If you are struggling with order fulfilment, look at partial fulfilment.

Understanding Partial Fulfillment

Partial fulfilment is a strategy in which the retailer has backorders from customers; they then ship the available items and bill from an order ASAP while leaving the rest on backorder. This approach offers flexibility in order processing, improving customer satisfaction and cash flow.

How Partial Fulfillment Works

The process is straightforward:

1. A customer places an order for multiple items.
2. Your inventory system identifies which items are in stock.
3. When available, the items are shipped immediately.
4. Out-of-stock items remain on backorder to be shipped when available.

So, customers receive a portion of their order now rather than waiting for all items to be in stock before shipping.

The Advantages of Partial Fulfillment

Implementing partial fulfilment brings numerous benefits to your retail business:

Improved Cash Flow

By shipping available items immediately, you can invoice and receive payment sooner.

Enhanced Customer Satisfaction

Customers appreciate receiving part of their order quickly rather than waiting for everything to be in stock.

Reduced Storage Costs

You can operate with leaner inventory levels, reducing warehouse space requirements.

Better Inventory Management

It is easier to keep track of items more effectively.

Multi-Location Stock Management

You can often order directly from the supplier and deliver the goods directly to the customer. Just be careful that the customer needs to get the price. I find this cheaper and more manageable. If they provide it to me anyway, and then I deliver it to the customer, why not have the supplier do it directly? Let them have the headache and cost of delivery.

Increased Flexibility

You can fulfil orders from whichever location has the stock available.

Faster Order Processing

By utilising stock from multiple locations, you can process orders more quickly.

Reduced Shipping Costs

Often, you can ship from the location closest to the customer, minimising shipping expenses.

Implementing Partial fullfilment

Go to business invoicing.

This is a test example of how it works

Now, we have four separate orders from suppliers to fulfil the customer's order

Why wait till the last one of these arrived to ship it out?

Train Your Staff

Properly educate your team on handling partial orders.

Overcoming Common Challenges

While implementing these strategies, you may encounter some challenges:

Clear Customer Communication

Be transparent about partial shipments and expected delivery dates for back-ordered items. I would like to include the shipping details so the customer can directly contact the shipper without me having to deal with the middleman's headaches.

Managing Shipping Logistics

You may need to coordinate with multiple carriers or locations. With our POS System and correct processes in place, these challenges can be effectively managed.

Success Stories: Australian Retail Triumphs

Consider these real-world examples of Australian retailers who have successfully implemented these strategies:

1. Newsagents doing Back to School Often wait for goods to arrive on the order, but why hold up 90% of the order because 10% has yet to come?
2. We do it - We often have to wait for a part, but there is no reason we cannot send out what we have now.
   

   Conclusion

   Learning how to do partial fulfilment can transform your retail business. It enables you to maximise inventory, improve customer satisfaction, and boost revenue.

FAQ

Q: What does it mean when an item is back-ordered? 
A: A back-ordered item is generally out of stock in the shop, but the supplier can still purchase it with a future delivery date once inventory is replenished. The item will be shipped when it becomes available again, and customers are placing orders for when it arrives.

Q: What is the difference between backorder and out-of-stock?
A: The key differences are:
- Backorders can still be purchased and will be delivered when available
- Out-of-stock items cannot be ordered until they return to inventory
- Backorders have an estimated delivery timeframe
- Out-of-stock items have no guaranteed return date

Q: What is the difference between a backorder and a pre-order?
A: Here are the main distinctions:
- Pre-orders are placed before an item is released or manufactured
- Backorders are placed after an item has been released but is temporarily unavailable
- Pre-orders typically require upfront payment
- Backorders usually charge payment upon shipping
- Pre-orders help gauge initial demand
- Backorders help manage existing demand for established products

Q: How does the partial fulfilment process work? 
A: 1. Customer submits an order for multiple items
2. System checks inventory availability
3. Available items are shipped immediately
4. Backordered items are shipped when they become available

Q: Can suppliers ship directly to customers?
A: Suppliers often can ship directly to customers, reducing handling costs and delivery complications.

Q: What do I need to prepare before implementing partial fulfilment?
A: - Train staff on handling partial orders
- Set up proper business invoicing systems
- Establish clear communication protocols
- Implement inventory tracking systems

Q: How do I manage shipping logistics?
A: Coordinate with multiple carriers and locations through your POS System and established processes.

Q: How should I communicate partial shipments to customers?
A: Provide transparent information about:
- Which items are shipping immediately
- Expected delivery dates for back-ordered items
- Shipping tracking details

Q: Will customers accept partial deliveries?
A: Generally, customers prefer receiving some available items quickly rather than waiting for complete orders.

Q: What are the financial benefits?
A: - Improved cash flow from faster billing
- Reduced storage costs
- Lower shipping expenses through optimized delivery routes
- Better inventory turnover

Q: How does it affect inventory management?
A: - Enables leaner inventory levels
- Improves stock tracking
- Allows for multi-location stock management
- Facilitates faster order processing

The retail world operates on a fascinating principle that can transform your business strategy: a tiny fraction of your inventory drives most of your success. This insight, known as the 1% Rule, demonstrates why selective focus is crucial for maximising your store's profitability. To get the 80/20 rule, that fact is that most retail slightly less than 1% of the products you handle typically generate 50% of your total revenue. It isn't just theory – a proven pattern that emerges across various retail sectors.

When I first saw this, it hit me like a brick.

I analysed a retail store in Melbourne with over 20,000 stock lines.

The analysis revealed striking results: just 220 products (about 1%) generated 50% of total sales. Even more remarkable, the top 10 items accounted for 33% of revenue, with the top two products driving 15% of all sales.

Product Performance Analysis

Your POS system is the key to unlocking these valuable insights. Regularly analysing your top-performing products reveals patterns in customer preferences and purchasing behaviours that can guide your retail strategy.

Now, let us find your top 1% stock lines.

Go to register reports and select the top stock report as marked with the red arrow here.

You will get this screen.

Now select your criteria. Note that there is also a tab called "More Criteria," which has more options, plus the traffic (which is people in the shop) option, but we will discuss that later.

I suggest you do this by looking at overall shop sales and then doing in-depth research for each department.

Here, I used the stationery department. In red, I put in 32000 to make sure I got everything. As I like to get a long-term view, I selected a whole year, as small periods can have major fluctuations.

Then you will get a report with all the figures.

It’s that simple

It can be done in less than a minute. 

Now you have them what can we do, well... 

Stock Management Priorities

• Implement automated reorder points for top sellers
• Monitor stock levels with heightened attention
• Adjust order quantities based on sales velocity
• Create buffer stock for your star products

Maximising Visual Impact

Display Excellence

Transform your store layout to showcase your top performers effectively:

• Position best sellers at eye level for maximum visibility
• Create prominent displays that draw attention
• Ensure easy access from multiple angles
• Cross-merchandise with complimentary items

Team Empowerment

Your staff plays a crucial role in maximising the potential of your top performers:

• Share detailed product knowledge
• Provide specific merchandising guidelines

Common Pitfalls to Avoid

Understanding what not to do is just as important as knowing what to do:

Inventory Management Mistakes

• Running out of stock during peak periods
• Failing to maintain adequate safety stock
• Neglecting to analyse seasonal patterns
• Overlooking complementary product opportunities

Analysis Oversights

• Assuming past performance guarantees future success
• Focusing solely on revenue without considering profit margins
• Neglecting to analyse why products perform well
• Missing opportunities for product bundle creation

Implementation Strategy

To harness the power of the 1% Rule effectively:

Taking Action

Transform your retail success today:

Conclusion

Remember, retail success isn't about managing everything equally—it's about focusing your efforts where they matter most. By understanding and applying the 1% Rule, you're managing your store and optimising it for maximum profitability. The data is already in your POS system and waiting for your use. The only question is: Are you ready to use it?

