On Finances : Turn Your Old Stock into Cash for Your Store’s Future
BY DAVID BROWN
Published in the April 2012 issue.
Too much aged inventory? It’s a common problem. In fact, it’s probably the industry norm.
We’ve covered ways of getting rid of old inventory before, including favorites such as sales, showing a specials cabinet and remaking old pieces into new items. There’s nothing wrong with these (there are only so many ways to cash up old product), but many jewelers still seem to finish the year with the same amount of old product that they started with. Sadly, the new stuff doesn’t stop getting older.
So, how can a jewelry-store owner prevent the problem from recurring? One of the best ways is to buy smarter in the first place. After all, if you replace an old item with a fast seller, it will, by definition, move quicker!
Another solution is to ask the question: “Does this item I’ve just sold really need to be replaced”? With the majority of jewelers carrying far more product than they need relative to the sales they are generating, the answer is often no.
Our consultant Mike Druan implements a simple strategy to help our clients deal with this:
Earmark cash received for inventory sold that is over 36 months old, and make sure it is not reinvested in more inventory.
Take a look at an inventory report now and pinpoint how many dollars you have in product that is more than 36 months old. Chances are you’ll get a shock! But if you could put that money in the bank or pay off existing debt would it make a big difference to your business?
In most cases, the answer is yes,and you’ve already proven, by the fact that it sat around for 3 years, that you don’t need it. So here’s what to do:
>> Print a list of all items over 36 months old.
>> Mark the tags of these items so staff can identify them. Deploy your strategy to move inventory.
>> Track the sales of the 36-month-old items.
>> Vow that the cash raised (after clearing any obligations on the items such as memo payments) will not be reinvested in product.
Start small — Mike often begins with just one item a month and works up from there. One store was soon into the swing of it and was able to reduce inventory (and increase cash) by over $30,000!
Decide you’re going to make a difference to your business by adopting this strategy today. Another solution is to ask the question: “Does this item I’ve just sold really need to be replaced”? With the majority of jewelers carrying far more product than they need relative to the sales they are generating, the answer is often no.