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How much inventory do I need for my store?

Can you tell me, “how much inventory do I need for my store”?

This is usually one of the first questions I get from retail boutique and even wholesaler prospective clients. 

I like this question because it shows that they don’t want to haphazardly buy inventory. Which means they want to have an inventory management strategy. Which is great!

Inventory management is important because inventory is the number one asset in your boutique business.  If it’s not managed well, it becomes your number one liability!

How-much-inventory-should-I-have-in-my-store
How-much-inventory-should-I-have-in-my-store

Ill-managed inventory causes:

  • Low gross margin due to excessive markdowns
  • Low to no cash flow due to tied up cash in dead inventory
  • Little profitability due to expenses higher than revenue

So, this is a loaded question that will take more than just one blog to answer.  Planning what you buy depends on a number of factors.

Here’s a starting point for buying your boutique or wholesale inventory:

  1. Identify your potential sales 
    • Ideally, you are doing this for the entire year (annual)
    • But you can do it for three months (quarter) until you are more comfortable with annual sales plans
  2. Breakout your sales to determine sales contribution percent
    • Start with the department level – i.e. Women’s Department
    • Next to the classification (class) level – Tops
    • Then to the sub-classification (subclass) level – Short sleeve
    • But you can do it for three months (quarter) until you are more comfortable with annual sales plans
    • Wholesalers, break out by account or channel
  1. Establish your selling price
    • This is the price the customer pays.  This is not always your ticket or MSRP price
    • Determine this by department, classification (class) or sub-classification (subclass)
    • Pricing changes seasonally (i.e. Spring vs Fall) for various reasons
  1. All, this will determine units needed
    • Sales / selling price = units needed
  1. If you have done your assortment planning (oh, that’s another blog) you will now have an idea of how much you need by style/size/color

Well, that should start you out on understanding “how much inventory you need in your store”. In my next blog I’ll cover inventory turn rate. Yep, it is a science.

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Written by

I love everything about retail! I've been in the retail industry for 20+ years, many of my years were in corporate retail in leadership roles of merchandise planning, demand planning and allocation for some of the most world-renowned retailers. I later leveraged those skills in my own boutique. I specialize in the financials of running a retail business. I create the financial and inventory management strategies that puts cash in the bank for my clients.