How much inventory needed for a retail start up

Evaluating startup costs can be difficult for new retailers. If several of the steps to planning a business require you to have a retail business license, how will you obtain the necessary information to determine whether or not your retailing business plan is a viable one? The bottom line is many of the figures for the business plan will need to be estimates.

Finding the right vendors and suppliers generally only send catalogs with dealer price lists to established businesses and building the trust relationship along the way.  For established and in good repute business, you can ask for terms of payments such as 30 days payments terms up to 120 days term, this way you can revolve your capital and have multiple turn overs and repeat orders before making the payment to your suppliers.

Luxury items and hand-crafted merchandise generally allow for higher markups, while your basic and essential products may have a smaller profit margin. Retail markup typically runs between 30 and 40 percent, depending on the industry segment.  For most direct importations, you can add an additional 10% mark up margin to your selling price.

Let's say you plan to sell a Php 19.95 item to your customers. That item will probably cost between Php 14 and Php 15 wholesale. Industry research, especially reports from trade associations, can offer some insight on what markup your retail segment uses. Shipping, handling, and any other expenses related to obtaining the merchandise should be considered in determining inventory costs.

Inventory Turn Over

Controlling inventory turnover is the key to keeping our shelves stocked with interesting products and keeping the cash flowing. We want to buy the merchandise, move it quickly and then repurchase more products for our customers. However, if the turnover becomes too high, sales may be lost because of reduced customer selection. Here's how we calculate inventory turns to help create a proper inventory control:

Here's How:

1. Start with the Beginning Inventory At Cost
2. Add Purchases At Cost
3. Subtract Ending Inventory At Cost
4. Subtract Cost of Scrapped and Lost items (if applicable)
5. Divide by the Cost of Sales
6. The result is the number of times the average inventory is sold and replaced.

Tips:

1. Inventory turnover can be calculated in whole, as well as by department or merchandise category.
2. Inventory turns can be calculated by the month, quarter, season or year.

Consumer Interests Must be a Priority

All consumers are a lot wiser and smarter, and to gain their approval for them to willingly buy our product is of primary importance.  Consumers have varied interests, different needs and wants, various opinions and unique selective taste and sense of propriety and lifestyle.

That is why in my line of work, I not only act as the merchandising manager/purchaser but I must also have a marketing idea as to fully grasp the understanding of how they want the products they will willingly pay for.

Some people who are in marketing tends to be selective in their understanding of the consumer behavior. Some even give distinctions to the consumers as baby boomers, Gen X or the Gen Y.  Based on my experience, there's must be no such distinction in a retailers stand-point, if they truly want to be on top of their business.

To understand the consumer behavior and lure them to buy is to present them with products on our store shelves with the assistance of sales personnel/sales merchandisers/sales clerks. 

What is my selling style?

I must personally be convinced of the product merchandise I find from suppliers/ manufacturers/ distributors, the price proportionate to its retail value, I must personally believe that the product is viable, has good value for my own money if I am the consumer who is willing to take a look into it, and if I myself would be willing to spare my cash to have these merchandise in my home, will be using it, has good value, then I am certain that a buying consumer can't wait to get hold of these as well.

Next I would want these to be priced relative to its value, how much a consumer is willing to pay for it, more like an innate instinct in me have to psychoanalyze the consumer behaviors, how they are going to react to the pricing I will have to dictate upon them with these goods.

Thirdly, I will make sure these are visibly displayed on the stores, offering big banners or place them on mannequins for apparels, highlight them on the store display windows, put on an area where these can be easily noticed by the consumers.

Last but not the least of all, I need to do a sales pitch, present these products to the store frontliners who will daily scour for the walk in consumers to take notice, I must give them enough reason to believe in the merchandise goods potential to bring in the customers to take a look, to grasp the urgency to buy it and end up making one happy customers satisfied with a decision to purchase and at the same time keep the cash registers ringing.

This never failed me in my aim to continually grow my year on year sales and profitability.  To me success is relevant to ensuring that one must have the consumer's interest as the end means priority in my selection and buying principle.

Store Planogram

Most retailers especially those that are in the supermarket, groceries, hypermarkets, beauty shops, perfumeries, pharmacy, convenience stores, drugstore retail businesses have a blueprint of shelf stock allocation count, phasing or what we commonly call the “planogram”, to determine the appropriate stock required for the product assortments and mix and to ensure the steady replenishment of merchandise in their gondola shelf.

