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From the Entrepreneur’s Perspective: What are the inventory control expectations retailers have of vendors?

You do not want to have too much or too little inventory. Either one can cost you. Why?

Too little:

If you do not have the inventory necessary to fill a retailer’s PO, then they are sitting without product and that means lost sales. A buyer is judged on how she/he meets his/her financial goals. If there is an empty spot on the shelf because you couldn’t ship product, that is lost revenue to this retailer. Imagine their dissatisfaction. And yours, because you are losing, too, not only from lost sales, but you don’t want to put yourself in a position of being in the “hot seat” with this retailer and lose their confidence – and thus their business.

Too much:

If you have too much inventory with this retailer, that means your product doesn’t have the sales pull through that the retailer was expecting. It is your job to help manage the amount of inventory they order and to make sure you are marketing your product (through in house programs and outside – social media, PR, advertising). When you feel your buyer is placing too big or small of an order, it’s time to speak up, have a conversation with the buyer as to why they are ordering what they are, and explain your rationale (which is based on your hard sales data). You can work towards a win/win number. A super large PO is not necessarily a good thing. Manage the process, expectations, and your finances. (See my next blog on cash flow considerations as to why a large PO is not necessarily a good thing.)

2 thoughts on “From the Entrepreneur’s Perspective: What are the inventory control expectations retailers have of vendors?

  1. This is a great point, Romy! I am gaining a lot of new wholesale accounts. Many are impressed, but overwhelmed by my product selection. I walk them through their choices asking lots of questions about their clients and encourage them to order less–not more until they establish a sales pattern for their store.

    I also offer sample orders of products that they should be able to easily promote depending on the venue. I think this help me bond with my wholesale customers.

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  2. It’s hard to gauge the correct amount of inventory to stock as you’re working on acquiring new accounts. One thing I’m doing is encouraging my overseas distributors to order in quantities that allow a production run specifically for them and ship it from my factory. This doesn’t deplete my inventory and allows me to offer them better pricing which, in turn, helps them to sell more.

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