The Hardware Man - Dealing with Inventory

Howdy folks,

After last week’s article on spring cleaning, we decided to use the motivation and start picking through the corners of our back room, and begin some rearranging. It was a project we had been discussing, and with the weather and staffing aligning, we got to work.

When we purchased the store last year, we had a pretty good idea of what mix of inventory we were dealing with. We had a lot of good, active products as well as dead items. We made some strategic changes and additions to what we carry, and most have proven to be winners. We started a clearance table that did well, but ended up with lingering items. We have pulled products and replaced them with new sets, and added them to the clearance bin. Ultimately, those goods that won’t move at even a discount need to disappear. There are times retail feels like a net-zero game. Take a seasonal product, for example. You sell half or more of a set at full price, discount, and promote it to finish the move, and donate the lingering one or two items at less than cost.

There is a general ratio that applies to sales, labor, and inventory. The 80:20 rule is that 80% of your sales come from 20% of your inventory. Substitute inventory for workers or customers and follow the logic. It’s not inaccurate, especially in larger organizations. Conversely, 80% of our problems come from 20% . . . well, you get the point.

The same logic applies to our inventory. A good hardware store often carries a minimum of 5,000 unique SKUs. Larger stores naturally have more items. Our wholesaler has 100,000 products available for us to choose from. We had boxes of new old stock that hadn’t been sold for years. Some because they were never displayed. Others because the brand went out of business, and replacements were made. Trends change, and bets on buying were lost. Regardless of the reason, it was time to make it disappear.

As a data guy, I also had an issue with these dead items being stuck in inventory, inflating my inventory values and giving an inaccurate picture of the business. I need to get these items out of the system and do some data cleanup. That can be a tedious task if done haphazardly can inadvertently cause collateral damage to good products.

So, what should one do? Let’s make an event out of it, create some buzz, and have a little fun! I went with a Penny Deal concept – anything that was outside in the clearance bins ended up being a penny. It created positive energy as customers poked through the boxes and piles, and gave us reason to scan everything out of the system. I was surprised at some items that were found, and believe me, there are some great deals. By the time you read this, there will be fewer, but we are also adding more to it.

A few days into this, I must consider this a successful promotion. Sure, we ‘lost money’. Our total profit for the first day of the sale was a loss of $87. That was on paper, especially as we needed to write down the inventory anyway. But we were able to clean up, our customers were able to find some good deals, and we even had new people come and check us out. That is a win all around.

Hardware stores, like our homes, need that deep spring clean. I was happy we could re-home some of that merchandise without resorting to the dumpster. Now, on to the new stuff.

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Daniel Karns and his wife own Clintonville Hardware & Rental along with other businesses. Join the discussion by contacting him at info@clintonvillehardware.com.