Speaker: 00:00:00

You've got racks full of inventory, but your bank account feels empty.

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Sound familiar?

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That's because inventory is not profit.

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It's just money in a different form.

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And if it's not moving, selling, it's keeping you stuck.

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Today, we're going to talk about how to look at your inventory strategically so that you

can maximize your cash flow.

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I have helped thousands of boutique owners around the world go from underpaid and

overbought to profitable.

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boutique owners.

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This video is a part two in our three part series on how to build a profitable product

assortment for your boutique or clothing brand.

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In this video, I'm going to share the exact strategies I'm using with clients to keep

their cash flowing and their bank account getting fuller every time they make a sale.

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The first thing you have to understand is that inventory is cash just in a different form.

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It's not a number in your bank account.

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It's now sitting on a hanger.

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the inventory sitting on yourself, sitting on your rack, sitting in a box, sitting in the

back room, that is cash sitting in those boxes, okay, waiting to be turned into actual

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cash, waiting to be turned into money in your bank account.

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I think a lot of boutique owners see inventory as a sunk cost.

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Like, I spent the money, it's spent, it's an expense, like, ugh, it's so much money.

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You're not seeing the opportunity in it.

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That is where I want you to shift your mindset about this because...

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Opportunity comes in the form of inventory and inventory is how we actually make money.

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So by starting to understand your inventory, you're actually understanding your money.

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This is why a lot of people talk about your sell through or your turn rate.

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The thing about turning through inventory, meaning selling through it, or it's like a

fancy way to say like, how quickly are you selling through inventory?

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That's what sell through is.

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And it doesn't even have to be that fancy.

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You know right now about how quickly your inventory is turning.

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You can say, I'm selling really fast.

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I'm selling really slow.

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Everything's sitting.

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haven't sold in weeks.

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Right?

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The turn rate on those is going to be different.

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If you're selling through like 100 % of your inventory within a week or two, like you

don't have enough inventory, obviously.

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We need to get you set up so you have about four to six weeks of inventory at any given

time and that that inventory is going to turn or sell through.

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at about a 60 to 70 % rate.

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Part of the reason why I think this is a hard concept is because you're always receiving

inventory and you're sort of always selling inventory.

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So to like actually see where this lives can be a moving target.

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So let's take it out of context a little bit.

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Let's put it in.

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You are having a pop-up shop for eight weeks.

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So let's say for those eight weeks, you need to be sold out by the end or you need to be

close to sold out by the end.

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Like really, let's say this is an eight week pop-up.

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You've got to think about how can you stock the store, how can you stock the assortment

with items where you have a breadth of items, meaning you have a variety, but you have

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depth in the things that you know are going to be best sellers.

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This is why a lot of people will start out and they get to this point where they say, I

think I need more inventory.

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It's like, you do, but only in specific styles.

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You don't have to just say, I'm going to buy two packs of everything now.

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Don't do that, please.

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So the goal would be that by week six,

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week five, you still look pretty good.

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You might look a little broken.

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You might have to like change some displays.

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Those last two weeks, you're on sale.

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The first week you're at 30 % off.

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The second week you're at 50 % off or 60 % off.

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You're like, need to sell.

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Like I'm done.

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I'm done.

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The biggest piece of understanding how much you're going to sell through is knowing what

your sales projections are.

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So the key to getting the right amount of inventory is knowing how much you're going to

sell.

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So let's say I knew in these eight weeks I was going to sell $80,000 revenue.

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I need to buy enough inventory for about like $30,000, $25,000.

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I need to buy enough inventory or have access to that amount of inventory to be able to

hit that sales number.

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If I have the wrong inventory, I'm not going to hit the sales number.

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If I don't have enough inventory, I'm not going to hit that sales number.

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It's a perfect balance with your sell through of having the right product at the right

time, the right amount at the right price.

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This is why retail is hard to sell through in the time frame that you need to.

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So if you have inventory you've had for a year, six months, five months, four months, it

should be gone.

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Like we do not need it.

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That said, unless it's a basic, okay, we can make some exceptions, but a boutique is meant

to turn quickly, meaning you're meant to sell through items quickly.

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And so if you buy too much, if you price it incorrectly, if you hit the season wrong, you

won't.

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sell through and therefore you won't hit your sales goal and you won't make the profit

back that you want from that inventory.