Frequently Asked Questions

Q: How often should I update my top performer's analysis?

A: It only takes a minute to run. Consider making it a monthly review. A regular review helps you spot trends early and adjust your strategy accordingly.

Q: What if my top performers change frequently?

A: Fluctuating top performers often indicate seasonal trends or changing customer preferences. Use your POS system's historical data to identify patterns and plan inventory accordingly. This variability makes regular monitoring even more crucial for maintaining optimal stock levels.

Q: Should I focus only on revenue when identifying top performers?

A: While revenue is essential, consider using profit and sales numbers. High-revenue items often have low margins.

Q: How can I prevent stock-outs of my top performers?

A: Implement these proven strategies:

• Set automated reorder points in your POS system
• Calculate safety stock levels based on lead times
• Monitor daily sales velocity
• Establish supplier backup plans

Q: What's the best way to merchandise top performers?

A: Create a dynamic merchandising strategy that includes:

• Prime positioning at eye level
• Multiple display locations throughout the store
• Cross-merchandising with complimentary items
• Clear, professional signage highlighting key features

We are all balancing inventory—excess stock ties up capital, while insufficient stock can result in lost sales opportunities.

Here is a simple key to improving your stock control that is available now, and it will boost your bottom line.

Understanding the Power of Historical Data

Big suppliers don't just guess about stock control—they rely on historical data. They compare monthly sales year over year to identify trends and patterns. They tend to use 24 months of your data, which helps them account for seasonal fluctuations and make more accurate predictions.

But with a modern POS system, you've got all the tools you need to play in the big league.

Why Your POS Data is Gold

Your POS system isn't just for processing transactions, it full of valuable information. Here's why it's better for you than your supplier's information:

Real-time sales data

Unlike your suppliers, who only see what you've ordered, your POS system shows exactly what you've sold.

Seasonal insights

By comparing data from the same months across different years, you can spot seasonal trends specific to your business.

Stock level optimisation

With accurate sales data, you can decide how much stock to hold.

How to Use Your POS Data for Better Stock Control

Let's walk through a practical example of how you can use your POS data to improve your stock control:

Access your sales report

You'll find this under 'Reports'> 'Sales'> 'Stock Sales Details 24 Month Trend'.

Filter your data

For this exercise, we'll keep it simple:

Exclude inactive stock Filter by department or supplier

Analyse the trends

Look for patterns in your sales data. Are certain items consistently selling well? Do some products have seasonal spikes?

Evaluate stock levels

Compare your current stock levels with your average monthly sales. Do you need to be more overstocked on slow-moving items?

Case Study: Spotting Overstock Issues

Let's look at a couple of examples from our report:

Product A

Average sales: 2 per month Current stock: 6 units Stock cover: 3 months. If you can reorder this product weekly, holding three months of stock might be excessive. Consider reducing your stock levels to free up capital.

Product B

Average sales: 0.5 per month (1 every two months) Current stock: 16 units Stock cover: 32 months (nearly three years!) This is a clear case of overstocking. Unless there's a specific reason for holding so much stock (like a bulk discount or upcoming promotion), you should look at significantly reducing your inventory of this item.

Turning Insights into Action

Now that you've got this knowledge, here are some steps you can take:

Adjust your reorder points

Use your sales data to set more accurate reorder points for each product.

Negotiate with suppliers

Armed with solid data, you can better negotiate order quantities and frequencies with your suppliers. In my experience, most suppliers will listen to you if you have an issue.

Plan for seasonality

If you spot seasonal trends, plan your stock levels accordingly.

Clear out, slow movers.

Identify products that aren't selling well; now you have something to think about and what to do with them.

Focus on your winners

Make sure you're well-stocked with these winners.

The Bottom Line

Leverage your POS data; don't guess. Make informed decisions about your inventory. This approach can help you: Reduce tied-up capital Minimise storage costs Avoid stockouts of popular items With your cash flow

Your POS system is a powerful tool that gives you the information you need to compete.

Our POS software makes it easy to access and analyse sales data.

Contact us to learn how we can help you optimise your stock control and boost your profits.​

We have all experienced inventory nightmares. The most persistent one is dead stock. It sits there, and you see it everywhere in the shop. It is a silent killer of profits, a space hogger in your shop, and a constant reminder of a wrong purchasing decision. Here are some battle-tested strategies used. Often, they are painful, but they do work.

What is Dead Stock

Dead stock is stuff that's not selling. It's inventory that is now growing roots in your shop. I recently saw a shop with items on the shelf that were a few years old. They did not even look sellable.

What is the dead stock analysis?

Deadstock analysis involves:

-Identifying non-selling inventory

-Calculating the cost of holding this inventory

-Determining reasons for lack of sales

-Assessing the impact on profitability and cash flow

-Developing strategies to prevent and manage dead stock

The Hidden Costs

Tied-up capital

That money could be working for you instead of gathering dust.

Rent costs

You are paying for every square metre of your shop; here, you are paying for space for nothing as the stock there is not selling.

Opportunity cost

You could be stocking items there that sell instead.

Other costs

You are paying for shoplifting, insurance, staff cleaning, etc. All for stock that does not sell.

How do you determine dead stock?

Here's how you spot dead stock: Set up specific criteria. Different retailers use different rules.

Time

Items that haven't sold in 6-12 months (varies by shop and industry)

Excess inventory beyond reasonable selling expectations

Products with little to no customer interest. Your staff will know this.

Outdated or obsolete products

Also, check for obsolescence; the sale cycle is only a month in fast-moving stock lines on movie toys.

Quantity

Selling less than 60% of purchased inventory

Damaged or unsellable condition

Look at your shelves for outdated, damaged, or low-quality items. Listen to your staff as they often know these items.

What is a dead stock register?

A dead stock register is a record-keeping system that tracks an organisation's movable property or assets that are no longer in use or have no sales potential. It includes product name, buy date, quantity, and current condition. Your POS system should have one, and its weight should be gold for tracking dead stock. If you have our POS System, follow the instructions here. It will take seconds to give you the result. I have seen results of over $50,000 of dead stock coming out. 

Regular stock reviews.

I make it a habit to review my inventory quarterly.

Strategies for clearing Dead Stock

Alright, you've identified the dead weight. Now what? Here are some tactics I've used successfully:

Discount, But Do It Smart

Slashing prices is the go-to move, but be strategic. I want it out.

How do you clear stock quickly?

Nothing beats flash sales to clear stock quickly. In my experience, end-of-financial-year and stocktaking sales work very well.

Bundle It Up

This is my go-to method. I find that pairing my dead stock with an item that sells and then using the item that sells as a push for a dead stock item works well. I offered my clients some monitors with a screen filter. From my client's point of view, they were getting a monitor and screen filter together at a beautiful price; from my point of view, I was moving monitors with something that had no value to me. It was a win-win situation.

