Inventory is the lifeblood of any retail organization.
We have all heard this simple yet accurate statement before. That’s because a business must sell its inventory (and services) to provide revenue to keep running.
For me, the more complete statement would be: Inventory and inventory management can make or break a retail operation. The wrong inventory selection, poor administration and lackluster presentation will have negative short- and long-term effects on the business.
Inventory management is a necessity, not an option.
As the RV industry engages the post-pandemic reset button, this topic has become increasingly relevant. Motivated by worldwide product shortages in 2020 and 2021, many businesses stocked up on essential products. Now they find themselves in an overstock position for a significant number of SKUs. For those businesses, especially, now is the perfect time to examine their current product mix and operational procedures to determine how these elements affect their organization’s health.
To improve your inventory results the first step is to create and foster a loss prevention mindset in your business. What does that look like? First, establish clear policies for managing inventory, beginning with the receiving process and continuing until the product is sold.
Condition and dust merchandise on the shelf regularly to maintain a saleable condition and store any overstock in a clean, dry location to prevent damage. Also, ensure you implement retail price changes promptly to prevent shrinkage due to margin loss.
Training your RV technicians to consult with the parts manager before removing merchandise from the retail store is critical. The entire staff should be trained in inventory management. Post your cycle count and inventory audit results, and celebrate improvements.
Another important tool that helps with efficient inventory management is a robust point-of-sale (POS) or dealer management software. A POS system typically replaces a cash register in a retail establishment and can track inventory and record transactions such as purchases and returns. Also, many POS systems offer basic to moderate inventory management tools, such as computer-assisted ordering utilities—powered by reorder points (minimums and maximums)—and basic report generation. Some POS packages also include time and attendance programming. QuickBooks POS, QuickStore by Wasp, Microsoft 365 Retail and The General Store are a few of the popular (and effective) brands.
Dealer management systems (DMS) are more comprehensive in design and reach than POS systems. A DMS provides POS system functionality plus modules for managing back-end accounting, unit sales, finance and insurance, service, warranty, rental and storage and parts. By centralizing all business functions, the platform enables you to share customer information visibility across all areas, thus linking processes in different components, and housing all the data in one place. This integration can result in more efficient operations, improved information management and fewer errors. Well-known DMS options catering to the RV aftermarket include Topline Software, Lightspeed, EverLogic, Motility and Integrated Dealer Systems (IDS).
If you are in the market for a new DMS your dealership, I strongly encourage you to speak with representatives from the various companies. Ask for references from current customers and schedule a software demonstration. You may even be able to gain access to an online trial store setup so you can test-drive the software before you make your purchase. In my experience, many software packages offer similar features but can vary in visual appeal, ease of use and pricing.
When shopping, ask pointed questions about technical support, such as hours of availability, response rate, upfront costs and hidden fees. Think about the processes important to you in managing your parts and service operation.
Does the software support label printing? Does it support a cycle counting program? Does it support the establishment of bin locations and the ability to easily update this information?
Buying a DMS or POS system can be a major purchase, which you will be living with for years. Currently, the market offers numerous options ranging from $500 to $100,000, making the retail technology goal reachable for all.
If your analysis uncovers excessive and/or obsolete inventory, the good news is you can fix this issue. The not-so-good news is doing so will require a moderate amount of effort and buy-in from your leadership team.
As you know, the process, also known as SKU rationalization, is a common strategy for managing the number of SKUs kept in a warehouse or shop. Like in many other industries, the number of available products in the RV aftermarket is at an all-time high. Test this theory by seeing how many brands of scissor jacks you can name, just off the top of your head!
Some well-known research states that as much as 35%-40% of an average business’ total inventory comprises slow-moving, underachieving SKUs, which collectively equal less than 5% of sales. Read the last line again. Wow!
The first step is to identify the “dog” items, and your POS system can help. Most DMS programs feature a reporting function to pull canned reports and help you make decisions. One key tool is the gross margin report, which lists contributions of every SKU currently stocked in your store. Here, you will learn which items are adding to your bottom line. The aged inventory report, another important tool, can be pulled for a specific time. The report shows a snapshot of which parts are your artifacts.
The final and most crucial step is to act. To address underperforming SKUs, mark them as discontinued in your POS system and move to the “disposal” step. If your list is large, start with the worst offenders and work your way up the list.
While “cleaning house” is not necessary, you must start. First pull all products with discolored labels and distressed packaging as well as those having only one piece in stock. These items should be severely discounted and added to your clearance table or thrown out and removed from the system.
This process can benefit your department by increasing inventory turns, freeing capital invested in merchandise and simplifying off-season activities such as physical inventory auditing and planning for distributor show buys. Although you may face opposition to change within your store, the SKU rationalization process is a beneficial project.
Lastly, your merchandising strategy can serve as an inventory management tool. Key store design decisions, such as fixture height and store layout, can impact retail operations. For instance, placing shorter gondolas—5 feet high is recommended—in the center of the store enables employees to see when a shopper enters, enabling enhanced customer service and loss prevention efforts.
Additionally, a strategic store layout will guide traffic through the space and direct customers toward impulse items as they search for RVing staples such as holding tank treatment and toilet paper. Of course, the most important store layout consideration always must be your customers’ shopping experience. The same statement applies to product mix and placement. Retailers succeed because consumers make purchases, then return.
That said, you can certainly create a customer-centric retail presentation with built-in efficiencies for your staff. Similarly, a centrally located checkout counter provides parts associates better access and a clear view of the sales floor and brings the shopper closer to the employee, which can enhance the customer service impression.
Industry veterans, including myself, are unfazed by the current state of the industry because we have witnessed the ebbs and flows of unit deliveries and interest rates over the years. RVing continues to be a preferred travel method. The fact that 72 million Americans plan to take an RV trip in the next year is the strongest proof statement yet.
Val Byrd is NTP-Stag’s customer merchandising manager. She has worked in the RV aftermarket for the past 20 years and is a leading RV retail expert on store layout/design and aftermarket product display. Previously, she worked in the grocery industry as a retail manager, buyer and promotions manager.