Taking Stock This Summer:
The Importance of Smart Inventory Management for Independent Eyewear Retailers.
Inventory management is a crucial aspect of running a successful eyewear retail business. As an independent eye care professional (ECP), it's essential to understand the Pareto Principle, commonly known as the 80/20 rule. This principle states that 80% of your results come from 20% of your efforts.
When it comes to optics, we often find that 80% of our sales come from just 20% of our inventory. Understanding and applying this principle can significantly benefit your bottom line and help your frames fly off the shelves.
The Issue With Standard Inventory Control
Many independent ECPs practice a standard method of inventory control, which involves a cycle of binging and purging. They frequently receive visits from direct optical representatives who showcase their collections.
In the binge phase, retailers commit to purchasing a significant number of frames without considering the need to sell them within 30 days to make a profit. They load up on inventory and then spend the next 2-3 months purging, resulting in a depletion of their stock.
When the next wave of reps arrives, the cycle repeats, and retailers end up with a surplus of inventory that they have to pay for within 30 days. This constant cycle puts a strain on cash flow and overwhelms inventory.
The key to making money in retail is turning inventory quickly.
If every frame you buy sells promptly, you make a profit. However, due to the 80/20 rule, out of every 100 frames purchased, only 20 of them will be the top sellers.
The problem arises when retailers, burdened with excess inventory, neglect to reorder those 20 best-selling frames. Instead, they focus on the remaining 80 frames and think they'll reorder once they sell them. Unfortunately, selling those frames becomes an uphill battle.
In reality, it is crucial to reorder the 20 best-selling frames immediately or order them on a recurring basis. Otherwise, you'll have to wait for your optical rep to come back and exchange the 80 unsold pieces. Meanwhile, you still must pay for those 80 frames that sit on your board, essentially becoming little coffins of inventory.
Now, let's do the math and imagine multiplying this scenario across multiple reps and collections. It quickly becomes a financial disaster that puts you behind in paying your bills on time.
The Solution is Simple
When you sell your best sellers—the top 20%—don't wait; reorder them immediately and keep turning those frames over and over again. It's as simple as consistently replenishing the frames that sell. If you sell one frame a week, replace that frame. If you sell ten frames, replace all ten. Just don't let your reps sell you 20 frames when you only have room for 10.
If you want to make space for new inventory or styles, you can "bank" your future frame choices. Keep a log and every time you sell a frame, put it in the "bank." This means that when the rep visits again, you'll have room to make a purchase. Use this strategy whenever there's a frame you sell but don't necessarily want to replace. Save that spot in your mental bank, knowing that you have one space open to buy another bestseller from your distributor next time around.
This approach helps even out your cash flow and prevents inventory overload. It's essential to recognize that having 80 unsold frames on your board costs you much more than having a frame that sells 10 times in a single day. Best sellers have the potential to sell repeatedly, but once you take them off the board, that opportunity is lost.
Smart Inventory Management Tips
Here are some actionable tips to help you master smart inventory management as an independent eyewear retailer:
- Avoid ordering a large quantity of frames. Instead, focus on reordering only the best sellers or consider ordering them on a recurring basis. Here is a list of some of the top sellers our retailers have sold time and time again.
- Recognize the frames that frequently draw your attention and keep them on your board consistently. By prioritizing your bestsellers, you increase the chances of selling a frame multiple times, potentially reaching 5, 6, 7, or even 10 sales.
- Strive for excellent inventory turnover rates, ideally aiming for 4-5 turns per product. If a frame isn't performing well and consistently selling, consider it a dud and let it go, to free up space for more profitable options.
- Don't let underperforming frames burden your inventory. Even if someone purchases a frame that doesn't sell well, save that spot on your board and utilize it to add another best seller when you reorder next.
By focusing on smart inventory management and following the 80/20 rule, independent eyewear retailers can enhance their profitability and achieve better cash flow. So, take stock this summer, streamline your inventory, and watch your frames fly off the shelf all while benefiting your bottom line. For more insights, check out our blog here.