It’s Not You, It’s Your Stock System

Catherine Erdly: [00:00:00] Let me know if any of this resonates. When it comes to your stock, you feel like you are flying blind. You are buying things based on what’s in your bank account at the moment, or what you think looks interesting. You don’t really know whether or not what you’re doing is the right thing to be doing.

You’re just generally feeling a little bit less than confident when it comes to your stock, and maybe you are wondering, is it me? Am I just not very good at this running a business thing? Or maybe I should leave it to the big guys. Maybe they’re the ones who’ve [00:00:30] got the teams and the systems in place, and maybe I shouldn’t be trying to figure this stuff out.

Or maybe you’re just generally surprised that trying to figure out how much stock to have in your business is not as straightforward as perhaps you thought when you first got started.

Hi. I am Catherine Erdly, small business and retail expert and founder of the Resilient Retail Club, which is my business that helps product businesses manage their stock and grow their profits and sales through a variety of different offers. You can head over to [00:01:00] resilientretailclub.com and find out more.

Why stock is often the biggest cost in your business

Catherine Erdly: But one of the things that I am most passionate about when it comes to helping small businesses is stock management. And the reason for that is because I think that this is an area that is so underserved when it comes to the small business community, there is so little information about it that I really feel like this is kind of my mission to help people understand as much as possible about how the stock that they buy has an impact on the profitability of their business.

And one of my [00:01:30] biggest bug bears is that so much information that is out there for small businesses, so much general business information is aimed at service business owners, who have a completely different cost base than product business owners. And so a lot of information that you’re given just doesn’t really tackle this huge issue for a lot of people, which is how do you manage the most expensive thing in your business?

For most people, the thing that they spend the most on in their business is their [00:02:00] stock. Yes, you may be spending a lot of money on employees. You may be spending a lot of money on advertising.

You probably have fulfillment fees or fees to do with your rent or your location, your premises. But for most people, the thing that they spend the most amount of money on is their stock. So it’s no real great surprise that not feeling in control of your stock can make you feel completely out of control with your whole business. 

[00:02:30] Welcome to the Resilient Retail Game Plan, a podcast for anyone wanting to start, grow or scale a profitable creative product business with me, Catherine Erdly. The Resilient Retail Game Plan is a podcast dedicated to one thing, breaking down the concepts and tools that I’ve gathered from 20 years in the retail industry and showing you how you can use them in your business.

This is the real nuts and bolts of running a successful product business, broken down in an easy, [00:03:00] accessible way. This is not a podcast about learning how to make your business look good. It’s the tools and techniques that will make you and your business feel good. Confidently plan, launch, and manage your products, and feel in control of your sales numbers and cash flow to help you build a resilient retail business.

 So one of the things that happens is every single week when I talk to business [00:03:30] owners, whether it’s people in my one-to-one program, Retail by Design, people who are in my membership group, The Resilient Retail Club, or people that I’m talking to about my done for you service, Stock Doctor, one thing that comes up over and over again is people say,

” I’m just winging it. I just don’t feel confident in how to place numbers. I don’t know how to forecast. I don’t know how to figure it out.” And actually, I remember somebody telling me that they’d gone to a session run by quite like a big agency [00:04:00] for e-commerce businesses and their rapid growth business.

And they went and they wanted to figure out how much they should order for their Black Friday stock. And they went to this event after the person did their talk about Black Friday, they went to them and said, well, how do I figure out exactly how much I should buy? And the person said, oh, you just have to go off gut instinct.

Why you don’t have to be a “numbers person” to succeed

Catherine Erdly: It’s kind of funny and kind of, well, it’s funny to me because obviously I know the answer is you don’t just have to go off gut instinct, but it just really highlights to me how little information that there is out [00:04:30] there about managing your stock. I just wanna say, if you feel like you don’t know what you’re doing with your stock, or you’re feeling like it’s tricky, then you are not alone.

And really, ultimately what it boils down to is that stock management is actually an extremely niche skill. When I think about my background, so I graduated in the year 2000. I started working in the retail industry. My very first job was for Laura Ashley, and I then trained for the next, you know, nearly 20 years.

