As an industry, jewelers treat inventory differently than most other industry retailers and dealers.
After all, you can’t melt a box of tissues or a can of beans and turn it back into a viable product. You can pry the buttons of a blouse and reuse them, but the effort is more expensive than the result. The truth is, our inventory is different. . . . but that doesn’t mean we can escape the rules of good inventory management.
Just because you can reuse your inventory doesn’t mean it’s good for your business to sit on too much inventory. Too much inventory means your cash is tied up in hard goods – cash that you could be using to buy more up-to-date goods or invest in other business objectives.
And sure, you can sell off your inventory overages, but that doesn’t mean you’ll get the full value for it. Just ask anyone who has ever closed a jewelry business – inventory overages and store liquidations sell out inventory for cents on the dollar.
The world of consumer goods has shifted dramatically in the past 15 years. Before, consumers were willing to shop from among the items that were available to them. Today, consumers look on the internet and find things they want – and they can find almost anything they want. Savvy business owners are looking for ways to keep their inventory lean and their options high.
If you don’t have cash tied up in slow-moving inventory, you can offer exciting possibilities to your customers. You can make arrangements with your preferred vendors for rapid delivery of unique goods. Sure, you may incur slightly higher expediting and shipping fees, but you can also charge customers more for the experience of finding exactly what they want and receiving it quickly.
If you don’t have cash tied up in slow-moving inventory, you can invest that cash in creating an online experience for your customers that is an exciting and meaningful extension of your physical operations. Use your online offerings to bring store traffic that converts to exciting custom projects that you create in-house or in collaboration with your design and manufacturing partners.
If you are a retailer, your goal should be to turn your inventory 1.3 times per year. That’s very low relative to other consumer goods retailers, but acceptable in jewelry industry standards. Of course, if turn your inventory more than that, your cash flow will be that much better – which means your opportunities to invest in innovation will also be greater.
If you are still using the same rules of inventory management that you learned in the 1990s (or before), it’s time to reevaluate. Today’s smart merchants create tightly curated collections, keep inventory lean and moving, and look for ways to bring products to customers from beyond their own four walls.