Start up Inventory For Retail Gift Store

Posted on September 1, 2015 By

Starting up a new gift store can be challenging. One choice is how much product needs to be order. Too little and the customers will keep on walking. Too much and your inventory will sit for months.  Let’s quantify how much is needed for a basic opening amount.

The first step is to map out the retail store.  How many display racks do you have?  What is the space available on each rack?  Do you have sections?  Perhaps a specific area for different price points.  Calculate the exact display space.

If you are having trouble visualizing the display areas, take a page from home decorating experts:

Use graph paper to create a miniature retail space.  Cut out to scale representations of the display racks and move them about.  Remember that most clothing racks will need at least two feet on either side and that there needs to be sufficient room for people to comfortably browse and walk.

If that solution isn’t  working for you, try going to the retail space and use butcher paper and cut out the display rack space.  I find that works best in small or unique retail spaces.

Too much trouble?  Increased customer flow and product placement can have a huge impact on sales.

I think the worst retail experience that I had was at a NASA open house in San Jose.  We were given large checksheets, product were mounted on the wall, and we were supposed to mark what we  wanted and then wait in an endless line for the gift shop items.  To this day, I have no idea where the line started or ended.  There were large do not enter signs and no arrows to get to the cash register line.

It was truly designed to work for the cashier and not the customer.

Design a beautiful space for them to shop in!

Market Conditions:

Take a look at the neighboring stores, competing products and national trends.  Compare your shop to what is also available.  Etsy now has a wholesale division, consider buying some unique goods.

Stocking the store:

Gift shops usually have a wide inventory, but not a deep inventory. Items are usually pre-ordered to be dropped shipped at specific intervals and just before an appropriate season. For instance Christmas inventory might be sent in September so that it could be sold in an appropriate time.

Small drop ships ensure that products do not linger unsold on retail shelves. In addition, small quantities help ensure shopping variety.

On smaller impulse items, such as cash register displays, having a small back room inventory might be prudent.

Create a purchasing plan:

Create an effective inventory tracking program.  Most point of sale software has an option to track inventory.  However, it requires setup and education on how to properly use the software.  For instance, if you didn’t tie it to your cash registers it would not be an effective process since you would have to double enter everything.

It’s worth the few thousand dollars to save money over the life of the retail store.  For instance, if it’s kept up to date, shrinkage and best selling items, become much easier to spot.

Entering the opening information is a burden, but if you do it while the inventory is being physically received, it can lighten the load.

Establish what your safety stock and normal purchasing plan should be. Safety stock is the inventory that you have in the back room.

Clearance area:  Determine what and how much inventory will be in the clearance area.  Remember that some shoppers will only shop there, be sure to have a limited, but still a wide range of deals.

Laura Dodson
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Laura Dodson

Laura Dodson, CPA is a Seattle Financial Planning & Analysis consultant.She has attended Western Washington University, Pierce College and Bates Technical College. She has written four accounting instructional books. She has worked for small family businesses, mid-sized businesses and a Fortune 500 company.She founded and operated Blue Stone Accounting LLC for five years.She currently runs Paper Butterfly Forge LLC.
Laura Dodson
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