So 18 years in [00:05:00] total. I was working on stock management, sales strategy, profitability. That was what I did for big retailers. But you know, especially those first five, six years, I was very much learning the ropes, like learning and understanding how it all worked. And it was extremely niche. It’s a niche within the retail industry.

It’s a niche skill. It’s not something that a lot of people know about, but yet it actually makes or breaks a retail business. Retail businesses really [00:05:30] need that stock control element. It’s really crucial because if you don’t have your stock under control, then it doesn’t really matter what you do with everything else.

It doesn’t matter how great your advertising is or your marketing if you either keep running out of stock, or you have too much stock. Either one of those things can be really, really disastrous. So I have got just a note as well. I have got a free talk coming up where I go into this in much more detail.

So if you’re interested in this subject, then do go check out the show [00:06:00] notes. We’re going to talk, I’m gonna pop the link into the show notes, but. I just really want to highlight the fact that this is not something that you are the only one who feels this way.

The cash flow hamster wheel (and how to get off it)

Catherine Erdly: A lot of people I talk to talk about things like feeling on a hamster wheel, so money comes in from sales, but then has to go out immediately for stock.

Or they talk about just not knowing how they’re going to cover invoices or having to work around at what point do you take finance, for example, to cover an invoice that [00:06:30] you know that you’ll sell if you buy it. But you have to have the faith to really believe you’re gonna sell it, to actually put that money up front, and so it can end up feeling just like this complete, like I said, hamster wheel, like this feeling of not really knowing what’s going on.

And then that starts manifesting itself in the business. Typically, what I see is one of two things happen. People get really nervous about really going into their bestsellers and enough depth, so [00:07:00] they keep running out of them, and therefore that means that sales slow down or they get patchy and then they really struggle to kind of maintain the sales that they want.

Overbuying vs understocking–what’s actually going on?

Catherine Erdly: Or the other thing that happens is because people are so nervous about running out and they’re absolutely adamant, they don’t want to run out of things, they end up overbuying. And this is something that I’ve been having quite a few conversations with people about this recently because they didn’t really know what was driving their sales, they didn’t really know what they needed, they [00:07:30] absolutely must have in stock to maintain their sales.

They just basically bought more of everything because they had this real fear that if they didn’t have enough stock, they wouldn’t have enough sales. And so the fear of running out meant that they were overbuying, which then meant that their cash flow was really tight and just generally meant that the business felt a lot more stressful than it needed to be.

These are some of those symptoms, you know, overstocked, you can also have overstocked shelves and still run out of your best sellers. That’s the kind of bit where it gets really tough because your shelves are [00:08:00] generally overstocked and your money’s all tied up in your stock and you just don’t have the cash available to replenish your bestsellers, then that starts to become really, really tricky as well.

And that’s a lot of the time when people get themselves into a tough place. They get themselves where they’re feeling really stressed. They’ve got orders that they need to place, but they’re, they just don’t have the money for it. Or they just don’t really know. Am I doing this right?

Am I heading in the right direction? They start doubting themselves and they start losing confidence, [00:08:30] and also everything just starts to feel a lot more difficult. It feels like the business is running you and not the other way ’round. So if you are listening to this, and this sounds familiar. If you’re thinking yes, I felt like that. Yes, I feel like I’m flying blind a little bit without, or a lot with my stock.

Then I just wanted to say this is very common. And I would say that you don’t need to feel bad about the fact that [00:09:00] you don’t know how to manage stock because it feels like it should be easy, right? Most people, I’m sure, who don’t run product businesses who look at them from the outside must say. Well, okay, well how hard can it be?

You buy, you buy stuff and you sell it. But we all know that it’s a lot more complex than that. And it can get to the point where you suddenly realize, well actually it’s a lot more complex than this. And where do I, how do I figure it out? So that is also the reason behind me writing my book, Tame Your Tiger.

So again, if you want to really [00:09:30] delve into stock management, then definitely go check that out.

