All jewelers equate the problem of old inventory with having too much cash tied up in an unprofitable asset. But how they define that cost varies widely and we have heard some “reasons” for carrying old inventory that are merely a skin of truth wrapped around a lie. In other words, they are really more of an excuse than a reason. How many of these do you use?
- A lot of these pieces attract shoppers and add “Wow Factor” to my store
- The cases look empty without this high a level of inventory
- Customers expect to have a big selection
- It was such a good deal when I bought it; it isn’t really costing me much.
- It’s on memo so it doesn’t matter how old it is
And my personal favorite:
- A lot of these things really do sell (clearly; you bought them)
A fundamental fact in every jewelry store is that only about 10%-15% of sales come from stock that is over 18 months old. In fact, well over half of the sales typically come from stock that is less than 6 months old. The bottom line is that the older it gets, the less likely it is to sell. So we know old inventory does not make money, but do we really think about the fact that it costs us money? The measurable costs of carrying old inventory include:
- Interest expenses
- Insurance
- Cleaning and maintenance
Those are obvious. But how often do you think about the fact that it can actually cost you sales? Not just because you cannot afford to buy the new stuff. It’s also because people will only look through so many pieces they do not like to find the one they do. Think about the last time you went shopping for a suit. How many hangers were you willing to flip looking for just the right thing before you decided to pack it up and go to a store with more things that match your taste? If, on the other hand, you immediately found a few things you wanted to try on, you stayed and shopped longer. The exact same thing happens with your customers in your store. So consider the cost carefully and drop the excuses.
Cleaner inventory always means more sales.
