Shop Talk: Practical answers for tough business questions
Question: How long should we hold on to merchandise that isn’t selling before we mark it down? My husband never wants to mark anything down, but I’m concerned about inventory that just sits. What do you suggest?
Answer: Although there are no hard and fast industry rules, I suggest you create a rule for your store and follow it. Merchandise that sits on the shelf is very costly—not only is the merchandise not selling, it is tying up cash, keeping you from generating cash flow and profit. One general rule is to give products six months to sell, but it all depends on the scenario.
Some items, such as art pieces or larger stones, add ambiance to your store, and you may not care if they sell quickly—or ever. Then you have slow but steady sellers you just want to be aware of and not dedicate too much shelf space to their display. And finally, there are the “dogs”—merchandise you were sure your customers would love, but it just didn’t sell. When you put out new merchandise, it sometimes takes a month or two to catch on.
If after three or four months your customers show no interest in a product, try moving it to another location or changing your display. If that doesn’t work and it is still not moving after six months, put it on sale and get rid of it. And if discounting it doesn’t work, donate it. You need to make room for new merchandise to keep your customers coming back!
First published in Vol. 25 No. 3 of Retailing Insight. © 2011 Continuity Publishing Inc. All rights reserved.