This is a tedious work based on actual shelf size and stacking, a retailer must know how to estimate the size, boxes, how the look of the shelf should be.  It is important for one to have a planogram to know the store requirements for a given stocks(merchandise) to avoid store overflowing of merchandise.

Most retailers these days also use the planogram as basis determined by sales volume, as per category, supplier, and sales contribution.  Oftentimes for big multinational suppliers, who wants to occupy a more dominant store shelf space can offer to pay for the rental of the store shelf in order to have a more visible area in the given store.

This is one way for retailers to maximize shelf space and even earn from those willing to pay for rental of the shelf spaces if they want to have a more highlighted store space.

What is a Planogram?

A planogram is a diagram used by retail chains to determine the merchandise layout of any given store. The overall goal is to provide customers with the best-selling merchandise and to guide the customer through the store in a way that produces the largest sales volume for the retailer.  

A planogram contains a visual schematic as well as a product listing, which is used by a merchandiser to place the products on the shelf.  They are designed to aid the space and shelf management of the store which are updated frequently to keep up with the ever-changing marketplace, product offerings, new products.

Purpose

The planogram provides the merchandiser, with a guide as to how the store should be laid out and the proper space allocation for each section. For example, a grocery store usually contains a series of 4-foot shelving units known as gondolas and may allow 20 feet of shelf space for canned goods, 24 feet for prepared dinners such as canned pasta or 32 feet for condiments. The planogram will also tell the merchandiser where each particular item needs to be placed on the shelf and in what quantity.

Components

Typically, there are three main components to the planogram: the cover page, the schematic and the stock keeping unit (SKU) listing with accompanying Universal Product Codes (UPC). The cover page includes general information and instructions. The schematic shows the overall layout of each section along with the number of shelves needed and the proper shelf heights. The SKU listing and UPC codes tell the merchandiser the correct placement of each item and the proper number of facings, or number of shelf positions, each product is to receive.

Layout Design

It used to be that planograms were drawn by hand with the use of a mechanical pencil, a ruler and graph paper. These days, larger retail chains use computerized space management software to lay out a store set. The program makes use of information such as the size of the product and how fast it typically sells to determine proper shelf positioning.

Retail Implementation

Store sets are usually carried out by a team of professional merchandisers or by store employees. If possible, store resets are conducted while the store is closed, although it is not uncommon to perform them during shopping hours. The merchandisers normally work in teams, with each member possessing a copy of the planogram for the section being set.

Regularly Updated

Planograms are not static. As new products enter the market and old ones are discontinued by the manufacturer, there is a need to update the planograms both at the home office and in the store. The use of an effective space management program can make changes easier to manage for both headquarters personnel and the merchandisers.

In conclusion, I will have to say, in order for a retail store to have an organize shelf space usage and maximize the per square meter gondola space, one must have a dynamic planogram team who can manage, produce shelf lay out as fast as the market products turn in the store.  This can also be a money spinner for MNC's who may want to promote and highlight their new products.

Conducting Physical Inventory Count

Most retailers are required by tax and/or accounting rules to provide an accurate on-hand value of the merchandise in its store. Although the retail store may be using a perpetual inventory system or other software to keep track of all items, it may still be required to physically count all inventory. Here's how to conduct a physical inventory with as little disruption and as much accuracy as possible.

Here's How:

1. Replenish shelves with merchandise from the stockroom. Try to clear as much inventory from the backroom as possible. Be sure there is no merchandise under cash wraps, in the office or any other location.
2. If an inventory service has been hired to do the physical inventory, follow the guide they provide and prepare the store according to their instructions.
3. If the physical inventory is being conducted by store employees, meet with staff to explain the inventory counting process.
4. Assign each employee a location and provide pre-numbered inventory count sheets detailing the inventory with item name, price and inventory level.
5. Those conducting the inventory should count each item on their sheet and only record the exact quantities.
6. When the physical inventory count is completed, compare the physical count to the perpetual inventory record.
7. Discrepancies should be further investigated and resolved. A recount may be required by a different counting team for any major discrepancy.
8. At the end of the inventory process, adjust the perpetual inventory record for each line item to reflect the quantity and value of the physical inventory.

Tips:

1. Complete a full zoning (recovery) or straightening of the store prior to the physical inventory so all products are neat and orderly for easy counting.
2. To conduct the physical inventory count as quickly as possible, schedule a time when sales are slow and inventory levels are down.
3. The store manager should spot check several of the count sheets to verify accuracy in counting by employees.

What You Need

• Inventory Team of Several People
• Pencils with Erasers
• Inventory Count Sheets
• Tags Showing Completed Zones