By Michael Keenan
Inventory Management
In this article, we will look at the biggest challenges retailers face in managing seasonal inventory and the best tips from retail experts to overcome them.
What is Seasonal Inventory?
Seasonal inventory refers to products that are sold in larger quantities during specific times of the year. The demand for these products fluctuates due to weather, events, or holidays.
Challenges of Seasonal Inventory
Some challenges faced with seasonal inventory include unsold inventory, stockouts, and storage issues.
Unsold Inventory
Unsold inventory is one of the biggest challenges in seasonal inventory. The term unsold inventory refers to stock that you cannot sell. It’s a significant loss of revenue for retailers.
Stockouts
Stockouts are also a problem. A stockout occurs when a product is not available for purchase due to running out. Stockouts cost retailers in North America over $300 billion annually.
Storage Issues
Another area where seasonal inventory can be a challenge for retailers is storage. Seasonal products take up valuable space in warehouses and stores, and if not managed properly, they can lead to cost and handling issues.
Examples of Seasonal Inventory
For most businesses, demand for inventory changes with the seasons; it can be anything from clothing to household goods and beyond. Here are some common examples of seasonal inventory: holiday inventory, summer or winter clothing, event-specific inventory.
Ways to Manage Seasonal Inventory
Let’s take a look at some methods available for managing seasonal inventory.
Just-In-Time Inventory
Just-in-time inventory is a system where inventory is received only as needed in small quantities. It’s a way to reduce holding costs and unsold inventory.
First In, First Out
First in, first out is a common method for valuing inventory. Using this method, the products received first are sold first.
Last In, First Out
Last in, first out assumes that the inventory received most recently is sold first.
ABC Analysis
The ABC analysis model prioritizes products based on their value by categorizing inventory into three groups: A, B, and C.
Economic Order Quantity
The economic order quantity helps you determine the optimal amount of inventory to order. It considers three factors: demand, order cost, holding cost.
Types of Demand for Seasonal Inventory
There are four main influences on demand for seasonal inventory: weather, culture and holidays, migration and travel, and disposable income.
Weather
When thinking about the seasons, you think about weather, and weather plays a clear role in the demand for seasonal inventory.
Culture and Holidays
Culture and significant holidays have a major impact on the demand for seasonal inventory, so it’s good to be prepared.
Migration and Travel
Summer vacations are the prime time to think about preparation for migration and travel, but with cheaper prices and less crowding, many Americans enjoy winter holidays just as much.
Disposable Income
Of course, there are many factors that affect disposable income, and shopping budgets can be difficult to predict from one person to another.
Tips for Improving Seasonal Inventory Management
With seasonal inventory, the selling period is limited, and once the season is over, it can be difficult to liquidate remaining stock.
Using Historical Data for Forecasting
One of the best ways to improve forecasting is to look at past sales patterns. This way, you can gain a better understanding of what customers are likely to purchase and when they will buy it. You can use this information to adjust inventory levels accordingly.
Running Pre-Sales
A method to assess the sales potential of seasonal products is running pre-sales. It’s a tactic used by many retailers to understand seasonal trends.
Pooling
Supplementary Products
Bundling supplementary products is an effective way to improve seasonal inventory management. Bundling supplementary products can be an effective tool for increasing sales.
Reducing Slow-Moving Inventory Prices
If inventory is moving slowly, reducing prices can help clear excess stock before it becomes obsolete.
Considering International Markets
Another way to manage seasonal inventory is by selling products internationally. Traders can take advantage of seasonal patterns in the northern hemisphere.
Monitoring Inventory Metrics
Monitoring inventory levels effectively is crucial for managing seasonal inventory. Traders should keep an eye on inventory turnover rates, average inventory levels, and total stock.
Simplifying Fulfillment
Fulfillment is critical for managing seasonal inventory. Traders can simplify fulfillment by using techniques such as BOPIS (Buy Online, Pick Up In Store), local delivery, and applications that help streamline the fulfillment process.
By following the tips above, you can create a system for your store that helps you meet customer demands and increase sales during peak periods.
Source: https://www.shopify.com/ca/retail/seasonal-inventory
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