| For those who do not follow the antique trade, let | | | | gross profit is $1,000 on your inventory investment |
| me bring you up to speed: the antique business is in | | | | of $1,000. But, let us say you sell the table in six |
| the toilet. Prices are at their lowest level in a decade, | | | | months for $2,000, re-invest your original $1,000 into |
| following the boom of the 1990s. Antique furniture is | | | | another table, which you sell six months later. You |
| selling for 70-80% less than it sold for in 1998. | | | | have turned your table inventory twice. Your |
| Inventories are piling up. The customer base is | | | | inventory investment has remained at $1,000, but |
| shrinking, because the new Gen X buyers are not | | | | now in the same period (one year) you have made |
| that interested in antiques, especially large furniture | | | | $2,000 gross profit on your original $1,000 |
| pieces. | | | | investment. The key here is to turn your inventory |
| Many antique dealers are giving up the trade. Other | | | | as fast as possible. That way, you get a bigger |
| dealers swear that the downturn is just part of the | | | | return on your inventory investment. |
| normal business cycle, and that sales will rebound. | | | | Turning your inventory quickly leads right into the |
| These optimists point out that with prices so low, | | | | next principle: adjust your inventory mix. This is the |
| new buyers are attracted to collecting antiques. | | | | point on which many retailers fail. Truth be told, too |
| Certainly the market has dropped; I cannot argue | | | | many retailers are in love with their inventory. They |
| that point. And, certainly many dealers are going out | | | | have a store full of "neat stuff" that makes their |
| of business. The question on everyones' mind is: | | | | store look good. They insist on getting their price. So, |
| which dealers will survive? | | | | the merchandise sits on the shelves. If merchandise |
| My opinion is that what we have in the current | | | | sits on the shelf, inventory turns slowly. If inventory |
| market is a weaning out of weak dealers. When I | | | | turns slowly, cash is short. If cash is short, they |
| owned retail stores, I saw new dealerships jump | | | | cannot pay their bills. If they cannot pay their bills, |
| onto the "good times" bandwagon when the | | | | they are out of business. Lesson: your inventory |
| economy was booming, and fall out when times got | | | | should be turning at least four to six times per year. |
| tough. I also saw well-established dealers get lazy and | | | | You can keep a few premium items in stock, as long |
| ignore the principles of good retailing. Those lazy | | | | as you can afford the investment. Break your |
| dealers did not survive tough times either. | | | | inventory down into profit centers, and track the |
| What does a dealer need to do in order to survive in | | | | performance of each profit center. Profit centers |
| the present climate? There are three basic principles | | | | that do not meet your turnover requirements have |
| of good retailing that, when applied consistently, will | | | | to go. Liquidate the inventory if you must, but put |
| always work in these circumstances. They are: 1. | | | | your inventory dollars into something that will sell |
| Increase inventory turnover rate 2. Adjust your | | | | quickly. There are software programs available to |
| inventory mix. 3. Expand your customer base. Right | | | | help you track demand on ebay and other internet |
| now I hear a collective groan, as if the entire retail | | | | sales sites. Buy some and learn how to use it. |
| universe is saying "Duh!". So, let me explore each of | | | | Lastly, expand your customer base. This would seem |
| these in more detail and you will see where I am | | | | an obvious way to increase sales, but you would be |
| going with this. | | | | surprised how many bricks-and-mortar stores are still |
| For those that are new to the concept of inventory | | | | focused on foot traffic and not their internet |
| turnover, let me start by explaining what inventory | | | | presence. I am not talking about selling a few items |
| turnover is. Inventory turnover reflects how often | | | | on ebay; I am talking about making your entire |
| your inventory is sold and re-purchased (turned over) | | | | business focus on internet sales. If you are stocking |
| within an accounting period. The formula is Inventory | | | | a lot of large items that cannot be easily shipped, get |
| Turnover = Cost Of Goods Sold / Average Dollar | | | | rid of them. Aggressively plan an internet sales |
| Value of Inventory On-hand. Turning inventory fast is | | | | campaign and include as many online sales venues as |
| good for cash flow and profits. Here is an example; | | | | you can afford. |
| (these figures are made up to make the math easy). | | | | Summary: adjust your inventory mix to carry easily |
| Let us say you buy a table for $1000, and you plan | | | | shipped items with established demand, and promote |
| to sell it for $2,000. Tables are not selling well, and it | | | | your sales in as many venues as possible. |
| takes you one year to sell the table for $2,000. Your | | | | |