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Now how do you figure out sell through rate?

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It's really easy, honestly.

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Let's break down how to calculate your sell through rate.

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It's a percentage.

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It's the percentage of inventory you sold compared to how much you received.

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So the formula is sell through rate equals units sold divided by units received times 100.

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That's where you get the percentage.

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So let's do an example, okay?

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I love math.

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I want to make you love math.

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We received 50 sweaters.

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We sold 35 of them.

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Your sell through rate would be 70%.

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So 35 divided by 50 times 100 equals 70%.

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70 % is an incredible sell through.

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Like I am so excited about that sell through.

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I would say depending on how quickly it took you to sell through that, let's say you sold

through that many in a week or two weeks, I would say, whoa, you should buy some more.

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Do you have other colors in it?

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Should we expand it?

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70 % sell through is great.

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Now, what is not great is, you for me, it's very much like under 60 % under 50%.

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We want to sell through at least half of what we buy.

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I think that's the indicator of like, it's a good style.

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Now, does that also, as I said, get affected from how you market it and the season and all

that, the price point?

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Yeah, of course.

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But sell through is one good indicator to see if an item is doing well or not.

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We want to make sure that you're working on like a four to six to eight week sort of

calendar.

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I think it's hard for people to think too long term about their seasons, especially

because we have trends coming and going so quickly now.

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But every item has to have a shelf life.

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Now, if you're in like something that's more perishable, you're like, of course that has a

shelf life.

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Clothing really doesn't.

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And I think that's the hard part about it is like you could sell a sweatshirt in the

summer because the air conditioning is on.

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You could sell a bikini in the winter because someone's going on a cruise.

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So we're always taking these things into account as we're buying product.

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But I think the most important thing as you're shopping is thinking, do I love this item?

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Do I think I could sell it in four to six weeks with the reach I have, with the audience I

have, with the marketing plans I have set up, with what I know from other data about what

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has sold?

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Like if you feel like, yeah, you know, I can sell that pretty quickly.

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Four to six weeks feels good to get through a pack or two.

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Again, this is going to depend on how you're scaled.

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If you're going to buy an item, it's not just, is it cute?

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Is it a great price?

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It's also like, can I sell this quickly?

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Do I really think this is going to be a good seller?

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If it's not selling within four to six weeks.

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What do you do?

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Well, first off, we're doing markdown plans.

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So we're slowly lowering the price on the shelf on the rack with the other full price

merchandise.

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I think people are too quick to like do a fire sale or move things to a sale rack like

sale racks don't get chopped.

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It's going to be more profitable for you if you can sell it at a bit of a markdown on the

rack next to other full price items, then it's going to be on a shelf or a rack in the

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back of the store.

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Also, if you have an online boutique, the sales have like

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Again, like it doesn't really get shopped.

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unless it's a specific seasonal sale or I don't know, it's just like people want new

arrivals.

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So give that to them.

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And the way we give that to them is we just sell through at a nice rate and we can always

be bringing in new arrivals.

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So maximizing cash flow that's like really what we're all about because cash flow is the

key to everything if we can make money Then we can spend more money we can invest more

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money So getting the cash flowing meaning coming in and out and in and out at a nice pace

That's where we want to be the problem is is that a lot of people are over buying like

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you're buying too much You're going out you're buying more of the wrong stuff

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The truth is, is yeah, you're always going to need new inventory.

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You always need more, but not at the expense of your bottom line and not without focusing

on selling what you already have.

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Most retail store owners need to focus on sales more.

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Instead of complaining about it, it's like strategize how to make more money.

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I think the biggest problem I see is that boutique owners freak out.

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They're like, that's not selling.

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Have to fix it.

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And the fix, instead of being, need to make a new reel about it, I need to style it more,

I need to send an email about it, I need to whatever, get it to an influencer, they do a

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quick fire sale on it, they go out and buy more inventory, and the cycle continues.

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More inventory is almost never the fix to low sales, almost never.

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That's an asterisk there.

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Better inventory management is the fix, obviously.

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Yes, can we fix a mess at the end of the mess?

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Sure.

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But would we like to avoid the mess from the start?

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Absolutely.

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So that's inventory management.

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I think for most people, before you go and order more, we have to think about a few

things.

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One.

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What do I have that's still sitting that I haven't sold?