Try a new sales channel

If it's not selling in your shop, try online marketplaces. I've had success moving dead stock on eBay. You could also try Facebook Marketplace.

Use it yourself

Sometimes, you can use the products yourself. You do not need them, but consider them something you got for nothing.

Donate

Sometimes, it is best to cut your losses. I donated to a charity, which bought a pile of old computer parts for free. We got a tax deduction, and we felt good about doing something for the community.

Preventing Future Dead Stock

The best way to deal with dead stock is to prevent it. Here's how:

Improve your forecasting

Use your POS data to predict trends and seasonal fluctuations

Implement just-in-time inventory

To reduce risk, you want to keep your stock levels lean, so buy in small quantities and regularly rather than in large orders. Your automatic ordering in our POS System can handle small orders over a short period.

Can you get a sale or return

It is often worth giving up some margin if you can get this, If, say, you were to buy ten items and be stuck with an item in dead stock at a 50% margin, your actual margin is now 44% If, say, you were to buy ten items and be stuck with two items dead at a 50% margin, your actual margin is now 37.5% If, say, you were to buy ten items and be stuck with three items dead at a 50% margin, your actual margin is now 28%

The Role of Technology

A robust POS system with inventory management features can help. Here's why:

Real-time tracking

Know what's in stock and what's selling at any given moment.

Automated reordering

Set up alerts for low stock to prevent stockouts of popular items

Sales reporting

Identify trends and slow movers before they become dead stock

How do you write off dead stock?

If you do not get rid of it but want to write it off, you need to ensure proper documentation to your accountant for tax purposes

-Identify the items you will write off

-Determine the book value of the dead stock. Your POS System should have that.

-Note a journal entry to the accountant to remove the value from inventory assets. 

-Do not adjust the cost price in your POS data unless you intend never ever to order that item again. 

Conclusion

Deadstock is a retail reality but doesn't have to be a business killer.

As a seasoned retailer, you know how putting the stock details into your POS System can be a big job. That is why file imports are a game-changer for your Point of Sale (POS) system. They are not just time-savers but also accuracy boosters.

Latest Supplier catalog integration

For those of you working with Henderson Greeting and Waterlyn, their electronic catalogue lists are now available for you to import into your POS system. This integration means you can keep your inventory up-to-date with minimal effort and ensure you have their latest products on file.

What We Did in Troubleshooting

If you take the file from us, you know that it has been

A. Checking for Hidden Characters

Some suppliers use special characters, which can wreak havoc during imports. We check for these sneaky troublemakers before giving you the import file.

B. Pricing disasters

Pricing disasters are no joke. I have seen a few pretty bad ones; recently, a pack of 10 cards, each at $1.50, was listed as $22.50.

Decimal places management

We have also implemented a double-check system to ensure our POS and import files agree on decimal places. In Australia, we use commas for thousands of separators and dots for decimal places (e.g., $8,123.03). However, most European countries do the reverse, using dots for thousands and commas for decimals, so in our example, it becomes $8.123,03. This difference can lead to significant pricing errors if not properly managed.

C. Barcode duplication 

It's 2024, and suppliers keep putting the same barcode on different items. This causes major problems, particularly if the items are priced differently. 

POS system import

It is essential to improve to succeed in retail constantly. By improving your methods of bringing in products, you save time and set up your business to continue doing well.  

We can help each other. I'm ready to listen if you want to discuss this or share when things went well or poorly.

Economic Order Quantity(EOQ): A Deep Dive into the Science of Inventory Management

Over many years, I've seen firsthand how crucial effective inventory management can be. One tool that started the science of modern inventory management is the Economic Order Quantity (EOQ) formula. Since I received an enquiry about it last week, I thought I would explore the concept and show how it can benefit retailers.

The Origins of EOQ

A bit of history: in 1913, a mathematician named Ford W. Harris was pondering a theoretical shop stock control. He wasn't thinking about colourful products or bustling aisles. Instead, Harris was fixated on a more fundamental question: How often should a shop order its stock to keep costs down and do inventory optimization?

He derived his formula called EOQ, and modern inventory management was born.

Breaking Down the EOQ Formula

The formula he derived is this:

EOQ = Sqr(2 x D x K / h)

Where:

• D = is how much you sell in a period.
• K = Cost per order
• h = Holding cost per unit (how much it costs you to have the stock sit in your shop for a period)

Generally, it's over a year, so let's break this down with a real-world example and see what it can tell us.

A Real-World Example: The Stationery Shop

So I took a stationery shop that uses our POS System. Here's how we would use the EOQ formula to find how many times we should order to give us the best profit.

Annual Demand (D)

It sold 60,575 items last year in the shop. That's a lot of pens and paper!

Cost per Order (K)

I asked the woman who was in charge of the stationery order, and she told me that each order there was about

• 3 hours to place an order @ $25/hour
• 4 hours to pick up the order @ $25/hour
• $10 for petrol
• $20 for delivery fees

Total: $205 per order

Annual Holding Cost per Unit (h)

This is where things got eye-opening. We included:

• Bank fees and overdraft: 2.5%
• Shrinkage (a polite way of saying 'theft'): 1.5%
• Portion of rent: $15,000 a year
• Other costs from profit and loss: $10,000

When we crunched the numbers, it came to $1.08 per item per year. That's a lot if you think about it.

Let us do the calculation.

Now we have the figures, let us calculate the following:

EOQ = √[(2 x 60,575 x 205) / 1.08]

Let's break down the calculation step by step:

1. First, multiply 2 x 60,575 x 205 = 24,835,750
2. Then, divide this by 1.08: 24,835,750 / 1.08 = 23,014,583.33
3. Finally, take the square root: √23,014,583.33 = 4,797.35

Rounding to the nearest whole number, we get 4,797. That is a lot of ordering. 

Interpreting the Results

When we plugged all this into our EOQ formula, it suggested ordering 4,779 times a year. That's many times every day!

I don't know about you, but I've never met a retailer who wants to place orders daily. It's just not practical.

Practical Tips from EOQ

While the EOQ formula does not here give you a perfect ordering schedule, it does highlight some crucial points:

1. Holding stock is expensive: $1.08 per item per year adds up quickly. Our total inventory of 60,575 items is $65,421 annually, just in holding costs!

2. Frequent, smaller orders can be cost-effective. This approach aligns with many successful retailers' formula of order to do its' "little and often" philosophy. 

3. One size doesn't fit all: What works for our stationery shop might not work for a pet shop or a newsagency. 

How do you derive your figures using POS Solutions?

Calculating a simple EOQ requires three variables, which I will discuss point by point, quoting two departments as an example for you to work with as an example of stationery that I used above.

The demand quantity (D)

This is the quantity of goods moved.

There are two ways of doing this: the top sales report will give you this figure.

Cost of ordering (K)

I just asked about the procedure used in the shop and then costed it.

Holding costs (h)

Your profit and loss will help you here. If you are doing it by department, take a reasonable percentage of the total costs. 

I got the average stock holding to calculate my holding costs. So I went to the stock turn report in the stock reports. 

The Bottom Line

Executive summary

Here are some practical tips:

1. Calculate your holding costs: You might be surprised at what you find. Include all inventory costs, such as warehouse space, insurance, and potential depreciation. Your profit and loss will tell you most of this.

2. Review your ordering process: Write a typical order scenario in your shop. While doing so, I suggest you streamline this process to reduce costs. Maybe bulk ordering certain items could lead to discounts that offset increased holding costs. 

