“Don’t let inventory become family” is one of my favorite retail sayings. We all know the feeling of bringing in merchandise because we love it,  hoping that just the right customer will come in who loves it too. It’s sometimes hard to accept the fact that it is costing the shop money to hold onto an item that isn’t selling.

This expense is referred to as the opportunity cost, because tying your dollars and shelf space up with a slow seller means you have missed the opportunity to purchase goods that may sell faster. In addition, the items you are holding on to may become shopworn or dated while waiting for their day to come.

It’s important to have a system in place so that you can move slow sellers out. Two factors are necessary in order to do this:
      • the ability to track the arrival date of each item
     •  a way of being certain that the merchandise received first goes on the sales floor first, if you’ve reordered the same SKU (this is referred to as FIFO – first in, first out)

Moving merchandise to a different part of the store or combining it with other products that give it a boost without reducing the price. You could also feature it in an Instagram post or other social media.

When it comes time to putting an item on sale, keep in mind that Rod Stewart’s popular song “The first cut is the deepest” is talking about love, not markdowns.  Your first price cut, which should come as soon as you recognize that the merchandise is not selling as fast as its neighbors, should start with a “shallow” markdown of 15% or 20% off.

If this doesn’t work, you need to take a deeper markdown, ideally 40% so that you are still recovering the wholesale price and freight cost. After that, you may want to remove the product and hold it for a clearance sale at 50% off. I’m not a fan of stores having a permanent sale area, since these shelves often look very messy. We do two big clearance events a year, and they draw a good crowd of bargain shoppers.

The final option for getting slow merchandise out of the store is donating it to a local charity. But hopefully in most cases taking a markdown will allow you to move the goods, freeing up your money for new, exciting merchandise that will sell better.

Happy Retailing,

Carol “Orange” Schroeder