Ahhh, the wonderful topic of hair salon retail.
If you’re like many hair salon owners, the topic might make you cringe just a little. That’s because most salons don’t sell enough retail, and managing inventory can be a nightmare.
Today, that changes. We’re going to share a little insight, and some tips/tricks to help you not only sell more retail, but also the ability to better manage your inventory.
We call it the 90-Day Retail Rule.
See, statistics show that any product that has been on your shelves for more than 90 days, has only a 10% chance of selling at full/regular price. Yes, that number is a little scary. So… what can we do, do minimize that risk? It’s not as hard as you think.
Everything starts with one fundamental principle.
Your product shelves are an investment portfolio.
Now, let me elaborate on what this means. Every time you order retail for your shelves, you’re putting up money, in hopes of getting more money in return, once that product sells. If you invest wisely, you’ll sell that product quickly and you’ll see a healthy return on your investment. If you don’t invest wisely, you either get stuck taking less of a return (by discounting), or worse, with a complete loss (unsold product).
The easiest way to minimize the risk of “dead/unsold product”, is to identify Top Sellers and Slow Movers, and put measures in place to weed out the Slow Movers. That’s because our “Top Sellers” are the most profitable, and the Slow Movers are a liability with every passing day.
I won’t get into the in-depth details of replenishment strategies like “Min/Max Rates” and “Inventory Turnover”, etc, that’s for a different day. All we want to do here is, find an easy to way to visualize the aging process of our inventory. From the day it hits the shelves, until the dreaded 90 day mark.
Sure, your software can spit out reports and tell you all of this, but in my experience, that’s not how owners want to see it. They simply don’t have the time or desire to pour through nerdy numbers.
So instead, we use colour-coded stickers… Green, Yellow and Red stickers.
- Green stickers – Each new stock item that hits your shelf gets a green sticker. This represents a product that has been on the shelf 1-30 days.
- Yellow stickers – Yellow stickers get put over the green sticker on your next monthly “manual audit”. This identifies that a product has now been on the shelf for 31 days.
- Red stickers – Red stickers get put over the yellow sticker on the your next monthly “manual audit”. This identifies that a product has now been on the shelf for 61 days.
I think you see where we’re going here. Seems too simple… almost juvenile. But remember, this is to quickly identify which products simply aren’t moving, without having to pour over boring reports.
The final step in this process offers a little flexibility. Because on your next “manual audit”, we have no further sticker to place over a red sticker, that means it’s been on the shelf for 90 days. Ideally, we’ll now clear these products out, with a heavy discount, to protect our investment. And by “clearing out”, I mean CLEARING OUT. Set the new price at 10% over your cost… and do not re-order.
Reserve that new/empty shelf space for a product that doesn’t make you sweat for 90 days. Keep repeating this process for as long as it takes, until you stop seeing red stickers. It’s as simple as that!
If you’re interested in learning a little bit more of the ins-and-outs of this process, don’t hesitate to contact us. Explaining all of the details in this post would have simply made it far too long.
Just remember. Retail = Investment. Maximize your return on investment/profits, by ensuring your shelves are full of Top Sellers, not Slow Movers.