A few weeks ago on the podcast I was talking about preparing for the holiday sales season and a few of you asked about how to plan seasonal stock if the items you make are fundamentally unique, or have wide variances in say colour with each production. I touched very briefly on the idea that inventory management and forecasting is possible for unique gift ideas too and today I wanted to explore that further to really show you what I mean.
Why you should have an inventory management system
Business Insider UK reported that 82% of businesses fail because of cashflow problems and inventory management is a silent and deadly factor. Too much stock and you are effectively sitting on dead cash and too little stock means you can’t make the turnover you need each month.
It is really important that we have a plan for the stock we aim to make based on a wider sales strategy, just as we need to create a marketing strategy to push for sales of those items so that we get good sell-through.
Management and forecasting as a powerful sales tactic!
Every sales strategy is made up of smaller action plans. To make ours we need to;
Conduct customer, market, product and competitor research to show us what our opportunities are and what our customers really want next
Access our historical sales to see what has actually been selling; what, where, when and how
Understand how our website, or Etsy shop is performing currently in terms of regularity of sales
Understand our current stock holding position
Each of these action points and questions can be answered by setting up a simple inventory system that shows you exactly what you have in stock and how products have been selling for you historically.
It can be a simple spreadsheet that lists products, dates of listing, dates/places/circumstances of sale, prices, costings, and more. This spreadsheet is not just great for helping you know what you have in stock, but it should also help you with stock-checks and customer queries, as well as providing historical data that supports your sales strategy.
If you have several online shopping portals then you can buy into a cloud-based inventory management system that will help you input each of your products and track them. In some cases, you can certainly integrate the software with your website or Etsy shop. Christian from SynCommerce showed us his software that integrates Etsy, Shopify and several other outlets into one cloud-based management system.
Whichever system you choose you can start to see that the information that it contains is like gold when it comes to forming a new sales strategy.
So how do you use this information to predict what to make next?
Let’s pretend for a moment that you are starting from scratch… no sales history, no data collected and maybe even a new business planning to sell online. You have no idea what to predict. Where do you start?
First of all you need to work on your research. You need to know;
Who your potential customer is
Who your competitors are and how you can be different
What’s happening in your niche of the market
What your products will look like.
Understanding these things key things will tell you;
What’s already on the market and hopefully an indication of how it’s selling
Who is buying it and what else they are in to
If these things are quickly fading trends in your niche, or timeless products that sell regularly
Once you have this you have an idea of what you could make. This is where you sit down design and cost your product for its market viability.
Need help with starting your research? Check out my craft business course as part of the Craft Biz Incubator.
Creating your inventory management system is next, updating it as and when you make new items, or sell-through. During this time you will be monitoring your website or Etsy shop to see how things are selling, using the stats your site gives you to help you continue to learn about your customer.
As you step back and look at the data you are collecting, it will start to tell you more and more about the habits of your customers and also the products which do or do not sell for you. Immediately you can eliminate products which do not work for you and start to focus on what can really drive sales. You will also start to notice nuances of things like colours your customers may prefer.
This information is SO powerful!
Let’s give an example to address those of you who may still feel that making one of a kind items cannot be predicted. Let’s imagine I am a painter and I paint abstract artworks. I may never choose the same exact colours for every painting and I may paint on a variety of canvas formats. How can I use my system to predict, or forecast future sales?
I start to look for nuances in purchasing patterns using my inventory management system. It might be that at certain shows I sell a particular size of canvas (maybe I’m showing in an area with big houses and so they love big canvases, or I’m in a neighbourhood where although there’s affluence the properties are much smaller). Online it might be that I notice that at Christmas I sell far more smaller canvases intended as gifts, whereas in the summer it is the larger pieces that sell more, because people are renovating their homes. By having a system that helps me track my stock and my sales I can predict buying patterns based on historical facts, rather than guesses. So, I can check my stock pre-Christmas and make more of the right stock and less of those bigger pieces that won’t sell until the summer.
Let’s give another example based on one of my coaching clients… let’s say I spin yarn and weave shawls from that yarn. I sell both products to my customers. With a good system in place I can tell before each coming show how I did before, or what has been historically good for me at that time of year. This will help me forecast with better accuracy what might sell at that same show this year, or a new show at that time of year. It might be yarn over shawls at Christmas, or it might be yarn online and shawls at shows. I may also be able to see which colours my customers like, for example more greens over blues, or pinks over reds. It doesn’t matter that each yarn I dye maybe different when it comes out of the dye pot, but if I have some facts about my customer’s buying habits, then I have some idea of which dye stuff to use on which yarn. This prediction is far less risky than a guess, or a gut feeling.
Of course, as I say this it has to be remembered that creating a sales strategy, based on historical data is just a step towards better prediction. It is not an exact science and so risk is still implied as in any strategy you plan and you may come up against the odd surprise here and there. It is however, the reducing of that risk by planning your strategy more carefully, that is ultimately your best defence against producing the wrong stock.
Each time you plan a new season’s stock you enter an element of great risk; will you or won’t you sell what you make. It is the actions you take to reducing that risk before you make your products that ultimately help you make more of the right products and sell far more than you did the previous season, making your inventory management system a powerful tool in your sales strategy.
Do you have a system set up? Let me know what you use and how you find it.
Thank you for watching! I hope that was helpful, or at least thought provoking?
If you have any questions or comments, please pop them in the comment section below.