Steps taken by retailers to keep inventories lean are showing a bit of progress to accommodate to declining demand, as recent reports of early 2009 wholesale trade reveal.

As retail stores start sourcing their spring and summer merchandise, the National Retail Federation still expects a 5.3 percent rise in March retail container traffic from last month, a total of 1.07 million 20-foot-equivalent units (TEU).

At the same time however, such levels still fall below that of March 2008 by 7.4 percent – a trend that the trade group predicts to observe throughout the first half of 2009.

“This year’s numbers are going to remain well below last year because sales are still slow and most economists aren’t seeing a recovery before the second half of the year at the earliest,” said Jonathan Gold, vice president for supply chain and customs policy, in a statement released Friday. “Careful inventory management is a key to survival for retailers in the economic times we’re going through.”

And while retailers in some industries are still trying to shave off surplus inventory, rapidly declining sales have not made that task any easier to fulfill. A report released yesterday by the U.S. Census Bureau showed that in January, wholesale sales dropped more than four times faster than inventories.

Still, slightly declining wholesale inventory-to-sale ratios in a few categories – including apparel and miscellaneous non-durable goods – demonstrate that efforts made by retailers are still paying off, despite weak demand.

The 0.7 percent month-to-month decline in wholesale inventories also surprised economists. Seeking Alpha analysts had predicted a 1 percent decline in inventories, which now signals to them “either weaker consumption or stronger wholesale buying,” plus potentially good news later to be seen of retail sales.

Inventories in December 2008, totaling $427.5 billion, fell by 1.4 percent from the previous month, according to the Commerce Department. Analysts predicted a decline only about half as big, with predictions ranging from 0.7 to 0.9 percent, according to the Associated Press and Wall Street Journal.

“This is the latest evidence of the difficult environment for business spending in the fourth quarter,” said Tim Quinlan, economic analyst at Wachovia in Charlotte, North Carolina, to Reuters.

Even as overall inventories declined for the fourth month in a row, some levels remained higher than they had been in the previous year. For example, while inventories of durable goods experienced a 1.4 percent month-to-month decline, they still ended up 6.8 percent higher than in December 2007. On the other hand, levels of non-durable goods dropped by 1.5 percent, to levels 2.0 percent lower than last year.

Wholesale sales also dropped by 3.6 percent over the course of the month, to a level 10.7 percent lower than seen in December 2007. But then retail sales – excluding that of automobiles, gas stations and restaurants – increased by 0.5 percent in January, according to the National Retail Federation.

General merchandise sales led other categories, with a 1.1 percent seasonally adjusted increase from last month and a 3.5 percent unadjusted increase from 2007. Meanwhile, health and personal care sales remained flat from last month, though they still stood at levels 3.5 percent higher than last year.

Overall, the surprisingly positive news still serves as notes of caution for economists. They realize that while retail sales are rising, they are still lower than they were last year. Furthermore, the still-high ratio of sales to inventories indicates how the retail environment is still trying to recover from a slow holiday season.

“While 2009 got off to a surprising start, it’s going to be difficult for retailers to maintain this momentum,” said Rosalind Wells, chief economist at the National Retail Federation, in a statement. “We expect the first half of the year to present challenges while giving way to sustained growth in the fourth quarter.”

Every season will see different products shoot to the top of the must-have list and others sitting on the shelves, gathering dust. What you want to know is how to stock more of those ‘must-haves’ and fewer of the dust gatherers.

Some seasons will see a trend to fewer purchases – other months, everything you have on the shelves will be selling.

While you can’t change your customers’ buying patterns or convince them to buy what they don’t want, you can use a little logic, research and planning to try and get a better picture of when they are going to want things, what they may want and then prepare accordingly.

Do Your Homework

Start by trying to predict what will sell. If you don’t keep a record of your store sales, you may have a problem with this. The best way to predict the future is to learn from the past.

Looking at your sales from the same time period a year ago will give you a good idea of what sales will be at same time this year.

If you are planning for the fall season, look at last year’s fall sales to know what may be selling this year. Generally, the same types of items will sell, just in the current season’s styles.

Next, plan for typical down times. Create ways to bring customers in that may not traditionally choose to shop right now.

If you would prefer to hear the cash registers ring, you need to come up with new ways to get customers. Some options to do this include holding events, sales and stocking special items:

* Events – Season-based themes usually go over very well (Summer Beach Fun, Spring Break, etc). Use the current season to create an event that incorporates your items.

You could have special visitors that customers can meet, or even a themed party that gets them into your store having fun, and makes them more likely to open their wallets.

* Sales – A great deal will bring in shoppers that were not originally planning to spend money. Design clear signage that lets shoppers know how great the deals are in your store and what they’ll be missing out on if they just walk by.

* Special Items – If your regular items aren’t selling as well, maybe it’s time to try out a few new items or unique niche items that may grab the attention of your customers.

If you can get them in to purchase one small unique item, you may be able to get them to stick around – and purchase a couple more items that are part of your regular inventory.

