Wednesday, 18 October 2017

Running Out Of Stock Room Space!

I hear a lot about people running out of stock room space, I also suffer from this problem.

Usually people are not expanding their business when they get to this point, they are just at a point of not managing stock properly.

During my time of running an ebay store I have changed my stock keeping methods a number of times and I am now at a rack and bins stage and being one to never pass up on a bargain I have to ensure my space is kept to a manageable level.

How I do this stock rotation effectively is by using the loss leading strategy.

I sell my items for as much as I possibly can, as quickly as possible. I first sell my front end items and then run at clearance prices and then I back end out, if I make very good profit I can clearance and back end much faster so I do have to be savvy in what I buy.

For example if I purchase 100 items at £100 and I sell the first 50 at a price that makes me 5 times my initial investment (as you do have to remember that there will be selling expenses) so 50 items sold at £5 leaves me with £250, this already covers my initial £100 investment, so anything from this point is profit. I then start the next 25 at cost price at £1.00  making £25.00, I then list the remaining 25 at a bottoming price of £0.50 to clear, totalling £12.50 so my total profit for the initial investment will be £250+£25+£12.50 = £287.50 minus my initial investment of £100 = £187.50 profit.

The above example shows a profit of almost 2 times the initial investment but this can often be a lot more. If I am running a clearance I put them on auction at my bottom price, more often than not they will sell for more than your bottom price, yet it doesn't matter if they only sell at the price you set either. So there are no worries about making a loss, you can often make much more profit than you set out to do. 

So using loss leaders, is useful in not only that it helps to bring traffic to your store, it also helps to free up space so you have somewhere to put your new stock that will bring in a cash flow. There is no point in hanging on to dead stock that just will not budge, using loss leaders helps to combat a number of important issues, for me the biggest is stock room space

There is nothing worse than having dead or slow moving sock cluttering up the stockroom and having to turn away a good deal because you have no where to store it.

You are not losing money by selling below cost your are recapturing half of your cost to add to the profit of the purchase.


No comments:

Post a Comment