Using Inventory to Drive Retail Sales
The link between inventory management and moving cash products.
- By Rob Baumhover
- Oct 01, 2019
When business owners undertake a retail venture, they often
think, “If I build it, they will come.” There’s a misconception that if there is a
store with doors wide open, then customers will trickle in naturally. Unfortunately,
the market and the customer aren’t always ready for caretailing and
healthcare retail because we are. Therefore, maintaining store traffic can be a
bit more difficult than simply “building” and having faith loyal customers will
continue to cultivate. Instead, there must be nurturing and continual maintenance
in the form of focused operational efforts with abilities to exceed or
meet our customers’ needs. That’s why we are shining a light on the exchange
between inventory management as it relates to employee training.
To maximize the overall purpose of your employees (i.e., serving the customer),
we must first understand the desires of the audience we serve. To do
this, start by 1) identifying top product categories, 2) moving to top product
performers, then 3) identifying the quantities of product needed, and 4) determining
reorder points. These four items can work together to ensure your
store is an easy, one-stop-shop for your customers. This foundation will also
give employees clear direction that correlates with their sales goals. Use this
process as a guide:
- Identify Top Categories. To start managing your inventory correctly,
choose your bread and butter categories. These are the ones that most often
drive people into your store.
- Identify Top Product Performers. Inside your bread and butter category,
you need to identify the products that are performing the best. Do this by
using the 80/20 rule: identify the top-performing products that account for 20
percent of your sales and classify the rest of the products that account for 80
percent of your sales within that category.
- Identify the Quantities Needed. After you have segmented your topperforming
products, it is now time to identify the recommended quantities
on hand. For your top 20 percent, we recommend having two months’ worth
of inventory on hand. However, for the other 80 percent of your inventory,
the middle 50 percent and bottom 30 percent we recommend using your best
judgement. We say this because the products in the bottom 80 percent can be
volatile in sales.
- Determine Your Reorder Points. After you have identified the minimum
product amount that needs to remain on hand, stick to it! Reorder when necessary,
never letting a product fall under your minimum needs. This will help
you avoid those unexpected and unneeded additional shipping costs.
Remember, when it comes to inventory management, it is crucial to evaluate
inventory levels regularly. Specifically, daily, weekly, monthly, quarterly and
annually. Measures to consider include:
- Revenue by category
- Number of items being sold per transaction
- Number of transactions per day
- Dollars per square feet
- Inventory on hand (dollars and product quantities)
- Average ticket
- Cost of goods sold
- Top-line and bottom-line margins
Selling Through Inventory
While offering high-end, cash health and wellness products is a start, a sales
program and customer service training around these products is the key to
moving product. For this reason, providers must have a strategy behind inventory
management targets — beginning with a “why not best” selling program.
One of the biggest selling faux pas our team sees in the DMEPOS industry
is feature dumping. Feature dumping is where employees fail to take time
and understand a specific product and how it can best serve a particular
audience’s needs. With a “why not best” selling program, your staff can meet
revenue-based goals and create an indispensable store experience. A “why not
best” selling program includes the following:
- Building a relationship with the customer
- Understanding a customer’s unique situation
- Listening and asking questions
- Suggesting a bigger and better solution
- Honesty and transparency to close the sale
Did you know that less than 45 percent of companies have a formal sales
training process? For this program to be successful, employees must be
comfortable and knowledgeable about the current store goods being sold.
Putting your sales team through training will provide them with the tools and
knowledge they need to succeed. Let employees touch and try out products for
themselves so they can create personal testimonies around the product. Roleplaying
is also an excellent way for salespeople to practice and prepare.
Creating competitions will help motivate your sales staff to boost performance
and be rewarded or recognized within the company or publicly. By
creating a friendly competitive environment within your store, you will motivate
your sales staff to improve personal performance. Rewarding your topperforming
salespeople can provide long-term motivation for your sales staff
if the reward is well aligned with their desires. Even something as simple as
public recognition monthly can boost employee morale and provide additional
incentive to improve performance. Differentiate these competitions so sales
staff can practice promoting all top-performing product categories.
Lastly, always remember to set clear and specific goals. Many of our salespeople
find themselves overwhelmed with traditional monthly/yearly sales
targets that they are given. Often, urgency won’t appear until the deadline
approaches. Establishing daily goals for your salespeople keeps them on track
and provides them with less intimidating numbers. Creating storewide goals is
another great way to boost employee morale and boost performance.
It’s not enough to simply bring on a product for a store and expect sales
to boom. It takes consistent inventory maintenance and employees who feel
confident to sell products and service customers. By evaluating our inventory
levels routinely, we can more adequately give employees the tools to be
successful. Without a comfortable balance between our employees and the
products we sell, the infrastructure of our revenue will break. However, if we
allow these two pieces to work comfortably with each other, then we are positioned
for efficient success.
This article originally appeared in the October 2019 issue of HME Business.
Rob Baumhover, director of retail programs with VGM & Associates (Waterloo, Iowa; www.vgm.com), which assists VGM members to diversify their HME businesses through improved retail operations.