12 Ways to Lower Inventory Costs

U.S. retailers are sitting on about $1.43 in stock for each $1 of earnings. Decreasing inventory costs should therefore be a priority for many merchants.

In my experience, there are several options for reducing inventory costs. In this post, I will address 12 of these.

12 Ways to Lower Inventory Costs

Reduce stock. It appears to be a no-brainer, but take it seriously.

Retailers know the problem. They can spend money on marketing and end up with insufficient inventory to meet customer orders. The solution for this would be to take pre-orders and define shipping dates. It won’t work on commodity products that everybody sells. But if your product line is made up of what everybody else is selling, you will likely fail anyway.

Fashion manufacturers, by way of instance, provide pre-orders regularly. Fashion manufacturers design and produce samples, photograph them, and once they get enough orders, make the item. Have a look at wholesale fashion websites or online marketplaces. Things often carry disclaimers such as”Pre-order this merchandise to arrive by Aug. 1.” A producer will then cancel all orders if there are too few of these. The general public excuse is typically the item is sold out.

Order straight from manufacturers. If you have located products which will probably sell in your shop, research low cost, original resources. Track down the manufacturer and purchase directly from its site. Marketplaces and distributors have little markups which become meaningful on bigger quantities.


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Do not be afraid to contact the manufacturer and ask for a discount. You would be surprised how they are ready to negotiate.

Manufacture on demand. If you control the creation of your goods, this solution could help. Produce the items only once they are sold. It might work for products that are unique. (And the more specific your products are, the greater your odds to sustain online sales.)

Hunt for wholesale prices. If you don’t control creation, build a deeper connection with existing providers and continuously research and develop new ones. Shop for seasonal items during offseason. By way of instance, purchase holiday-themed merchandise during or following the holiday for a gigantic discount.

Negotiate on minimum purchase. Nothing is set in stone. A manufacturer that needs a minimum order is saying its preference. But in fact, business may be slow. If you choose a personal approach, you might could dictate lower quantities. Just ask.

By way of instance, clothing and accessory makers are experiencing problems this year. Many warehouses at the Los Angeles fashion district are filled with stock that they can not move. They’ll be happy to sell you something.

Ask for free delivery. Research marketplaces to find free shipping supplies. If you can not find those offers, ask the producers. It will not usually work on bulky and heavy product. However, for jewellery, beauty, and accessories, you could get unexpected shipping deals.

Blend in-house inventory and drop shipping. I am not a fan of drop shipping, for 2 reasons. First, merchants that provide drop shipping do not restrain final packaging and shipping. Second, it’s insecure on low quantities, limited editions, and special products. You could spend money on marketing, but as soon as the orders come through the goods may not be available.

But, mixing drop shipping products with in-house inventory can reduce your inventory costs. It’s also a fantastic way to test things without needing to buy them.

Eliminate unused warehouse space. I recently met with a former employer in the fashion business. I toured the corporation’s facility, which included a newly downsized warehouse. They maintained roughly one-fourth of this warehouse, rebuilt it with narrow, higher shelves, and rented out the rest.

Another customer who had leased a enormous warehouse for five years was shocked when his landlord declared a 20-percent rent increase. He decided to purchase a house with a huge yard, assemble storage, and so cover his own mortgage rather than someone else’s. And he ended up with lower payments.

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Avoid intermediaries. Distributors purchase product from, typically, manufacturers and resell it. You, too, could buy directly from the producers.

Order in massive quantities. Purchasing in massive quantities is risky. It may lower per-item costs. But it’s ideal for recognized sellers who know the product requirement and have loyal clients. If you’re uncertain about the demand, purchasing in huge quantities could lead to unsold inventory.

Re-evaluate product lines. Typically, 20 percent of products produce about 80 percent of sales. Re-think your stock mix. Again, unique merchandise produces more profit now because it’s possible to control prices and avoid heavy competition.

Eliminate dead inventory. Eliminate stock that you have held for over 1 year. Do closeouts. For low quantities, sell leftovers on apps like Poshmark, Mercari, Tradesy, and OfferUp. Consider the Facebook market,”de-stash” groups on Facebook, and Craigslist. If you can’t market, at least give the products so you can write off the losses.

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