Stock management within retail is an area that can bring significant challenges for PGA Professionals.
From overbuying to missed selling opportunities in-season, the build-up of lingering dead stock in your Professional shop can happen through different means and can negatively impact your business.
Peter Durham, Director at Golf Business Specialists, has extensive experience supporting PGA Professionals in this area. He shares practical advice on how to better manage stock and build a more sustainable retail operation.
Identifying when stock becomes dead
I've been to pro shops where you've got cardboard boxes in the back that have been there for up to five years, and you bring it out to clear it, or put it on a rail outside the shop, and it just doesn't work.
When that stock can no longer generate sufficient margin, it's of no use to you as a business. It can create excitement for the member, but it can also create excitement for the member by selling all your stock at cost price.
They're excited because the prices are great, but you’ll go out of business, so dead stock needs to be managed.
How and why stock becomes dead
Dead stock arrives because you are buying without control, and buying without doing your homework first. You haven't got a proper buying plan and a cash flow forecast in place, so therefore, you approach the business for the following year with no plan whatsoever.
It’s stock that you can't sell at full price and that is no longer in vogue, (for example) the old Titleist Pro V1 ball. You've overbought golf balls, and now the new models are being marketed, no one wants the old one, so you clear it at very little margin or a loss.
How to make solid buying plan
I have my clients get a stock matrix where you put all the numbers in from your EPOS system (Electronic Point of Sale) over the last three or four years as an average, and it will turn out what you do in turnover, what average margin you make, and also what residual stock you've got left over.
That integrates with a cash flow forecast that allows you to look at your cash flow forecast by month to make sure you can match the stock purchases with the cash flow forecast. Without that matrix, you can do it by looking at your EPOS system and getting your EPOS system to print off sales.
If you look at that, plus your stock holding on those lines, you work out what has sold, what hasn't, what brands are good for you, what brands give you better margin - and which brands are the most popular with the members.
Use one-off events to clear dead stock
You need to create an event that happens once a year, to create excitement around that event with lots of publicity and a 30-day countdown communicated to your members.
You need to clearly differentiate between your event and the store by holding the event in the clubhouse, not in the golf shop.
You put it on trestle tables in the clubhouse. You alert the club and organise it with them, so they put on additional catering, because it could be a very busy weekend for both you and the golf club.
You lay stock out that you can't sell throughout the year on big trestle tables, make it like a bazaar so you can rummage through. You can do things like a make-me-an-offer table, or everything on this table for £10. You can actually generate an awful lot of interest and clear stock in a one-off weekend event and often make a bit of margin at the same time.
You must advertise you can take credit cards as well as cash. You need to clearly tell that you cannot use shop credit at this event.
Online sales is a solid strategy
You can do it on eBay to clear stock. Pros I've worked with have this aspiration to become an online retailer as well as a bricks-and-mortar retailer. They all fail, because the resource to manage an online business and compete and react is massive.
Focus on your customers and your members. If you look after your members and treat them properly and manage their expectations and integrate with your membership, you don't need to source online sales.
Just use online for clearance issues, but don’t chase the big online retailers, because you do not have the infrastructure.
How to structure markdowns
If you see a line of clothing not selling very well in your shop, you should start doing a promotion in-season. For instance, one shirt is £39.99, you can do two for £60. You're reducing to entice more sell through, but you're still making reasonable margin.
Don't wait until the end of the season to address the problem. Address it throughout the season. You must get to the end of the season with no stock left or very little and yet, you've taken a hit during the summer, but you've taken far less of a hit in the summer than you would do in a clearance sale at the end of September or October.
They don't need to be big discounts in-season. You just need to encourage more add-ons, two-for-one, three-for-twos or a second shirt at half price.
How to harness data
You need to diarise time at the end of the season, or even once a month, to analyse the sales and data on the EPOS system to look at what's moving, what's not moving, how much margin you made last month, and is it in line with the cash flow forecast? Do you need to tweak the cash flow forecast and the buying plan to match reality?
You need to put time aside to do that. Many of these EPOS systems have remote access. You can sit and interrogate the system at home.
You have the tools, but are you making time to look at that data? This could alleviate stress and cash flow issues and problems occurring the following year.
