Hardware Retailing

OCT 2018

Hardware Retailing magazine is the pre-eminent how-to management magazine for small business owners and managers in the home improvement retailing industry.

Issue link: http://www.hardwareretailingarchive.com/i/1030469

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Page 91 of 102

October 2018 | HARDWARE RETAILING 87 approach is to make it a regular habit so it doesn't take as much time, says Hollingsworth. For the past two years, she's evaluated slow- movers every month. She starts by using an automated inventory maintenance tool that provides her with a monthly report showing her 100 items that are candidates for removal. That system makes it easy to find dead items, but most point-of-sale systems also generate relevant reports to show you items that haven't sold within a certain time parameter. Setting that time parameter may differ among retailers. Hollingsworth has traditionally used two years as the cutoff date. If it hasn't sold within that time, it's time to clear it off the shelf. But she's been considering getting stricter with that cutoff date, moving it up to one year and relying more on regular deliveries from her co-op's warehouse to supply her with special- order items. This process can help her still be the source for hard-to-find or unusual items without having them sit on the shelf collecting dust. Once Hollingsworth has the slow-moving inventory report, she next decides which items she wants to keep. There may be a temptation to keep more than you need to. It's reasonable to ask, "If I want to be known as the 'store that has everything,' shouldn't I still have a few of those slow-moving items?" It's true that not every item is going to be a best-seller. Even if a certain size of drill bit doesn't sell well, for example, it's still important to carry it so you have a complete set of sizes. Hollingsworth says there is a certain set of those slow-moving items she knows she needs to stock. To identify those, she relies on specialists within each department who have a good understanding of what products are needed to complete a category. After generating and analyzing her list of slow-moving items, Hollingsworth sends it to the assistant store manager at each location. The manager then separates the list by department and sends it to the appropriate department specialist, who determines if the item is critical to the store's product mix or if it can be set for clearance. Altogether, Hollingsworth says she spends about four hours per month working on the lists and preparing items for clearance. Her department specialists working on the salesfloor usually need a couple of hours each month to review the list, although it usually takes longer because they stop frequently to help customers. In reality, those few hours are a small investment compared to the benefits of having an up-to-date inventory. As you're identifying dead items, be sure to ask, "Why is this not selling?" The answer may help you either make better purchasing decisions in the future or correct potential errors in your inventory system. Perhaps the item wasn't a good fit for your customer base. Or it's possible that the item in question was just in the wrong location on the salesfloor, and nobody bought it because they couldn't find it. Or maybe there was an error in counting—your records show you have items on the shelf when in reality there are none. Items marked for clearance at Griffin Ace Hardware first get a red bin tag at their in-aisle location. Here are three numbers from NRHA's 2018 Cost of Doing Business Study that can help you measure the productivity of your inventory. Inventory Turnover Gross Margin Return on Inventory (GMROI) Inventory per Square Foot (Selling Area) Typical 2.4 169.5% $47 High-Profit 2.7 194.3% $52 Typical 3.1 145.8% $66 High-Profit 2.8 126.0% $162 Typical 4.0 122.3% $166 High-Profit 3.0 116.6% $138 Key Inventory Performance Indicators Hardware Stores Home Centers LBM Outlets

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