From a store's perspective, stock management means controlling the stock that is being bought so that customer needs are continually satisfied and maximum profitability is achieved.
Remember: Merchandise is typically the largest single asset in a retail business and, as such, its productivity is critical when determining a retailer's profitability.
Effective Stock Management is important because:
1) Stock is Money
Stock is money invested and the profitability and financial viability of the retailer depends on the return obtained from that investment.
No stock or the wrong stock means no sales and no income. Since stock is the prime generator of revenue, having the right stock in the right quantities at the right time for the customer is fundamental.
2) Stock Defines the Store
The amount and nature of the stock in a retail business is central to the way consumers relate to the business. It is the stock in a store which largely defines the positioning of the business in the minds of its customers; that is, how they see the business and whether they would consider it as a first choice store or one they would not bother going to.
Successful stock management leading to maximised profitability starts with the right buying plan. The buying plan is set by the buyer(s) in conjunction with input from the store(s) and reflects the market in which the retailer operates and the desired market positioning that the retailer has established.
Although managers in retail stores may have only limited responsibility for buying or replenishing stock, it is important that they understand how they can contribute to retail profitability through better stock management within their influence or area of responsibility.
Profit and a healthy cash flow come from having the stock that customers want, where and when they want it.
The fundamentals are the same today as they were 270 years ago. The skill required of the store manager is to achieve the right balance of stock that will meet customer demand while keeping stock levels at the minimum necessary to do that.