What retail merchandising actually looks like

Catherine Erdly: But I think the key thing is to say that even people who have a background in retail often don’t actually understand the stock management and I’ve mentioned this before, but in big retailers you have three product teams.

You have the buying team, you have the design team, you have the merchandising team, and the buying team and design team are fairly self-explanatory. They are there to be the ones who are excited about the product. The [00:10:00] design gives you the direction they create, what it actually looks like.

Buying is all about being commercial, working out what the customer wants, and then negotiating with the factories, and really getting everything basically ready to the point that it’s ready to ship to the stores.

And then merchandising not only takes over and getting the stock out to the stores or online, depending on where you work, but also everything to do with trading it. So how much you should buy, when you should buy it, when it should come in, what you should [00:10:30] sell it for, what your profit margin should be.

And then if it’s not moving, what you gonna do about that? So merchandising do a lot of the trading. And the thing to say is that I pretty regularly come across people who have been buyers or designers. Product developers who have worked in the retail industry and have worked with merchandising teams and have then left and started their own business because they’ve got those skills, they’ve got that commercial [00:11:00] aptitude, they’ve got that ability to create products, they’ve got that eye for it.

And then they’ve really, really struggled with the stock management piece. So even the people who work in the teams with the merchandising team don’t necessarily have those skills inherent in them, even though they’ve worked with people day in, day out for many years who do.

So what I’m trying to say is, if you’ve never worked in retail, if you’ve got a background in marketing, PR, if you’ve been a teacher or a doctor or a lawyer, [00:11:30] or any of the other millions of different things that people do before they start their own business, then the chances of you having in-depth knowledge of how to manage your stock effectively is pretty, it’s pretty slim.

So again, don’t start from a point of saying, oh, I should know this stuff because honestly, there isn’t that much information out there. Again, that’s why I wrote the book.

That’s why I do what I do a lot of the time. But also just to say that it is something that you can [00:12:00] learn and you know you’re not feeling stuck because you’re not smart and you’re not feeling stuck because you’re not a phenomenal business owner. Because to be honest, there’s also lots of pieces of the puzzle that I always felt like you know, to develop product, to identify the correct product, to really understand your customer like the design and the buying teams do, that’s something that is really, really difficult. And sometimes you would find people who are brilliant at the numbers, but really struggled with the product side of things.

So I would say that don’t feel [00:12:30] like it’s a failing on your part, it’s just that you have to do all three of those jobs, right? You have to. Be really excited about the direction of the product you have to get the product in, negotiate it like a buyer, and you have to manage it. Whereas in retailers, they do have the opportunity to have those different roles and the different types of people who like to be in those different roles, whereas you have to be all of those things rolled into one.

It’s not that you’re stuck because you’re [00:13:00] not smart. You are not feeling stuck because you’re not a phenomenal business owner with an amazing eye for product and really great at understanding what your customer wants. You are feeling stuck because you don’t have a system in place.

You know, what do people tend to do when they don’t have a system in place? They tend to rely too heavily on what they think that they would like for the business. So, I hear this a lot from people who have bricks and mortar stores. They get really sucked into buying for them. Which, you know, is not a terrible, terrible idea in itself, especially [00:13:30] if you are your own ideal customer.

And also because it’s nice, I think, for a business, especially when it’s a curated business. In other words, you’re buying from lots of different places. It is nice for the curation to have the point of view of the person who is curating it. But, the problem is if you’re buying too much on instinct and not enough on the data, you can just end up missing some really glaring issues.

Also, supply pressure, depends on the model that you’re at. You know, some people, if you are developing your own products [00:14:00] is probably doesn’t happen as much. But especially if you’re somebody who buys in product from other people, then you may well find this, that you are being steered or pushed around by the product suppliers, and it depends on your sector, but some of them are more predatory than others. And in fact, one story that somebody told me that really I mean, I think summed this whole thing up, was that I did some work with a fashion boutique. They were part of my Retail By Design program.

