3 Steps to Using Excess Inventory to Drive Increased Holiday Sales
Independent retailers have a combined $10 billion annually in excess inventory that simply goes unsold. This holiday season, you can distance your store from that statistic.
Let's look at how you can discount overstock inventory to attract holiday shoppers and encourage them to purchase additional merchandise.
Identify items to discount
Your store is full of items that have been on the shelf for varying lengths of time. Knowing this, you'll want to come up with strategies that fit the age and demand of your different products.
First, start by observing your sales velocity. Compare your total supply of an item with the average amount you've sold per month. At that rate, when can you expect to sell through the product? Aging reports from your point of sale system (if available) will provide valuable data here.
If you're unable to retrieve this sales information electronically, just walk around your store and take notes on what's been moving. The slower the item is selling (vs. your expectations), the more you should be prepared to mark it down.
Pay special attention to these products:
1. Items you don't plan to re-order: If you're not replenishing your stock of a certain product, it's a prime candidate for a price reduction. After all, these items are taking up shelf space and their days in the store are already numbered.
2. Stragglers and one-offs: Have you sold through all but a couple odd sizes/variations of a particular item? Encourage shoppers to clean out those remaining items by offering them at attractive prices.
3. Items over 1 year old: Has the product been replaced by a newer model? Help yourself get out of outdated items by pricing them to sell.
4. Items you overbought: Did you over-anticipate the demand for a particular item? That's okay as long as you learn and move on! In the meantime, be more aggressive about marking those items down so you can reclaim your cash.
5. Seasonal products: If an item is past its prime demand, do you really want to wait until next season for it to (hopefully) move? Selling the item now (even at a lower price) will put immediate cash in your pocket that can be invested in those upcoming batches of orders.
Set a discount strategy
Now that you've specifically identified off-MAP items to mark down, give careful thought to an overall plan. Think about your current cash position and the upcoming orders you'll be placing. From there, you can more effectively set goals around sales and the amount of product you need to sell. Once you've thought through finances, here are a few ways to come up with a holiday strategy and keep yourself on track:
1. Know the market: What could your customers buy this item for elsewhere? This provides you with a reference point for your own pricing and discounts. Eighty-two percent of customers plan to research products online this holiday season before coming in to buy. As an initial step, BoxFox has a free iPhone app that lets you scan your UPC's and quickly get a feel for an item's fair market value.
2. Think about your customers: If your store caters to bargain hunters, make sure you supply them with a sufficient number of deals. If your typical customer is more upscale, consider showing a smaller/less prominent discount area.
3. Have good timing: Understand that shoppers right after Thanksgiving will ikely have a different mindset from customers weeks later before Christmas. Consider tailoring your post-Thanksgiving discounts to those higher-value items (when demand is particularly high). As you near Christmas, run special sales around less expensive items for those last minute shoppers.
4. Create urgency: Try running your discounts for a limited period of time. You want to maximize your chances of that customer making a purchase today.
5. Discount incrementally: As the holidays progress, consider incrementally discounting certain products to help them move out the door. Be sure to maintain a record of those discounts so you know when to mark that item from 30% to 40% off if necessary.
Optimize your store layout
Be sure to arrange your inventory in a way that showcases all your hard work! Clearance products catch the shopper's eye, but the real value comes when you link that discount item to a higher-margin purchase. Here are a few merchandising tips that can help you use discount inventory to drive higher holiday sales:
1. Be your customer: You're in the store everyday so it's easy to take your layout for granted. Take a walk around, thinking like your customer. What parts stand out? How might you use clearance products to lead them around the store?
2. Analyze your walls: Think about the parts of your store that receive more attention than others. If you have a slower-moving product, it might not be entirely the item's fault. Try migrating those slow-movers to hotter pockets of your store that could bring the product the exposure it needs to finally sell. As the holiday weeks go on, tweak your store layout on a weekly basis just to keep it fresh for customers.
3. Know a little psychology: 90% of customers walk to the right when they enter a store. Shoppers also tend to move counterclockwise around the floor. Every layout is different, but think about where you want to make a good first impression and prompt your customers to further explore. Also, why not add decorations and play music that puts your shoppers in more of a buying mood?
4. Draw shoppers in: If you have a window display, give careful thought to the way you arrange your products. Display merchandise and signage in a way that captures a potential buyer's attention.
5. Group wisely: Strategically place discounted items next to complimentary items that are higher margin. After a customer picks up that discount item, what might they be looking to purchase next?
6. Get creative: Product bundling is a great way to influence the customer's perceived value of your merchandise. How about selling that slower-selling accessory along with a higher-priced pair of shoes? Don't forget about the classic "buy one, get one free" strategy as well. Both approaches provide an alternative to just discounting that one item.
7. Optimize your checkout area: Make sure you're taking advantage of the up-sell opportunities around your cash register. Around Thanksgiving, try showcasing your higher margin items as a potential impulse buy. In the days leading up to Christmas, turn your checkout real estate toward stocking stuffers that attract those last minute shoppers.
Now that you've done all this preparation, maximize your opportunity to spread the word. Small Business Saturday is a great place to start. Over 70% of shoppers are aware of the event so take advantage of it!
Visit the official Small Business Saturday page to learn more and apply for free marketing materials that can help you get the most out of the day.
P.S. Have overstock inventory you'd like to move out by the lot? BoxFox connects you with a network of buyers that compete for your merchandise.