The key to coping with varying and seasonal product demand is to try to plan ahead for those times to keep the profits coming in.

While the private labeling of physical products has been around for a while, it is the information products private labeling that has become THE new phenomenon. Particularly, by purchasing private label rights to some books that are being offered online, you too can benefit from the profits being received at an astounding rate.

Here is how it works. You purchase the master private label rights to an e-book, or from one website where there were several books you could purchase the rights to. After completing this process, you can proceed to rename the book, edit the contents a bit and then resell it as your own e-book on your website. This is a watered-down explanation of how it truly works, but you get the idea.

To make a profit selling private label information products, you must first obtain the legal right to resell whatever it is you are buying. There are a number of important things you should first consider. These factors will be critical in your attempt to make money, instead of losing it.

First, private label reseller rights are available on a number of different products, including e-books and software. Usually, the e-book author or the software developer is unable to spend time marketing and selling their own product, so they try to sell it for a percentage of the potential revenue it may generate. Instead of targeting potential customers, they shift their focus to others who are looking to make money by marketing and selling. If you have a vehicle and knowledge needed to market the product, you may be able to make a little or a lot of money with this opportunity.

After you have purchased the resell rights to a particular product, you then will be able to start selling that product. Since you have officially paid for the rights to resell the product in question, you are now able to gain the profits made from each sale.

Finally and most importantly, when it comes to selling any product, whether you created that product or just obtained the resell rights to it, you will need to have an effective sales method. There are many individuals who have found success by using online classified ads, creating their own websites, or by using online auction websites. While all of these selling approaches may produce results, you will need to select the one you are most comfortable with that fits your personality and your business profile.

However, a good inventory program will do more for you than just keep track of stock. Today’s inventory tracking software has the capability of analyzing sales data so you can watch for any ordering patterns. This comes in handy if you are testing marketing or advertising campaigns. You’ll be able to easily compare sales from before the campaign to after the campaign. Having such detailed sales data will also give you insight as to what products are fast-sellers and which ones are just collecting dust and need to be discontinued.

Being able to see your sales in an easily manageable format makes it easy to see the “cause and effect” factor for things like sales, coupon codes, and advertisements. If put to good use, an inventory management system can both save money (in inventory control) and make money (by seeing what advertising works)!

Inventory management software programs are simple to understand and operate; some programs even allow you to add pictures and descriptions of each item to make them easy to find and recognize. You’ll always know when inventory gets low because the program alerts you when your stock gets below a certain level.

Having an inventory control system in place saves you time, worries and money – and every online retailer should have one. And why not – they’re inexpensive, easy to install and there are so many programs to choose from, you’re bound to find the right one for your company. Most of the software programs offer a free trial (usually 10-30 days) so you can test it out and see if it’s right for your company. And, if it’s not then you can get a full refund.

There are literally hundreds of great inventory software programs on the market and, for small businesses, they’re all fairly similar. However, here are a few recommendations for you to get started in your search:

Small Business Inventory Control
Website: http://www.rytechsoftware.com
Cost: $99 and up
Free Trial: Yes

iMagic Inventory
Website: http://www.imagicinventorysoftware.com
Cost: $199
Free Trial: Yes

AdvancePro
Website: http://www.advanceware.net
Cost: $499 and up
Free Trial: Yes

Typically, the more expensive the program, the more features you get in return. The programs listed above are all for small to medium-sized businesses. For large warehouses, the pricing can easily get up to $25,000 for an inventory control program – so, in comparison, a few hundred dollars for a good program is a steal! The money you pay for a good inventory control program can easily be earned back (and then some) within just a few months. That is, as long as you’re willing to set the program up and use its tools!

1. Can you really afford to buy new products? This seems like the most obvious question but, believe it or not, it gets overlooked more times than not. Your business has been operating on a cash flow based on a certain inventory. If you are just getting by each month, then it may not be the best time to add new products. Take a good look at your cash flow and make sure that buying additional products won’t put your retail business under. And, don’t forget about the additional storage and handling fees from your warehouse or fulfillment center.

2. Can your warehouse handle the extra inventory? Before you decide to place your new order, you should be sure that your current warehouse or fulfillment center could really handle the extra inventory. It’s possible their space is too full to store additional products. It’s better to find this out before you order, rather then as the delivery truck is pulling up to the loading dock.

3. Is your retail space or online store ready to handle the extra products? Buying the products is the easy part. It’s making your store ready for new merchandise that takes some time and effort. So, instead of having products sit in your warehouse while you get your store or website geared up, get your store space or website ready for the new products ahead of time. If you have a website, it’s possible you may have to schedule work time with a web developer weeks or even months in advance.

4. Which products are best sellers for you now? When you make the decision to add new products to your store, it’s best to really think about what you want to spend your money on. Take a look at your sales history and see what types of products sell the fastest and have the biggest profit margins. Continuing to buy products in that particular category may prove to be a real profit boost!

5. Do the products you want to add make sense for your store? Do they complement what you currently offer, and will they boost your profits or just sit on your shelves, destined for the clearance bin?