How suppliers push you off-budget without a stock plan

Catherine Erdly: We did a lot of work on how much stock they actually should have in the [00:14:30] business, when it should be coming in. We worked on their stock plan, put it all together. And then they had a series of buying appointments and they went into the showroom and they started talking to one of the suppliers and they said, right, this is our budget.

This is how much we’d like to spend. And the supply basically laughed and said, oh, you small businesses, you never really have budgets. So basically almost like admitting that the way that they sold was to disregard how much the small [00:15:00] business actually should have or needed to have, but basically was like, oh, I know that if I just wave enough amazing product under your nose, you’ll end up buying it.

So that’s something that happens if you don’t have a system. You can end up getting swayed by pushy salespeople. As I said, less of an issue perhaps if you are somebody who is manufacturing your own products. Although sometimes manufacturers can be pushy too, so it’s something that leaves you vulnerable if you don’t have a plan and don’t have a really clear way of saying, actually, I need to have [00:15:30] this budget.

This is what I’m going to spend. And because you are not a hundred percent dead certain. That’s how much you should have. Then you can end up being swayed by other people. So that is the issue.

If you don’t have a simple system to keep you on track, you can end up in either this analysis paralysis where you’re not really sure what to buy, or you end up being too swayed by other people, or you end up just making decisions based on not exactly a whim.

But like a kind of a gut [00:16:00] feel or I think this is probably what I want, or you can end up feeling really scatter gun, or I’m gonna try this and I’m gonna try that. And it doesn’t feel in control. It feels very governed by how much money you’ve currently got. And it’s not related to things like what your sales are going to be in the future.

And it just feels a lot more ad hoc and a lot more winging it, for want of a better word. So what are the issues with this in the business? Well, apart from the stress level, because to be honest, this is one of the [00:16:30] things that causes a lot of stress for people, especially as they grow. Founders who are growing, who don’t have a really strong control over their stock often find it super stressful because they have to make bigger decisions. The numbers go up, the amount that their spending goes up. And when they were spending a small amount of money, they could justify it say, well, I’ll try this and if it doesn’t work, I can get figure it out.

The hidden costs of not having a system

Catherine Erdly: But then as the numbers go up, it gets more scary. So there’s the impact, there’s the [00:17:00] mental impact on the founders, which is not insignificant. It’s something that I see a lot and a lot of the time when I’m talking to people on sales calls to talk about Retail by Design or Stock Doctor, my done for you stock management service.

I can see the stress that they’re under. I can see how it’s waking them up in the middle of the night and it’s just generally not a nice feeling. I believe there’s a big financial cost as well, and making mistakes with what you’re purchasing because you purchased without a real clear, strong [00:17:30] strategy.

That is probably one of the most expensive mistakes that I see people make on an ongoing basis. They have stock that is sitting in the wrong place. Now, it’s worth reiterating that any retail business that you look at is going to have fast moving stock and slow moving stock. So every single business that I’ve ever worked in, if you looked at the 80-20 rule where you say 80% of your sales will be coming from just 20% of your stock: this always [00:18:00] happens. This happens whether the business is a $2 billion turnover business or whether it is a business turning over 30,000 pounds a year. There will be a disproportionate amount of sales coming from a few products. Or if you buy one-offs, lots of vintage, you will get a disproportionate amount of sales coming from a few product types.

This always happens. You cannot really have a business where all of the stock sells equally. I’m yet to see [00:18:30] anything that even comes close. There’s always some real outperformers. But then the difference is, so it’s not about saying, oh, well, unless I can get all the stock to sell equally, then I must be doing something really bad.

The name of the game is, how do you drop your stock levels to the point at which you are not losing sales, but you also don’t have too much money tied up in dead stock, and that is the thing. So that is probably the biggest financial cost of not having [00:19:00] a plan, not having a clear idea, is you have too much stock or you have too much stock in the wrong place.

