How Proper Merchandise Flow Affects Your Bottom Line

As we enter Q4, spring buying continues. But remember, how you schedule receipts will have a great effect on your company’s bottom line.

Over the years many retailers have asked why they shouldn’t just “frontload” their goods for the season. It would give them the entire season to sell the merchandise. However, we have found the exact opposite to be the case. The benefits of spacing out your receipts over the full season far outweigh frontloading merchandise.

A question I would ask is: “If you bring all (or most) of your merchandise in at the beginning of the season, how does that compare to the sales cycle for the season?”

There are typically highs and lows throughout the season. If there is too much, too soon several things tend to happen. One, you’ll find a much lower sell-thru since there is much more merchandise than a typical customer will buy. With too much to look at, most people will just pick out a few things and stop when they reach their budget limit. Having too many items gives the perception to a customer that there is no rush to buy. If there is a smaller, more focused presentation, the customer will think, “I need to buy now before what I like is gone.”

Too much at one time will also have an effect on cash flow. Bringing in high quantities all at once creates large invoices as well – Invoices that may need to be paid prior to generating enough in sales to pay for them. It’s always best to have the flow of merchandise follow the sales flow so you are paying current invoices with current dollars.

Improper flow of goods also lowers the merchandise turn and history shows that as the turn goes down things stay on the sales floor longer and need to be marked down. This causes lower maintained margins, and therefore lowers profitability.

As we’ve mentioned previously, having too much inventory is obviously not a good thing. You should always leave yourself the option of cancelling goods if you need to. Receipt spacing gives you that flexibility if the season’s sales are not preforming to expectations. Don’t be afraid to cancel goods instead of taking in more than necessary. It’s better to cancel than to create a situation that leads to not being able to pay your bills on time.

Lastly, if there are shipments of fresh, new inventory coming in every month it enables your sales staff to reach out to their customers and invite them back into the store to see the new, exciting merchandise. We know that customers typically visit every six months. A constant flow of new merchandise gives your staff a great excuse to communicate with your customers more often.