b'REORDERS AND YOUR INVENTORY LEVELSBy David BrownAs many of you know Im a big fan of the 80/20 principleIf a particular item has sold once in a noticeably and applying it within your business. As a quick refresher theshortperiodoftime,theresachancethat 80/20 principle, often known as the Pareto Principle after thesomeone else might like it too and you should Italian economist who discovered it, demonstrates that a smallgetitbackinstore.Ifitssoldtwice,theodds proportion of your inputs lead to a large proportion of yourget betterand if its sold five times it might be time to start outputs. 20% of your wardrobe is worn 80% of the time, 20%thinking about carrying some spares.of criminals commit 80% of the crimes, and there are countless other examples in both your personal and professional life. NoDespite this, I find a marked reluctance for many better example exists than with your inventoryat the end ofstoreownerstoreinvestinwhathasalready the day 80% of your sales will come from 20% of your productbeenprovenpartiallybecausetheydontor some variation of those numbers.wantcustomerstoseetheirspecialitemasa commodity that they will find everywhere else, and partly due to their own tendency to look for the new and exciting rather 80% of your sales will come than the proven and reliable. The reluctance for customers to find the item somewhere else is understandableafter all from 20% of your product you dont want your special piece popping up on everyone elses finger or earlobes, but Im reminded of the store owner in a small town who had managed to sell the same $1500 ring 45 times in his townand still never heard of anyone saying theyd come across it somewhere else. Only once in over 12 years did a customer ever ask if hed promise to stop carrying an item if they bought it. His reply? If youre happy to pay me the profit I will lose on the other sales that wont happen, Im more than willing to do it. Unsurprisingly the customer declined to insist on exclusivity and bought the item anyway.The best way to demand a better return from your inventory is to replenish that which has been proven to you. As for the rest - dont carry more product than you need to make the sale. Excess inventory is one of the easiest ways of drawing cash out of your business provided you resist the temptation to put it straight Unfortunately,thatmeansthatmostofyourproductlinesback in again. (around 4 pieces out of every 5) are not pulling their weight when it comes to earning a good return on the investment you have made in them. Purchasing inventory normally comes with an opportunity costDavid Browninvolvedif you choose to purchase this item for your range itDavid is the President of The Edge Retail means something else has to give (for those who dont applyAcademy (sister company of The Edge), who provide expert consulting services to help with this rule the something that gives will inevitably be the bankall facets of your business including inventory balance!). By definition it pays to reinvest your money intomanagement, staffing, sales techniques, financial growth and retirement planning.All custom-product that is more likely to sellnot certain to sell I mighttailored to your stores needs. By utilizing the add; none of us has a crystal ball with which to be certain ofpower of The Edge, we analyze major Key Performance Indicators that point to your stores the future, but when it comes to choosing where to invest incurrent challenges and future opportunities. Edge Pulse is the ideal add-inventory hindsight is something of a great thing. To quoteon to the Edge, to better understand critical sales and inventory data to Warren Buffett in the business world the rearview mirror isimprove business profitability. It benchmarks your store against 1100+ other Edge Users and ensures you stay on top of market trends. Ph 877-569-8657, always clearer than the windshield. ext. 1, [email protected] or www.edgeretailacademy.com28 |The Jewelry Business Magazine'