3. Consider a mix of strategies: Perhaps you should place frequent orders for fast-moving items and less frequent orders for others. Use EOQ as a starting point, but adjust based on your business's unique needs.

4. Use technology to your advantage: Our POS system can help you track inventory and make smarter ordering decisions frequently and accurately.

EOQ does not offer a flawless ordering plan. It indeed confirms certain crucial aspects of inventory management. 

Over the years in retail, I've seen that the most prosperous retailers use data and their gut feelings. So, while you should crunch the numbers, don't discount the value of your gut feelings.

Frequently Asked Questions (FAQ)

What is Economic Order Quantity (EOQ)?

Economic Order Quantity is an analytics formula for determining the optimal number of times to order stock to maximize profit.

How is EOQ calculated?

The EOQ formula is: EOQ = √[(2 x D x S) / H], where D is annual demand, S is setup cost per order, and H is holding cost per unit per year.

What are the benefits of using EOQ?

EOQ is a theoretical construction that helps balance ordering and holding costs, minimise total inventory costs, and optimize stock levels.

Can EOQ be used with seasonal products?

Probably not. EOQ becomes less effective if, over some time, you have fluctuating demand.

What's the difference between EOQ and reorder point?

EOQ determines the best number of times to order, while the reorder point is an inventory management system that concerns inventory levels. The EOQ may help you to derive this reorder point.

How can I implement EOQ in my business?

Your profit and loss statement and your POS System will give you the information you need to calculate your shop's EOQ. If you do so, please let me know what you get.
 

I've seen firsthand how the right strategies can transform a retail business. Today, we're diving into selling fewer products, which can, although it sounds counterintuitive, sell more. Using your POS System, Product assortment optimisation can revolutionise your store. Currently, each product you have needs to be displayed, and if you have two or three similar products for the same potential market, you need more display room and more tied-up capital in stock. 

The Challenge of Customer Choice Overload

Imagine walking into a shop brimming with products. Sounds great, right? Not always. This abundance often leads to what experts call customer choice overload. Too many options paralyse decision-making, potentially driving customers away empty-handed.

The Hidden Costs of Excess Inventory

Beyond customer confusion, an expansive product range can create significant challenges:

1. Display space limitations
2. Tied-up capital in stock
3. Complex retail inventory management

Leveraging Your POS Software for Smart Decisions

Your Point of Sale (POS) system is more than just a cash register - it's a powerful tool for product assortment optimization. Here's how to use it effectively:

It’s easier than you think

Go to Register reports.

Now select "Top N Stock Sales for a Given Period"

Now, the following comes up.

I will select a day, for example, but you usually would put in a year now select a department.

Out comes a report with the top sellers

Now, everything on this list needs to be marked. Everything *NOT* on this list is considered *CULLING*

Implementing Your Optimisation Strategy

1. Monthly Review: Regularly assess your product performance
2. Strategic Culling: Remove underperforming items
3. Smart Diversification: Introduce new products that serve different needs

Addressing Key Retail Concerns

For Retailers Looking to Streamline Product Offerings

Implementing a 'less is more' approach doesn't mean limiting your business. It's about curating a selection that truly resonates with your customers. Use your POS system to identify top sellers and structure your product mix around these vital items.

Enhancing Profitability:

Concentrating on popular items can lead to better supplier deals due to larger orders. This and lower inventory management costs can significantly boost your bottom line.

Improving Customer Experience:

A carefully selected product range makes your store more user-friendly and enjoyable. It shows you understand and value your customers' needs and time, potentially increasing loyalty.

Optimising Inventory:

Fewer product lines mean easier stock management, less storage space required, and faster stocktakes. Your POS system becomes an essential tool in maintaining optimal inventory levels.

Reducing Operational Costs

A streamlined inventory leads to lower storage expenses, less deadstock risk, and more efficient use of retail space. It also frees up staff time for enhanced customer service.

Conclusion

Embracing product assortment optimization through selling fewer products is a powerful strategy for small retailers. It addresses the issue of customer choice overload, simplifies retail inventory management, and can lead to increased profitability and customer satisfaction.

Keep in mind, the aim is to present a carefully chosen array of products that satisfies your customers' requirements without causing decision fatigue. Begin with small changes, let your POS analytics inform your choices, and observe how your refined product lineup revolutionises your retail operation.By concentrating on the essentials - your top-performing items and your customers' desires - you're not merely reducing inventory, you're enhancing your sales strategy.

Have you ever found yourself shivering in the cold weather, wishing you'd bought that cosy jumper you have at home? Or perhaps you are hot and want a cool drink? These weather-induced moments of need aren't just everyday inconveniences—they're untapped goldmines for savvy retailers. Just look at the recent cold spell that swept across Australia, now sending sales of winter gear soaring.

A research paper here done on the weather stated

"Analyzing daily sales at a national apparel and sporting goods brand’s stores reveals that weather effects on store sales are surprisingly persistent, even after accounting for shoppers simply changing when and where they make their purchases. Moreover, sales at stores that have more experience with adverse weather events have a lower response, suggesting that adaptation may reduce the negative impact of increasingly severe weather on sales."

As someone who has analysed sales data for many retail clients, I've seen firsthand how changes in temperature and rain can affect product sales. It is not rocket science. Different weather conditions change what people buy. This is a chart I made based on data from one of our users. 

This stacked bar chart showed the sales performance of different product categories (Drinks, Clothing, Accessories, and Indoor Items) across three weather conditions (Hot, Cold, and Rainy Days). The y-axis represents sales volume, while the x-axis shows the different weather conditions.

Key insights from this chart:

Drinks have the highest sales on hot days, as expected.
Clothing sales peak on cold days, likely due to increased demand for warm clothing.
Accessories like umbrellas showed the highest sales on rainy days.
Indoor items see increased sales on both cold and rainy days, possibly because people spend more time indoors during these conditions.

This chart effectively illustrates how different product categories perform across various weather conditions, allowing users to quickly identify trends and patterns in weather-based sales.

Hot Days, Cool Profits

When the mercury soars:

• Cold drinks sell
• Sunscreen sells

Chilly Weather, Warm Sales

As soon as it gets nippy:

• Hot drinks sell
• Jumpers and beanies become must-haves
• Heaters become essential purchases

Rainy Day Retail

When the rain comes down:

• Umbrellas sell
• Raincoats become good sellers
• Indoor activity items like books and board games see increased interest

This weather-driven consumer behaviour is critical to understanding and predicting your sales patterns.

Turning Weather Data into Retail Gold

So, how can you use this info to boost your sales? It's all about being prepared and using your point of sale (POS) software to your advantage for weather-based inventory management and retail sales forecasting.

Dig into Your Data

This is where our POS software for weather trends shines, as your POS system is a goldmine of information for retail data analysis. Here's how to tap into it:

Go to Register Reports

Now select "Top N Stock Sales for a Given Period.

Put in a date of a hot day and see what you get. Do a few. Now put in a cold day and so on.

Do this also for cold and rainy days—you'll start seeing patterns emerge. 

These are products that sell in your shop in those days. 

Stock Smart, Sell More

Once you've got your data, use it for weather-responsive merchandising:

Make categories for stock that sell well according to the day's weather, e.g., start with hot, cold, and wet.  Get the appropriate signs.

