Tuesday, September 2, 2008

An Upward Trend In A Downward Market, Part 2

You might take a look at the inventory you sell and see how it has done over a period of time. When times are good, sometimes we just keep doing what we've done. Many are experiencing a slowdown and that is a great time to analyze a lot of things. So maybe your inventory has done okay, but there are too many things that sit unsold all the time. You might try concentrating in the areas of the items that do sell more quickly.

Sometimes people try to be to many things to too many people when if there were more of a focus on a few things, you could become a superstar with them. Let me give you some examples. A local music store here has guitars (a decent selection), acoustic and solid body electric, bass guitars, guitar amps, bass amps, pianos, PA equipment, Recording equipment, drums and accessories, music books, outboard effects equipment and much more. It is really hard to do a good job with all that width in inventory in one location with no online sales. This means that there is a lot that goes unsold for a long period. If they chose to specialize more and drop a number of things and not try to be something for everyone, they could have more depth. Depth is far more important than width. If you have enough capital to afford to have width and depth like Lowe's or The Home Depot or The Musician's Friend, that would be fine, but on a much smaller budget, there can be a better return by narrowing the focus of the offerings.

In a music store I had some years ago, I sold a lot of guitars, but I only carried a couple of different brands, but I had a large selection of the different models they offered, so in a town of 50,000 people, I had more depth than the big store in the city of 400,000. It made it easier to deal with inventory and I could target my advertising better as well.

Let's say you had a store that sells music CD's, so you have as wide a selection as you can afford in inventory. You've got Jazz, Rock, Rap, Blues, New Age, Country, Some Spanish titles, some Classic and so on. With the volume of things on the market today, unless you have a huge budget for inventory, you can only have a very thin surface of coverage. Though you have a lot of width, it is not the least bit deep. Think about specializing in one or two types of music and see what you might do with it. Let's just go for Rock for example. You can get some good depth now if all you sold were Rock CD's. Just think how you could market that and how you could really become known for that specialization. The fear of not having what the customer wants is more of a reality with width and no depth, than with depth and no width. This would also make a perfect online store.

Are there some things that you might do with your inventory that you haven't really thought of until now. Maybe you could add a line of used items and create a consignment venue or you give up new and go totally used. The best thing about used items is that every item is unique. The other best thing about used is there tends to be more profit on used than on new.

Back to the local music store. They could specialize in guitars. Take all the dollars tied up in all the rest of the inventory and focus it into guitars. They might even change the name to have guitar in the name. Perhaps they could make that transition a one year goal. They would have a much stronger draw in having the depth that they cannot afford to have now simply by thinking about their inventory in a different way. That was the point of this exercise.

More tomorrow.

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