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4 Ways to Identify Slow-Moving Beauty Products in Your Retail Store

Business/Economy4 Ways to Identify Slow-Moving Beauty Products in Your...

Most unopened skincare products, such as cleansers, toners, serums and moisturizers, have a shelf life of two to three years. Sealed, unused and properly stored makeup, including foundation and blush, can last for the same period as well.

However, this doesn’t mean you should keep storing your slow-moving wholesale beauty products for two to three years. Doing so can cause problems for your business that you may have difficulty overcoming.

When your inventory is tied up in unpopular products, you are wasting capital that you can invest elsewhere in the business. These items also take up valuable shelf space that could be allocated to faster-selling merchandise, thereby limiting your store’s potential revenues and profits.

Moreover, slow-moving beauty products can affect brand perception. Shoppers may think that your abundant stock of stagnant merchandise is a sign of poor quality or lack of relevance, which can impact their trust and loyalty.

An excess inventory of slow-moving cosmetic and skincare products usually leads to increased markdowns or promotional activities to clear stock, which reduces your profit margins, and can cause potential brand devaluation.

Although having an excessive stock of beauty products may seem like a minor concern since you store them securely as you do with luxury items, they can have a significant impact on your business. Because of this, you need to have a plan for dealing with these items.

How to Identify Slow-Moving Products in Your Inventory

The first and most important step in handling slow-moving beauty products is identifying them.

Below are some tips for determining which of your beauty products are unpopular among your current and potential customers and could be costing your business money:

1.     Use inventory analysis methods.

Inventory analysis pertains to the process of regularly auditing the inventory to determine the quantity of goods you should have on hand to fill customers’ demands while minimizing or avoiding stocking unpopular products.

There are different inventory analysis methods you can use to identify slow-moving goods. These include:

ABC Analysis

This strategy involves classifying products into three categories based on their consumption value.

These categories are:

  • A – This covers your most popular, best-selling products. These items are often expensive yet contribute to your profits the most.
  • B – This category applies to products that fall between the most and least valuable. There are always customers buying these items but they are not as popular as those that fall under group A.
  • C – This covers the rest of your inventory. Few shoppers buy them and these items often eat up most of your inventory expenses.

If you want to categorize your inventory correctly, multiply the number of items sold by the cost per item. This will give you the annual usage value per product. You can then rank your merchandise from the most to the least popular.

This method lets you identify your dead stock and think about the best way to offload it without losing too much money.

FSN Analysis

FSN is an acronym that stands for:

  • Fast-moving (F)

These are products that sell quickly and are replenished regularly. These items usually account for less than 20% of your total inventory.

  • Slow-moving (S)

This pertains to merchandise that moves slower through the supply chain and is replenished less frequently. These items usually make up about 35% of the total inventory.

  • Non-moving (N)

These are products that shoppers rarely buy. These items usually have an inventory turnover ratio below one and comprise around 60-65% of your total goods.

Through this strategy, you can easily identify slow-moving merchandise and dead stock. You can also prevent these items from accumulating.

Days in Inventory (DII) Method

Also called days sales inventory (DSI), DII lets you compare your rate of sales and the average value of your inventory. From the result, you’ll know how many days it would take to sell your inventory.

An average DII between 30 and 60 days means the product is selling quickly and efficiently. Conversely, an item is considered slow-moving if it has not been purchased within six months.

These methods are easy to learn and implement, enabling you to identify your slow-moving products and determine the best strategies to sell them.

2.     Determine your inventory holding costs.

Holding costs pertain to all the expenditures from maintaining and storing your inventory. These expenses can include your warehouse rental, energy bills and the fees for displaying your products in a third-party seller’s store.

It also covers payments to staff managing your inventory, insurance, depreciation and total cost of business capital.

Although this expense may not seem significant, it can contribute to massive cash losses. Slow-moving inventory can cause operational inefficiencies and hurt your sales at the same time.

3.     Calculate your monthly sell-through rate.

The sell-through rate pertains to the percentage of inventory you sell within a specific timeframe. It gives you valuable insights regarding product performance, allowing you to identify your unpopular items.

A high sell-through rate indicates strong consumer interest and satisfaction. This means stocking up on these items is a smart decision to ensure you meet your customers’ demands.

On the other hand, products with low sell-through rates are unpopular and struggling to attract your customers’ attention.

4.     Implement inventory forecasting.

Inventory forecasting entails calculating how much stock you should keep to satisfy customer demands. By analyzing your historical sales data, market, seasonal and promotional trends, and other relevant factors, you can predict future product demand more accurately.

This method is particularly useful when your sales volume is unpredictable since comparing this week’s or month’s sales to the previous period may be inaccurate.

This strategy allows you to anticipate products that may experience sluggish sales and take preemptive measures to address potential issues.

What to Do With Your Slow-Moving Products

Once you have identified your slow-moving beauty products, you can come up with strategies to sell or earn from them.

If you still want to include these items in your product lineup, you can adjust their prices, implement targeted marketing campaigns, and offer discounts, bundling and other promotional deals.

You can also consider cashing your slow-moving inventory to lower your days’ sales outstanding (DSO) and the working capital tied up with the products. This option is an easier way to offload your unpopular items and earn money back.

With these strategies, you can avoid the repercussions that come with having a stock of slow-moving beauty products and continue nurturing your retail store’s growth and success.

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