If a day in the morning is forecasted to be such a day, these signs and products will be placed in a prominent position in the shop. 

Communicating Weather Strategies to Staff

Your team plays a crucial role in implementing your weather-based strategy. Here's how to get them on board:

1. Hold regular briefings on upcoming weather and corresponding product focuses
2. Train staff to understand the connection between weather and sales trends
3. Encourage staff to provide feedback on customer behaviour during different weather conditions
4. Create simple checklists for weather-based display changes

FAQs: Weather and Retail

Q: How quickly do weather changes affect sales?
A: Impact can be almost immediate, especially for impulse buys like umbrellas or cold drinks.

Q: How far in advance should you plan for weather-related changes?
A: Today's seven-day forecasts are generally fairly accurate. 

So I would suggest that you check the 7-day forecast each week in your area and note any abnormal hot, cold, or rainy days coming up.

The Bottom Line

While Mother Nature may be unpredictable, your retail strategy should not be. Make sure you have the right approach and tech tools, to take advantage of the weather to make sales. Your POS system isn't just a glorified cash register—it can be a predictor of your customer behaviour. With some planning and the right tech, you can ensure your sales forecast is always sunny, no matter what's happening outside.

Have you noticed the weather affecting your sales? I'd love to hear your experiences! Comment below or reach out if you need help setting up your POS system to weather any storm.

Stay savvy, and may your sales be ever in your favour!

Did you know that boosting your stock turn rate by just 20% could dramatically increase your profits? 

What Are Stock Turns?

Stock turns, or Inventory Turnover, measure how often you replace your inventory over a given period. It is a crucial indicator of your shop's performance.

The Basic Formula:

Manually, it is calculated by

Stock Turn = (Cost of Goods Sold) / (Average Inventory Cost)

Step-by-Step Guide to Calculate Stock Turns Manually

Calculate your Cost of Goods Sold (COGS) for the period.

Determine your Average Inventory Cost
Add your beginning and ending inventory values
Divide by 2

Divide COGS by the Average Inventory Cost

For example:

COGS for the year: $100,000
Start of the year inventory: $25,000
End of financial year inventory: $15,000
Average Inventory: ($25,000 + $15,000) / 2 = $20,000
Stock Turn = $100,000 / $20,000 = 5

The Impact of Stock Turns on Profitability

Cash Flow Management: Higher turns mean you're not investing in the slow-moving stock. This improved cash flow allows you to reinvest in your business.

New stock: Moving your inventory faster keeps your stock current, reducing the risk of obsolescence.

Space Efficiency: You can use your valuable retail space better by keeping fast-moving items on hand.

The Magic Number: 12

Many retailers aim for a stock turn of 12. Why? It's simple:

You're likely paying suppliers monthly
A turn of 12 means you're selling out monthly
This means you do not pay for the stock you sell.

How to Check Your Stock Turns with POS Software

Our POS software has made inventory analysis more manageable than ever. Here's how to check your stock turns:

Open your POS software
Navigate to Main Menu > Cash Register > Register Reports
Expand the 'Stock' section
Select "Show Stock Turn by Dissection and Item"

​Here is the sample I produced showing the stock turns by department.

As a general rule, the higher the score of your stock, the better. This, however, is not always true; a stock turn that is too high often shows that you are understocked. For example, you have an item you could sell once daily, but you order one weekly. So every week, you have sold one, so at the end of the year, you have a score of 50, which is a great score, but you have lost 250 sales that you could have had because you could have sold one a day and all you have sold is one a week.  

High Turns (8+): Great! But are you missing sales due to running out of stock? 

Mid-Range (4-7): Good, but room for improvement.

Low Turns (1-3): Time to reassess. Are prices too high? Quality issues?

Common Pitfalls to Avoid When Optimizing Stock Turns

Over-optimizing: Pushing for extremely high turns can lead to being out of stock.
Ignoring seasonality: Some products naturally have different turn rates at various times of the year.
Neglecting customer service: Don't sacrifice having enough stock to meet customer needs to improve your turns.
Forgetting about lead times: Consider how long it takes to restock when planning your inventory levels.

Our POS systems offer a range of features to help with inventory optimization:

Real-time tracking: Get up-to-the-minute data on your stock levels and turns.
Automated reordering: Set up automatic purchase orders when stock hits a certain level.
Predictive analytics: Use AI-powered (FOCUS) forecasting to predict future stock needs. Our software includes this feature for free.

FAQ: Common Questions About Stock Turns

Q: What's a reasonable stock turn rate? 
A: It varies by industry, but generally, a turn rate of 4-6 is considered good, while 6-12 is excellent.

Q: How often should I calculate my stock turns? 
A: Monthly calculations are ideal for most businesses.

Q: Can stock turns be too high? 
A: High turns may indicate that you're losing sales due to running out of stock.

Q: Should I use the same stock turn goal for all products? 
A: No, different product categories may have different optimal turn rates. Use our POS data to set appropriate goals for each category.

Wrapping Up

Take time to analyse what these scores are telling you. This will help you to identify the actions required to improve profitability and return on investment.

Now, you need to analyse your stock and check each department to see what is working and what is not. A score signals bad sales and that you are more stock than you realistically need at any given time. Maybe you have a pricing or quality issue, but that department has a lot of obsolete stock. If so, move the obsolete stock to a different department, as it will not give you fair figures here.

A high score indicates greater profitability and a good return on investment, although, as I stated, it may also mean that you are not ordering enough.

Remember, every figure has a story.

Can you imagine a world where every purchase involves manually entering the department and the price of every item at the checkout? Such a scenario might appear to have been lifted from a 1980s video game, but it was a fact for retailers then. Then came the barcode.

Fifty years ago today, on June 26, 1974, the first commercial barcode scanning was done on a Wrigley's chewing gum pack. Those stripes may seem simple, but they revolutionised how we shop!

After the barcodes were released, we released the first magazine barcoded return system here. At first, because it was so new, we had to manually put on a barcode sticker as many magazines did not have barcodes.

I am in the middle, boy. I was proud that day as no-one had ever done anything like this before, and next to me was Joe, the programmer who did most of the analysis for the returns. We had a deal between us; I handled the newsagency stuff and the data handling, and he dealt with the magazines. It was in DOS. The result is that we saved our clients a lot of time and money.

How the Barcode Changed Retail (and Saved Money!)

Before barcodes, cashiers rang up sales by manually entering in price and department codes. This process was slow and error-prone, frustrating customers and costing retailers money. The barcode, however, changed everything. Here's how:

• Faster Checkouts and Happy Customers: A simple scan eliminates the need for manual code entry, resulting in shorter queues, happier customers, and improved staff productivity.
• Reduced Errors and Happy Staff: Barcodes are much more accurate than manual code entry, leading to fewer mistakes and happier staff (no more hunting for the correct code!).
• Improved Inventory Management and Reduced Costs: Barcodes allow retailers to track stock levels more efficiently. This means there's less chance of running out of popular items, less money tied up in unnecessary stock, and better-informed ordering decisions—all contributing to significant cost savings.
• Enhanced Customer Experience: Beyond speed, barcodes enable features like price verification at checkout, reducing customer confusion.