6. Does your distributor carry other items? If you’re looking for new products, try starting with your current supplier. Chances are they carry a wealth of products from dozens of manufacturers. Buying more products from them just might make you qualify for some hefty quantity discounts!

7. Do you need to find another distributor? If you’ve decided you don’t want to carry your current suppliers other offerings, then you’ll have to look elsewhere for products. Any seasoned buyer knows that this can turn into a lengthy search. First finding the right products, then the supplier, then good prices.

Adding new products to your store or website is exciting, but don’t let your enthusiasm get in the way of making the right decision for your business. It just takes an honest look at your finances, your sales and the competition to know if your business is really ready for the next step.

Sourcing inventory from a single supplier

This option won’t work for all retailers, but for those who carry industry-specific items or a limited amount of merchandise, it’s worth considering this type of wholesale buying. However, as you’ll see, there are both pros and cons to having a single supplier retail business.

Pros:

Convenient – Choosing products from just one catalog or website is a lot easier than trying to keep up with new products from a dozen or more wholesalers. You’ll certainly save a lot of time and effort by having your entire product selection choices in one place.

Quantity discounts – It’s a lot easier to get a bulk discount on merchandise when you’re buying your entire inventory from one supplier. Depending on the supplier, you could get a 2% -10% discount by placing your entire order with them. If you’re a small business, it’s doubtful you would even get a discount if you placed several small orders with different wholesalers.

Save on shipping – Shipping all your products from one place is a lot cheaper then having several small orders shipped to you from various suppliers. Shipping is expensive and, over time, all those charges can add up to some serious dollars.

Cons:

Limited products – It’s rare that one supplier would have ALL the products you’re looking for. So, that means your store may not be as fully stocked or your product line as extensive as you had hoped.

Risky – If your entire inventory relies on the one supplier, then what happens if they suddenly go out of business, their warehouse burns down, or they’re just plum out of stock on your merchandise? That leaves you in a very difficult situation.

Buying your products from several suppliers

Sourcing from a variety of wholesalers isn’t just for the big companies. With small minimum orders, wholesalers (and even some manufacturers) are making it easy for small companies to buy products.

Pros:

Product Variety – With an unlimited amount of wholesalers to choose from, you can freely pick and choose the products you want and expand your product lines, without having to be committed to a particular set of product offerings.

Lower Risk – If something happens with one of your suppliers, it’s not the end of your business because you have plenty of other product supply sources to choose from.

Cons:

High Shipping costs – It’s a lot more expensive to ship several smaller orders, rather than one large one. Shipping costs can quickly eat up your profit margins if you’re not careful.

Trouble meeting order minimums – If you’re only ordering one or two items from a particular supplier, it may be hard to meet their order minimum. This may mean having to buy more products than you really wanted or not being able to purchase a particular item.

High product costs – If you’re not buying your products in bulk from a single supplier, you may not end up qualifying for those nice larger quantity discounts.

As you can see, neither option is absolutely perfect but, that’s okay. You just need to understand the pros and cons of each so you can choose which is right for you and your company.

Keep inventory levels comfortably low. Most business owners will inevitably make the mistake of ordering too much of a certain product to get quantity discounts. While that is a smart move for an item that’s a proven fast seller in your store, it’s not a good idea for an initial order. It doesn’t matter what kind of lightning-speed the salesman assures you it will “fly off your shelves.” An item that’s not selling quickly means excess inventory and that means 1) storage fees that add up and 2) money that is just collecting dust. It’s money that could have been used to buy an item that sells quicker and easier.

Know your inventory. Every storeowner should know exactly how much of each item is in stock, what was paid for each item and what the individual storage fees are. This will ensure that you don’t end up in a backorder situation, and that you’re making enough profit on an item to cover its costs. It’s far too common for business owners to be so unfamiliar with their inventory, that they are actually losing money on some items. Frequently, that situation occurs when a storeowner doesn’t take a recent price or storage fee increase into account on the retail end.

Turn dust into dollars. It’s very important to get dead merchandise out of the warehouse. Monthly storage fees add up and it won’t be long before those fees will eat up all the profit left on those non-moving items. It’s best to get the merchandise out and sell it-whether it’s to a liquidator or on eBay-to recover at least some portion of the money. Be careful not to get trapped into thinking it doesn’t make sense to sell a product for less than what you paid. If you don’t sell now, you may not be able to sell later. For every month dead products sit in your warehouse, you are losing more money-both in storage fees and not being able to convert the stale merchandise into cash. If you received just a portion back of what you paid, you could use that money to buy faster-moving products. Keeping merchandise that doesn’t sell is never a winning strategy.

By using the above steps, along with carefully choosing all your products, you’ll have gained control of your inventory and the ability to keep your products moving. Remember, in order to have a successful business you have to keep your inventory rotating. As soon as you start to see a pattern of stagnant sales for a particular product, take action–keep the movers in and get the dust collectors out. The only way to know which products are stale is to be aware of your inventory and its sales patterns. It’s important to check inventory levels and sales on a regular basis and don’t delay in removing stale merchandise.