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Two is what did sell quickly?

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What's turned fast?

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And how much profit did I make on that?

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And three is like, what is your buying budget realistically?

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Not like hoping you'll sell it, not hoping you'll have enough money.

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Like be realistic about how much money is in your bank account and what you can afford to

spend before making more money.

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I will say.

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I don't meet as many people that overbuy as I used to.

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And I'm hoping that's because I've been talking about this for a long time.

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But if you are someone who's overbought, you have a lot of inventory.

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I'm going to tell you, you probably don't have too much inventory.

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You probably just need to scale down.

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You probably need to streamline.

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You probably need to just focus on the right things.

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And this is where we get into the idea that we need to reinvest and buy inventory based on

data, not on like a hope and a prayer.

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The thing is,

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At first, you do need intuition.

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You have to say like, what is selling well?

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What do I know I like?

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What do I my friends will like?

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What is trending?

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What items do I have that guttural emotional reaction to?

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That right there will get you started, but it will not be what gets you to grow and scale

your business.

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What that is, is starting to read data.

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You have to let your numbers guide your next buy.

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Looking at what sold best, looking at how quickly it sold through, what was the margin on

it, what was the price point of it?

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Like, did you have other things in the store competing with it?

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What did customers actually respond to?

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That's what we're rebuying into.

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It makes me absolutely cringe.

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And I'm sorry if you're someone who does this, but it makes me cringe when boutique owners

put up, hey, what do you guys want?

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Hey, do you want this or that?

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Polling your audience.

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is a terrible way to do business.

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Sometimes.

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Again, all of this is actually, take me with a grain of salt.

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Sometimes if you have a highly specific audience, then yes, pulling them is good.

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But if you have a newer audience or one that's a little bit all over the place, you have

people who respond to everything but never buy, you have people who buy everything but

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never say anything, doing a poll is not gonna help you.

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You have to go off your intuition.

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But at a certain point,

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your intuition must convert into the data.

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And so you have to start learning new ways to look at buying inventory that are more

database and less intuition based.

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It feels like it's so easy.

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Like buy inventory, sell inventory, make a profit, and then reinvest it.

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Yes, and there's 10 other processes in there.

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So if you are brand new and you're like, Emily, I'm just getting the handle on the pace of

like ordering and posting and I'm so.

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That's okay.

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All right.

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But just know at a certain point when you're up and you're kind of turning like I always

think of like turning as like wheels turning like the faster you're going, the faster

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you're turning the inventory, the more money you're making.

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Right.

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But just as you're starting out, it is a bit of a slow climb.

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So do the best that you can use the best data you can and as you grow.

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make sure that all the inventory that you're putting into your POS system is well coded,

is well named.

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So when you come to me and you say, Emily, I want a buying plan.

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I want a sales analysis.

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I want to learn how you do all this stuff.

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I can say, well, how much data do you have?

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What does it look like in your system?

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Is it coded?

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Does it have the sizes with it?

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Does it have the product type with it?

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Can we tell what the Emily dress is?

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And how can we tell that, right?

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The more information you can put into your POS system about an item, the more it's gonna

help us later.

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decipher more data and be able to have you buy even more accurately.

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The way you manage your inventory is the reason you are either making money and feel good

about your business or you're not making money and you feel like you're floundering.

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It is inventory.

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Okay, I hate to say it.

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It's not the algorithm is all it's inventory if you can get your inventory management,

right?

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Your business can soar and that is what I do so often with clients That is what I coach on

the most is inventory management because it is the thing that truly changes people's

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businesses and therefore changes their life in the next video we are going to cover

probably one of the like most frequently asked questions about inventory on the internet

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How do I price my inventory?

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How do I figure out the price?

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I am gonna teach you how to price for profit without losing customers, without feeling

like you're too expensive, without feeling like you have to be cheaper.

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Let's talk about what goes into pricing because is it a formula?

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Yes.

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Is there nuances?

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Heck yes.

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And do I want you to understand all those nuances and things that I think about when

pricing something?

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Yes.

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I If this video helped, I want to encourage you to subscribe to my channel so that you'll

get alerted about when the third video comes out.

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And if you haven't watched that first video, you can go right here and watch it right now.

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Thanks so much for watching.

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Here's to making lots of friends and making lots of money.

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I'll see you on the next one.