The Barcode and Modern POS Systems: A Powerful Partnership

The barcode laid the foundation for modern POS systems like the ones we offer at POS Solutions. Here's how they work together to streamline your operations further:

• Product Data at Your Fingertips: When you scan a barcode, the POS system instantly retrieves the product information, including its name, price, and the applicable GST Code.
• Automatic Inventory Updates: Each scan automatically updates your inventory levels in real time, ensuring you always have accurate stock data and can make informed decisions about reordering.
• Sales Tracking and Informed Decisions: POS systems use barcode data to track sales trends and identify popular items. This information helps you decide stock levels, promotions, and future ordering.
• Seamless Integration for a Smooth Experience: Modern POS systems seamlessly integrate with barcode scanners, creating a smooth and efficient checkout experience for you and your customers.

Next Step of the Retail Industry

The introduction of a barcode, no doubt, has been a breakthrough, but the technology is still developing. We at POS Solutions are very optimistic about the future of retail efficiency, involving the following, which we are introducing:

• 2D Barcodes: These data-rich barcodes can hold more information than traditional barcodes, potentially including product descriptions, origin details, and even expiry dates.
• QR Codes: These square-shaped codes can be scanned using smartphones, opening up new possibilities for customer engagement and product information access.
• RFID Tags: These tiny radio frequency chips offer even greater tracking capabilities and can be used for tasks like automated inventory management.

These advancements can inspire, but the barcode is essential in the retail ecosystem. Remarkably, this solution made the most significant difference in modern retail.

Ready to leverage the power of barcodes and modern POS systems for a more efficient and profitable future? Contact POS Solutions today to learn more about our innovative solutions!

Now, at the end of the financial year, we are releasing this video, which provides a complete YouTube tutorial on how to do the physical count for a stocktake using our POS Software.

We walk you through this essential inventory management system and explain the options and best practices.  This video would be useful as a training and reference resource for anyone who needs to perform stock control using POSBrowser. 

It covers the two main approaches—doing the full shop at once or breaking it down into smaller location-based sections. Although both work, we advocate the location-based approach, which we find more efficient. Prepare your plan by dividing the shop into sections. Then, stocktake each section one at a time. This makes the process more manageable and accurate. 

The video demonstrates creating a new stocktake, correctly scanning/counting items, and correctly recording it. We also cover the necessary settings like "Check Stock Movement" if you are doing it during trading. It shows how to run reports to see discrepancies, cost valuations by department, and more. The reporting capabilities highlighted allow you to analyze and audit your stock position.

The clear explanations and visual demonstrations make it a valuable reference for new and experienced users. I suggest getting your staff to run through it, too.

"The integration between stocktake data and our ordering process has streamlined our operations significantly. We've reduced carrying costs, minimized stock-outs and given us accurate reporting." 

Mastering stocktakes is essential for the success for any retailer.

This question arises every year and again this year. Here, I will discuss the importance of stocktaking for businesses and address common objections. 

We also explore the advantages of performing a stocktake, even when facing challenging circumstances. Additionally, we highlight the potential risks of skipping a formal stocktake and how implementing regular rolling stocktakes throughout the year may offer better results.

Firstly, stocktaking is a critical process for retailers, ensuring accurate management of inventory levels. Despite perceived challenges, I think its benefits far outweigh the drawbacks. Modern POS software can streamline the stocktaking process. It's not just for the ATO; I have seen many retailers whose profits have mysteriously disappeared. We are not talking small figures here. Theft, damage, or errors of the inventory mean a significant time loss to the retailers, which also implies a substantial loss of revenue due to the problems of the businesses. You can substantially decrease the losses and increase the revenue by carefully regulating your inventory.

Objections to Stocktaking:

Stocktaking can be viewed as a tedious and resource-intensive task, with several arguments against its necessity:

It consumes time and effort
It incurs additional costs without generating revenue
Disruptions to daily operations can negatively impact sales

These concerns are legitimate; however, there are compelling reasons to perform a stocktake despite them.

Legal Requirements for Stocktaking:

According to the Australian Taxation Office (ATO), businesses must perform a stocktake if they cannot accurately estimate their current stock levels based on historical data and do not meet specific conditions. These conditions include:

The difference in stock values between the previous financial year and the current financial year is less than $5,000

Using a reliable method, you can reasonably estimate your current stock levels and maintain sufficient evidence to substantiate your estimates.

Please read this page from the ATO here on this question and pay particular attention to the square I marked in red. 

I am sure every client I have has at least a $5,000 inventory difference between this fiscal year and the previous one. 

It is your responsibility to affirm your stock figures to the ATO, at least to their complete satisfaction, so that the ATO will regard your figures as reliable evidence.

Rolling Stocktakes vs Formal Stocktakes:

There's debate over whether to conduct traditional annual stocktakes or opt for rolling stocktakes throughout the year. While rolling stocktakes offer real-time insights, they can be more resource-intensive than formal stocktakes. Both methods have their merits, but accuracy in stock valuation remains paramount for tax purposes.

Advantages of Performing a Stocktake:

A well-executed stocktake offers numerous benefits for businesses, including:

By comparing the inventory on record with the actual stock, one can obtain the data needed to make better stock orders, properly manage inventory, and prevent loss at the premises in cases of theft or things are just out of place. This information can then be used to devise better security measures.

Products are checked to see how many are near expiry and if stock is spoilt and damaged. Often, this allows last-minute sales to recover whatever value is left in these goods.

Getting technology that provides 24/7 visibility of the inventory status and the capability to view, track, and control the flow of goods in and out of the business will ultimately increase operational efficiency, accuracy, and, more importantly, customer satisfaction.
 

POS Software Benefits:

Our POS software comes equipped with robust inventory management features to simplify stocktaking:

• Barcode scanning: Scan product barcodes for faster and more accurate counting.
• Real-time inventory updates: You do not need to close the shop to do a stocktake.
• Stocktake reports: It generates detailed reports to analyze discrepancies and identify trends.

Conclusion:

With their circumstances, different businesses ought to decide whether to implement a formal or rolling stocktake. The legal aspects and benefits, which must be balanced with each approach, should form the basis for a decision. By taking these necessary steps, you can make wiser decisions. 

Whichever way you go, I wish you all the best for your business.
 

Somehow, I doubt anyone in the world has been as involved in stocktakes as I have. Stocktaking is one of the best practices and a crucial process for any business in 2024. It involves physically counting your inventory to ensure your records match what you have on hand. This can be daunting, but it is the best way to control inventory. It is also your way of testing your inventory management system. For example, Excess Inventory, *Eating Away* at your profits in 2024, and checking your inventory data.

Why Inventory Management Matters

In today's dynamic market, real-time inventory visibility is essential for success.

Current studies are showing "found that inventory record inaccuracies are a significant problem, affecting approximately 60% of stock  analysed. Interestingly both positive and negative inaccuracies had a detrimental effects on sales and correcting these inaccuracies led to a 4-8% increase in sales" 

Effective inventory management allows you to:

Stock management

Regular stocktaking helps you identify excess inventory and your inventory tracking and assess your current inventory control. For example, people often find "dead stock" just sitting there and holding their cash flow.

Improve Inventory Accuracy

Accurate inventory levels are the foundation for informed decision-making. Regular stocktaking ensures you have the right stock to meet customer demand.

Accounting requirements

A properly conducted stocktake is the best way to prove and justify your stock holding to the ATO. Estimates are always dubious to an auditor, and if the auditor feels that you do not have good inventory management techniques and stock keeping, they can make and use their estimates. I have seen this problem happen with clients that have used cyclic stocktakes.  I have discussed this issue here.

