Monday, September 14, 2009

Inventory Management

One of my clients, Main Street Cyclery is a retail bike shop on Main Street (obviously) and we are nearing the week of Interbike - the annual show for all things cycling. This year it is in Las Vegas and there are hundreds of vendors, distributors, retailers and enthusiasts all in attendance. For more information go to

Anyway, one of the issues we have this time of year is the management of inventory. New 2010 models are coming out (though only some are available now, the rest in January or April depending on brand and type), some 2009 models are sold through and some 2009 have too many leftovers (think upcoming fall sales!) so inventory is a critical issue. My client, Dave has a simple strategy "Don't change a winning game, change a losing one." Seems simple right? LOL - if only.

Some models we know do well: beach cruisers for example. Why? Because our shop is three blocks away from the beach. You can see the Seal Beach Pier from our front door. Great! But which cruisers are the winning game? We look to sales volume, profit margin and the distributor cost of the product. There is also the opportunity cost - there are only so many bike "slots" in our shop for display product. Dave likes an open air feeling in the shop. This gives it a great customer experience, but allows us to showcase a smaller amount of product. Still seems simple, right?

Then we enter the world of fortune telling! What colors are hot? Will fixed gear continue to be a fast moving segment or will it slow? In the world of BMX, should we continue to have some retro bikes, some entry level or should we move to something more high end in terms of construction. Do we get behind which new models? What about the technology - is it still in early adopter phase or is it mature? What about changing demographics in the cycling world? Will more people go for bikes as alternative transportation rather than stylistic statements on their "bling" or fashion?

This is part of what I love about my consulting practice - there is a myriad of opportunities to analyze, evaluate and then predict future behavior. You win, the business continues to be profitable and inventory is "Just in Time" like my grad econ professor liked to advocate for. You lose, you end up with product not giving you the margin you need, a clutter of merchandise and a poor customer experience. Whether or not you are in retail, service, goods, transport or other items, inventory management can be a huge factor - even if it is just your office supplies! So take a moment and think about inventory. The more you control it, the better it will perform for you!

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