Evan Goodman

How to Solve the Slow-Moving Inventory Problem Forever for the Retail Small Business

There’s a plague that haunts retail small business owners. It ties up cash, wastes floor space, and can leave a store looking cluttered and stale. It’s one of those problems that every retail shop owner or manager faces at one time or another. Sooner or later, it must be dealt with. The problem is the growing amount of inventory that just isn’t moving. If it’s not handled, this can be a big enough problem to put a business under. Let’s have a look at how to get that bad inventory off your floor (without taking a big loss), get some cash back in the bank account, and give your store a fresh look.

Nobody’s perfect. Every buyer has regrets when it comes to making purchasing mistakes. Whatever is to blame, there are 2 goals to accomplish now that the problem is recognized. The first is to get the bad inventory gone, and the second is figuring out how to manage the issue in the future to avoid ending up in the same situation again.

You’re in business to make a profit so selling at a loss can leave you feeling like you’ve failed. What we need here is to reframe how we look at the problem. Begin by recognizing that you are not alone. Accept that this is not the first time this will happen, and it won’t be the last.

As retail businesspeople, we get to know that a percentage of our buying choices will turn out to be big winners. They sell out fast and become the next hot item. Then there’s what we’ll simply call the normal inventory which should represent the bulk of your stock. It ticks over, selling solidly, not breaking any records, but clearly moving and worth having in the shop. Finally, there are the mistakes. For whatever reason, they didn’t turn out to be the big movers that you had hoped they would be.

This phenomenon isn’t new. It happens to every retailer. So, knowing that, what can we do to get rid of these constant reminders of our failure? The answer is simple. Get them out of the store as soon as possible.  And don’t lose money doing it.

­Build it in

Think of it as a sunk cost. Begin by recognizing that what you paid for the bad stock is irrelevant. The end buyer doesn’t care. This makes your first task to forget what you paid. The money is spent, and you can’t return the product to the supplier. Not what most small business owners want to hear, but in truth, it’s not really a big deal.

Consider it like any other expense. It’s just a cost of doing business. Wages and salaries, marketing, and rent are all built into the cost of your goods. You need to build in one more overhead cost. That cost is the loss taken on your bad inventory. In other words, you really aren’t taking a loss. You’re building it into the sale price of the hot sellers, and regular solidly moving inventory. Begin by running an estimate of the expected losses overall and spread that over the balance of your expected sales.

Get it Gone

There’s a couple of options here. The first is to start discounting. Don’t hesitate. The second you realize that you have a dud, start working on moving it out. Now that you’ve allowed for the losses, getting rid of the duds will be much less painful. Discount it as deeply as necessary to get it gone. If it still refuses to sell, donate it for a tax receipt, but one way or another, get it out of your store.

How Not to Fail Twice

You learn from your failures. With each mistake, do your utmost to determine why the item didn’t move. Was it about price? Was the item not suitable for your target market? Was it something to do with form or function? Use this knowledge to inform future buying decisions. While this will never completely eliminate buying mistakes, it will give you a system for managing the issue to the point where it’s no longer a stressor. Recovered cash, floor space, and time can be invested in areas that will help your business to move forward and thrive.

Making some simple changes to how you view your poor sellers and taking steps to eliminate a serious threat to your retail business’s survival, can be fundamental to managing your retail business. Building a good system can take what was once a nagging concern and turn it into a straightforward, routine task that will lead to simplified operations and greater future profitability. It may even be a key decision that ensures your business’s survival.