Tips to get your stocktaking procedure going in 2024 going.

Preparation is Key

Thorough preparation is critical to a successful stocktake. Schedule your stocktake for a quiet time, organise your shop as much as you can before, and consider what people are best for getting faster and more accurate counting. Remember as well that:

-Stock counting tends to work faster if people are in teams, so consider dividing people into teams of two or three people; I find that two people to count and one to record the count makes an effective team.

-A stocktake is an excellent opportunity to check pricing, barcode, and product labels while counting.

-It is also an excellent opportunity to clean the shop.

-Plan how to split the task into blocks to keep your staff motivated and alert. We recommend that you divide your shop into manageable counting areas. Label each section clearly. You should aim for each area to be something that can be done in one to two hours max. This makes it easier to have regular breaks

-If you have a warehouse, make sure it is not missed. Often, it can be done on another day.

-Move stock as much as possible to the appropriate counting area. You want stocktake day to be as simple and fast as possible.

-You can take a few days as a stocktake can be done in more than one day.

-Sometimes, you cannot count but will have to use estimates.

Check your Technology

Modern inventory management software has revolutionised the stocktaking process. Our POS system integrates with stocktaking software, automates tasks, and streamlines the entire process, but make sure the setup you intend to use works. I have seen how frustrating it is for people to assemble their teams, start the stocktake, go to record stock levels, and discover something isn't working. Make sure your stocktaking software and equipment work now! 

Test your equipment and verify it works. Confirm that the chargers and batteries are all fully operational and ready for use. It is also an ideal opportunity to familiarise yourself again with their operation.

If you can use laptops or, better still, PDTs, both will be real-time savers as these can move around the shop rather than going to the items to count. If you have a laptop, ensure it works with our POS Software.

Review how stocktakes work.

Develop a Systematic Counting Procedure

Establish a clear and consistent method for counting your inventory. This could involve counting by sections or categories to ensure no stock is missed or double-counted. In Australia, it is generally considered easier to count from left to right—bottom to top. Make this a rule before you start, and make sure everyone knows this in advance.

-As you count, prepare place markers to mark counted areas to avoid missing or double-counting sections.

Common stock issues

These problems you need to address before you start the stocktake:

-Have a problem holding area where problem items that appear while doing a stocktake can be moved too, allowing you to move on in the stocktake and not be held up. You are trying to streamline the process.

-Move as many problem items into this holding area as possible before you begin.

-Review the types of inventory you have. For example, put all laybys, consignment items, or items waiting for dispatch in separate holding areas. Later, you must check with your accountant about how they want these items handled.

Conclusion

These tips will help you make a successful stocktake. If I missed something, please let me know.

We are reviewing our complete stocktaking guide, so give us a few days to review it. We will also release some other guides on specialised issues in stocktaking. These guides will equip you with the latest knowledge to improve your bottom line.

Happy stocktaking!

Software training

Introduction

Training on point-of-sale software is an essential component of your business. It is a powerful business tool that can manage inventory management, customer loyalty programs, sales reports, etc of your business. You can do it better if you are properly trained. 

This article examines the benefits of training and answers some often-asked questions.

Benefits of POS Systems Training

Increased Efficiency

With the proper training, you can quickly navigate your POS software, allowing you to focus on other aspects of your business and save time.

Better Service for Customers

If you better understand how your POS software works, you can make it easier for your customers, making them more satisfied and loyal.

Accuracy of the Data

The POS system offers a lot of flexibility. You need to know the correct procedures to enter and manage your data. We provide proper training to give you this knowledge, ensuring your business works with accurate information. We also will discuss if you require the importance of data security training to ensure you understand best practices for protecting customer information.

Improved Control

You have many reports that detail your business in detail. With better information, you can run your business much better. Soon, you'll be able to make better decisions about your business operations and get better results.

> This only works if you have good information.

You do not have to do it alone.

Our POS Software Training Program

Cost

Our software training program is free for our clients in our offices or on Zoom. 

In your shop, there will be charges.

Customization

Our training program can be customized to meet your specific requirements. It can be done using your actual data from the shop.

Expert Teachers

Our experts who contact our training program have years of experience in our software. They know how it works in retail environments like yours. They will be able to provide examples and solutions from actual situations to your issues and problems.

Practical Instruction

These sessions offer hands-on training to use the software and improve your knowledge in a real-world setting.

Flexibility

Training can be done at times that are suitable to your needs. Your staff can receive the necessary training without interfering with minimal business operations.

Continuous Support

Once done, you can book more sessions. There is no limit. That way, you can do a refresher and keep up with all our software updates. 

Frequently Asked About POS Software Training (FAQ)

Q: What is training for Pos software?

A: POS software training is a comprehensive program that teaches you how to use your point-of-sale software. It provides you with the knowledge and skills necessary to manage your business operations effectively. The training covers all aspects of the software, from basic to advanced features and functions relevant to your needs.

Q: Is training in Pos software required?

A: NO, but if you want to get the best out of your software and improve your business, then YES. 

Q: How long does training for Pos software take?

A: How long is a piece of string? Some need a lot of training, and some only a little. Some people use many features of our software, and some only need a bit. The length of your Pos software training depends on your particular requirements. 

As a rule, I recommend it is done in two-hour slots with a coffee break between 15 minutes—more than that, it gets hard to digest.

Q: Is in-person or online Pos software training available?

A: Pos software training is available online and in person so that you and your team can choose the best method.

In-person training provides better hands-on and interactive instruction.

Online training offers more convenience.

Q: Who ought to attend training for Pos software?

A: I want to understand why POS software training is not available to anyone in your shop, including staff members who use computers. 

Conclusion

> Formal Point of Sale software training is essential for maximizing the software's capabilities.

> It enhances business operations.

> It gives you more control.

> Training can help you get more out of your software and achieve better results, no matter how experienced or new you are to the field.

Master your POS software and take your business to the next level with proper training.

No cost and you have much to gain, give us a call.

The delicate dance of retail inventory management: Picture the frustration of encountering empty shelves where popular items should be or overflowing aisles with last season's clothes. Both scenarios highlight the importance of balancing meeting customer demand and minimizing excess stock. At the heart of this strategy lies this:

Sell-Thru Rate

This rate is a powerful key performance indicator (KPI) in retail that measures the efficiency of a stock's performance. It is the percentage of your stock item sold during a specific period compared to the amount you received. It essentially tells you how quickly your stock is moving off the shelves. A high sell-thru rate indicates strong sales performance and effective inventory management. In contrast, a low sell-thru rate may signal a misstep on the inventory management tightrope, indicating overstocking or outdated products.

It requires real-time information that your POS System should have. Information here is power. 

Calculation of Sell-Thru Rate

The rate is calculated using a straightforward formula:

Sell-Thru Rate = (Number of Units Sold) / (Number of Units Received) x 100%

Say you got  a hundred blue pens and sold sixty blue pens in a month; your sell-thru rate is:

(60 / 100) x 100 = 60%

If you sell in one month (100%), you often do not need to pay for the stock, as your customer sales will pay the suppliers.  

