Why small businesses are getting rid of excess inventory

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Over the past few weeks, several major retailers have said they are trying to get rid of excess inventory they have accumulated during the pandemic. For example, Target marked down clothing, electronics and furniture, to help get them out the door. Walmart said it canceled billions of dollars in orders, to “help bring inventory levels in line with expected demand.” kohls, Macy’sand Nordström made similar announcements.

And it’s not just the big retailers either. After stocking up on inventory at the start of the pandemic, many small business owners have tried to reduce that inventory this year.

Inventory management is all about predicting how many things a business will sell based on what the business has sold in the past. And right now, making that prediction is not easy.

“I can’t look at what happened in 2020 and 2021 and think it’s going to repeat itself in 2022,” said Brandelyn Green, owner of the hair products company. hair voice.

Green works with manufacturers to make products like shampoos and conditioners. And generally, it supplies its manufacturers with the plastic bottles, caps and other packaging materials in which the products are sold.

Throughout the pandemic, she’s been stocking up on those wraps. But now she is rethinking that strategy.

“I have a lot of inventory, and I’ve honestly tried to get rid of it, instead of buying more and sitting on it,” Green said.

That’s because sitting on all that wrappers takes up a lot of money. And right now, Green said she’d rather hold on to that money, because the economy is so uncertain.

As a result, she’s trying a new strategy: asking the manufacturers who make the hair products she sells if she can use their packaging instead.

“And instead of buying it and shipping it to them, I just use what they have,” Green said. “I don’t have to keep all of this in my own warehouse, nor do I have to pay so much for things I’m not using right now.”

Green said buying packaging from his manufacturers ends up costing him more for each bottle. But she said the extra cost was worth it because it allowed her to buy only what she needed, instead of buying extra inventory and waiting six months or more to get it.

But business owners aren’t just worried about the next six months. They are also concerned about the way business is going right now.

“Business is down,” said Tracey Mangano, owner of Cardsmart Greetings, a greeting card and gift shop in Buffalo, New York. “Inflation is killing us. The prices are absolutely ridiculous for some things, so I just watch my inventory because people don’t want to pay that price.

Mangano said she tries to stock more budget-friendly items, like cheaper gift cards, clothes and jewelry. Meanwhile, it doesn’t stock specialty items as much, like greeting cards congratulating you on getting a driver’s license.

“Maybe I won’t rearrange this right away,” Mangano said. “It’s not the same as getting a wife’s birthday card, or a condolence card, or an anniversary or wedding card. These are the ones you need to keep in stock.

There’s another reason inventory management is so difficult right now: interest rates. Keeping good products in stock often means taking out loans to stock shelves, and borrowing is more expensive now that interest rates are rising.

“If you have a million dollar product and you’re paying 2% to fund it, and now you’re paying 6% to fund it, that’s going to hit the bottom line very hard,” Pat said. Whelan. , who handles imports at Sahadi’s, a Brooklyn grocery store that carries Mediterranean and Middle Eastern produce.

And given the inventory other businesses have been building during the pandemic, Whelan said it’s been difficult to even find warehouse space to store his inventory.

“Someone will say, ‘yeah I have some space, how much do you have?’ And you tell them, ‘well, I’d like to put in about 500 pallets.’ And they say, ‘well, no no, we can’t do that,’” Whelan said.

Whelan said the grocery store is reducing inventory. This means slowing down its imports to help free up space.

In the meantime, Whelan said he won’t be stocking a single new item until next year at the earliest.

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