Does Effective Product Management Increase Profits?
In retail, there are a number of ways to increase profits. Reduce expenses and increase sales are two very basic ways to impact profits. Do both and you are guaranteed to increase profits. But what about focusing on product management? Can you increase profits simply by managing your inventory levels better?
There are three primary considerations when it comes to which products you sell:
- Having the right products in your inventory – If your customers want blue widgets, then you should have blue widgets in your inventory. Product management involves ordering the right products to meet the needs of your customers. That could mean specializing within your niche. Perhaps you sell only women’s clothes. More specifically, you could specialize in petite clothing for women. If you are a general retailer, perhaps you specialize in certain brands, or you simply sell what is popular. Define your brand and carry the right products for your clientele.
- Having the right amount of product in your inventory – There are two ways to go wrong with the amount of product you hold. You can have too much of a particular product in your inventory, or too little. If you order to much, you’ll get stuck with merchandise you can’t sell. Then you’ll have to discount the merchandise to move it, and that will cut into your profits. The other way to go wrong is to not order enough product, in which case you won’t meet the demand for the product and you’ll sell less. That will surely impact profits. Therefore, in order to manage your inventory, you’ll need to get better at predicting how much product to order at any given time.
- Having the necessary products at the right time – Timing is also important. Many products are seasonal. For instance, in sporting goods, baseball equipment sells better in the spring when baseball season begins. Some items may sell better at Christmas. Others may sell better at Easter. Your job as retail manager is to know your business so well that you know when products sell better–what time of year, what season, what holiday, etc.–and to know which of your stores moves certain products faster than others. Order the right amount of product at just the right time.
Product management does affect sales and profits. That’s why you need an effective way to manage your inventory.