Step-by-Step to calculate the Sell-Thru Rate

1. Determine the Period: Choose a timeframe for the calculation (e.g., weekly, monthly, quarterly). Using one timeframe for the shop allows for a more straightforward analysis. Most people use a month, which works well for Australian business practices.
2. Count Units Sold: Record the number of units sold during the chosen period. Your point-of-sale (POS) system can easily access this data.
3. Count Units Received: Record the number of units received during the same period. Your inventory management system or purchase records should provide this information.
4. Apply the Formula: Use the sell-thru rate formula: 

   Sell-Thru Rate = (Number of Units Sold) / (Number of Units Received) x 100%

Example Calculation

Say you brought twenty Coke cans for the shop at the beginning of the month, and by the end, you had sold fifteen. To calculate the sell-thru rate:

(15 / 20) x 100 = 75%

This 75% sell-thru rate shows a good demand for Coke at the product quantity selected.

Timeframe Considerations

• Calculating your sell-through rate regularly helps you manage your inventory. Being consistent helps identify trends, forecast demand, and adjust inventory levels.
• Using a POS system can significantly simplify the sell-thru rate calculation. Modern POS systems automatically track sales and inventory, providing real-time data that eliminates manual errors and saves valuable time.  POS Solutions offers intuitive dashboards and reports

Understanding a Sell-thru Rate

Benchmarks for a Good Sell-Thru Rate

A "good" sell-thru rate can vary widely depending on the industry and product category. Here's why:

• Product Category: Fast-moving consumer goods (FMCG) like beverages typically have higher sell-thru rates than luxury items like jewellery or high-end electronics.
• Seasonality: Coke has a higher sell-thru rate during summer, while sales drop in winter.

Here are generally accepted retail benchmarks:

• 60% - 80%: This range is considered a reasonable sell-thru rate for many retail sectors. It indicates that a significant portion of inventory is sold within a reasonable timeframe.
• Above 80%: An exceptionally high sell-thru rate. This is often considered a danger as it suggests you're not stocking enough inventory to meet peak demand or selling too cheap. 
• Below 60% could indicate overstocking, outdated products, or pricing issues. Analyse your data and implement strategies to improve sell-thru rates for these categories.

As a rule, most retailers are suggested to get to 75% sell-thru. In our tests, we see much room for improvement in SMEs as most retailers there are now at about 60%

Influencing Factors

Several factors can impact your sell-thru rate, and understanding them is crucial for navigating the inventory management tightrope:

• Product Category: As mentioned earlier, some products naturally have higher turnover rates than others. When setting expectations, consider the inherent demand cycle for your product mix.
• Seasonality: Seasonal fluctuations are a fact.
• Market Trends: Staying attuned to current trends and consumer preferences can significantly impact your sell-thru rate. Products aligned with trending styles or features tend to sell faster. Do market research to adjust your buying strategies accordingly. One good source is the list of the best sellers, many of which are publicly available. 
• Pricing Strategy: Competitive pricing can enhance your sell-thru rate. However, avoid excessive discounting. If an item needs to be significantly discounted to be moved, consider whether it should be kept.
• Marketing and Merchandising: Creative marketing campaigns and attractive in-store displays can boost product visibility and sales, improving your sell-thru rate. I like the idea that many online retailers use now to highlight their popular items in their shops; try it in your shop, as this method has been shown to drive customer interest.

Advanced Techniques for Sell-Thru Rate Mastery

To truly master the inventory management tightrope and achieve exceptional sell-thru rates, consider implementing these advanced techniques:

• Inventory Forecasting: Accurate inventory forecasting involves predicting future demand based on historical sales data, market trends, and seasonal fluctuations. Our advanced POS systems have many predictive tools to help you make data-driven purchasing decisions.

• Stock Levels: Maintaining optimal stock levels is crucial. Here are two standard methods:

  - Min/Max Stock Level: You set a minimum and maximum stock level for each item. If the stock goes below the minimum, you order to the maximum.  This ensures you don't overstock and tie up capital in unsold products. Find the sweet spot between these two levels to maintain a healthy sell-thru rate. The threshold below is the inventory level that should not fall to prevent stockouts. -- Focus stock level: Most use this as you let the computer calculate the minimum/maximum based on various methods, including AI technology. It will be calculated based on history and current sales figures. You can always review the result after the calculation if you want manual control.  This technology can significantly enhance inventory management capabilities.

Case Studies: Real-World Examples

Let's look at a few examples of businesses that successfully improved their sell-thru rates using the strategies discussed, illustrating how they navigated the inventory management tightrope:

Case Study 1: Newsagency

A newsagency was struggling with its stationery department, as the person doing it manually for years had left. So, they decided to implement focus in their POS system. It began tracking sales data in real-time and analysing customer purchasing patterns. After about three months, their sell-thru rate had increased slightly, they had significantly less stock, and they had improved their cash flow.

Case Study 2: Fruit and vegetable store

They decided to push honey, but there was such a variety that it was becoming unmanageable. They adopted a minimum/maximum stock control for some selected lines to seed the original purchases. Soon, they started ordering based on predicted demand rather than historical sales alone. They focused on high-demand products and adjusted stock levels dynamically based on real-time sales data. Soon, they achieved a consistent sell-thru rate of over 70%.

Inventory management

Managing inventory effectively is a requirement today in retail. 

• Prioritise Data-Driven Decisions: Integrate a robust POS system to gain real-time insights into your sales and inventory. Review your sell-thru rate and analyze trends.
• Embrace Advanced Techniques: Implement inventory forecasting strategies to maintain stock levels.
• Focus on Customer Satisfaction: The goal is ultimately to balance efficient inventory management and providing a positive customer experience. 

Recap of Key Points

• Sell-Thru Rate Basics: It measures the efficiency of inventory usage and sales performance.
• Calculation: Regularly calculate your sell-thru rate using the formula and track it over consistent timeframes.
• Influencing Factors: Consider product category, seasonality, market trends, and pricing strategies.
• Improvement Strategies: Use data-driven inventory management, effective product selection, and creative merchandising.
• Advanced Techniques: Implement inventory forecasting, min-max stock levels, and leverage technology for optimization.

Take Action

Start by integrating a robust POS system like POS Solutions to gain real-time insights into your sales and inventory. Regularly review your sell-through rate. Then, adjust your strategies based on their data-driven insights. Inventory is an ongoing process.

Contact us for more information on how POS Solutions can help you improve inventory management.

Running a successful retail business means ensuring every product on your shelves earns its keep. This is not easy. You know the items are ringing up the most sales. What is more challenging is to see if the slow sellers are boosting revenue by selling other products. This is where your point of sale software's Stock Companion Report can help.

Measure An Item's True Value

Go to Cash Register Reports > Sales Register > Stock Companion Sales by Period. See the green arrow below.

Select the stock item, put in the last 12 months, and you will get a detailed report listing profit, numbers, etc. 

You'll get a detailed report showing the item's profit, sales numbers, and more. With this data, you can evaluate whether a slower-selling product with low direct sales attracts customers who purchase other higher-margin items.

Insights for Smarter Merchandising

One client used the Stock Companion Report for dry cleaning. This service had low profitability, so they debated whether to keep it, but they found it brought in good customers who bought other products. So they kept offering it.

The Stock Companion Report is just one example of how our POS software arms you with the insights you need to optimize your product mix. Slower-selling items may be necessary to attract foot traffic and complementary sales. Understanding these hidden contributions lets you make informed merchandising decisions that maximise your total store revenue.

Let our POS system provide the robust reporting you need to understand what's driving your sales. 

This is just another example of how our POS System provides you with stuff you can use. Call us to learn more.