January is the month when most retailers take a good, hard look at what sold and what did not during the holiday season that just ended. The single most important action to take now, in addition to setting the right retail resolutions, is to liquidate inventory that did not perform.
If your inventory has not sold by now, chances are it won’t. Cut your losses, take the markdowns, and turn that non-performing stock into cash that can be reinvested into fresh new inventory that will have a better chance of selling.
It’s All About the Turn
Whatever you are retailing—clothing, shoes, automobiles, music, pots and pans, or art, there is an appropriate “turn.” That is the rate of sale relative to the inventory. Women’s dresses turn quite quickly. Bananas and other produce even quicker. On the other hand, some things turn more slowly, items with a lot of sizes, like shoes and bras. Or items with very high value, like Persian carpets.
But whatever the product is, when it is offered for sale and the customers have had a chance to purchase it—and they make the decision not to—that is a vote. A vote against it. So it is time to move on and generate cash by liquidating underperforming stock.
Out with the old and in with the new. Christmas is definitely over, and spring and summer are just around the corner. No one in the Midwest or anyplace where it snows is going to buy a new overcoat this time of year, even though there are still months of snow ahead and there will be a lot of cold weather. As far as retail is concerned, the cold weather product is history, and it’s time to start presenting swimsuits.
What if you are not retailing cold weather apparel or a gift category of merchandise? The same law applies to everything. It’s all about the turn. Turn your inventory into something that will be accepted by your customer base.
Everyone Is Retailing Something
Say you are a politician, and you lost an election. (I am not talking about any specific current national event right now. I’m talking theoretically about a law of retailing that applies to the selling or retailing of just about everything.)
Anyway, you lost the election—now what? Do you keep talking about the same thing in the same way, or do you take a markdown on the part of the inventory that did not appeal to your customers enough for them to vote for you?
It’s all about market share. If the customers you have don’t buy enough for you to make your sales plan (get elected), then you have to devise a strategy to attract new customers while being consistent with your brand identity.
Say you are a clergyman or working with a church, and this season and the previous seasons there has been a noticeable decline in attendance, with a commensurate drop in collections. Instead of hoping that things will get better, that parishioners will like the same message next season, there might be part of the message that needs to be replaced with new, fresh imaging. Again, one need not change or erode the entire brand, just the part of the assortment that people are not buying—the inventory that is not performing.
We are all retailing something, and the same principles apply no matter what that product is. In the case of the January time period, one of the main principals is Turn Is Magic. That is, whatever you are selling, if it did not perform in the last few months, it is not going to get better. It’s time to cut your losses, take the markdown, change the message, and move on. Turn your non-performing inventory into something your customers will like better.
Learn more about retail in my soon-to-be-released book, The Five Laws of Retail From di Medicis to Macy’s. Sign up to follow my blogs and to be notified when the book is available.