets, helps retailers retain most of their cost per item back, and identifies a retailer as an active reseller who turns merchandise and replenishes stock.

For smaller independents and small chain operations to survive, we must reduce inventory and turn it into cash. But turning merchandise isn’t the entire solution. Building consumer desire and confidence, adding value to our products, marketing, and promoting are all key ingredients.

Distributors/manufacturers should spend less time developing new items and more time developing partnerships with retailers and training their staffs to better understand and sell their products. They can simplify the process with signage, tent cards, certification, and interactive mechanisms such as Web sites that stimulate sales.

The bulk of retail selling comes in the year’s final months. Yet, the demand, the drive, and the desire to purchase our products the rest of the year isn’t being fueled by our industry as a whole. We as a trade—especially the leadership of the various trade associations—should sit down together to find commonalities and long-term solutions to generate the desire and demand needed for future growth. We’re all in this together. We all need to capture more disposable income.