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A complete strategy for unloading slow-moving inventory.
Managing Obsolete Inventory
For many dealers, there are two sides to the showroom. The A side comprises all the hot sellers, while the B side comprises inventory that just doesn't seem to move. Fortunately, strong performance from the A side often results in a pleasing cash flow spike during peak selling season. But a lot of that much-needed cash now has to pay for the B side of the showroom. That's not a very good reward for a prosperous season, is it?
"It's easy to turn cash into inventory, but not always so easy to turn inventory into cash," says sales and marketing consultant Rick Barrera. "You have to get obsessive about moving inventory--especially slow-moving and obsolete inventory. When you eliminate interest cost and free-up floor space, your profitability really changes. And it creates quite a bit of excitement in your store."
Barrera says slow-moving and obsolete inventory should never exceed 5% of your total inventory. A variety of circumstances can result in excess inventory. Some are at least partially out of your control, such as unpredictable weather patterns or an economic downturn in your market. Others are well within your control, such as poor forecasting and/or purchasing. If you happen to overdo it a bit on your early-season orders, you need a strategy to unload any slow-moving inventory before it becomes obsolete. When the inventory becomes obsolete, it becomes that much harder to move.
Start early with a plan
Always be thinking about selling slow-moving inventory in-season--before it's too late. Generally speaking, outdoor power equipment retailers have a bell-shaped sales curve. Sales gradually climb until about mid-season, and then start to wane as winter approaches. You want to begin focusing on slow-movers at the peak of your bell curve, which is mid-season. That way you have enough time to make some adjustments and get inventory moving before the next model year approaches. If you wait until October or November, that slow-moving inventory is now obsolete.
Focus on it
The emotional tendency is to ignore inventory that isn't moving, but you should actually do the opposite. You must...