Loss sales is the other piece that is really damaging. If you have got your best sellers, but you’re not backing them in enough depth because you don’t have a really clear plan and have it all mapped out. Lost sales is really, really tricky as well. And that confidence cost. As I said, anytime you make an error or you feel like you’ve got too much stock tied up, then it can chip away at your trust in yourself.[00:19:30] 

And then it also just bleeds. The stress can bleed into a lot of different areas of the business, especially if it’s having an impact on your cash flow, and it just starts to all feel a bit more difficult. The difference being when I work with people on their stock, then they feel generally much calmer.

They feel more in control and they feel confident. So sometimes for the first time, they feel like they can make decisions in the business and be really able to see the impact of them, which to me is hugely empowering [00:20:00] and you know, really, really rewarding When I see people go from feeling completely out of control because of these large amounts of money going out of their bank account at different times to feeling really considered with what they’re doing with their purchasing, and really strong and confident. So what do you actually need? Really what you need is something simple to help you understand where you need to be spending your [00:20:30] money and how much money you need to be spending.

So I always say that You stock plan should start with your sales plan. So the first thing you really need to understand is, okay, what am I actually aiming for in terms of sales? And then once you have that, you can build up what your stock plan should be, and then you are able to create yourself a budget for stock.

Having a budget for stock is a game changer because it gives you a finite amount of money that you are really prepared to spend on a [00:21:00] particular month on your stock as opposed to feeling like it’s this endless pile. And it also hopefully puts you really clearly gets it really clear in your head that it’s not just about having as much stock as possible, it’s about having the right stock in the right place at the right time, which is one of those merchandising mantras that you are basically taught on day one of the job.

Right stock, right place, right time. So you need to have a framework, and I’m a big believer in putting together a simple framework that [00:21:30] is not difficult to understand. That is something that is easy to maintain. That is essentially, the kind of, the long and the short of it is you need to have a budget for your stock each month and you need to have an idea of where you should be focusing that money.

Switch from thinking that it’s an infinite amount, or you can spend as much money as you’ve got in your bank account saying, no, this is how much money I should have. And therefore, I’m going [00:22:00] to be really directional and this is where I’m going to spend it. And making those two tweaks can help you go from feeling completely out of control, to feeling much more in control and focused.

You don’t want something that is going to take you hours and hours and hours to update. You want something at the very least top level you want something that you can manage yourself. And so, it takes away the guesswork and it just helps [00:22:30] you look at your stock in a different way and helps you get really clear on, as I said, what you should be spending, how much you should be spending, and what you should be spending it on.

So giving product business owners that control, helping them feel confident, as I said, it’s absolutely what I love to do. It is what motivates me, and I really do truly believe that anybody, even if they don’t consider themselves to be a numbers person, can get themselves to a point where they feel much more in control about their stock, that they feel much [00:23:00] clearer about where they want to go, and they can have that confidence back in terms of I’m spending the right amount of money and I’m spending it on the right things. It’s just about a shift in perspective more than it’s about complicated sums.

Free talk: Stop Letting Stock Eat Your Profit

Catherine Erdly: So if you’ve enjoyed today’s episode and you’d like to know more about managing your stock, I am going to be running a free talk.

This is happening on Monday, the 16th of June at 10:00 AM and the title of the talk is [00:23:30] Stop Letting Stock Eat Your Profit. We’re going to break down what’s been going wrong with your stock and show you how to start fixing it, and it’s totally free and I promise it is going to be well worth your time. No jargon, no shame, just an idea of how you can make three quick fixes to help start improving your stock management in that week. Because I know how busy you are. I know you don’t have the time for this, so I wanted to show quickly how you can get a handle on your stock and start making [00:24:00] better decisions. So in summary then, it’s not about you. It’s about having a system, but that’s the good news. You can have a system.

It doesn’t have to be super complicated. You can start making a difference and start feeling more in control of your stock, and I’d love to help. So check out the show notes where you can find out more details about the talk.

And then if you have a moment to rate and review the podcast, it makes a huge difference to getting it out there in front of more people. And of course, if you like, follow and subscribe, you’ll be the first to [00:24:30] know about each new episode, which comes out every Thursday morning. See you next week. 

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