How Much Inventory Should I Order for My New Clothing Store/Boutique?
Launching a new clothing store can be an exhilarating experience. It feels like your childhood dream has finally become a reality.
Chances are, you have figured out what to sell – and the ideal audience you want to sell to. However, you quickly realise you haven’t really thought about how much stock you should order from a manufacturer.
One part of you wants to order a million new products because more sales means more profits. But the other part of you knows ordering that much stock might leave you in a bind, as you might end up tying up cash in inventory that won’t sell, considering it’s a new business.
So how much stock should you order to stay profitable as a new boutique? That’s what this post is about, so stay tuned.
Factors to Consider When Ordering Stock
There are key factors to take into consideration before placing a production order. They are as follows:
Season
Imagine ordering 100 pieces of jacket in Summer? One thing is sure: your only hope is to wait till winter to sell them off. By the time winter comes around, people might be looking for a style of jacket, making yours obsolete. That’s lost sales and tied-up cash.
For this reason, it’s important to take season into consideration when planning your assortment.
Fashion Trends
Fashion is highly dynamic and influenced by evolving trends. What’s popular today might not be tomorrow, making trend forecasting a critical aspect of inventory management. Staying updated with fashion trends can help you stock items that are likely to sell, enhancing turnover rates and reducing markdowns.
Local Events and Holidays
Local events and public holidays can significantly affect your inventory needs. For instance, if your store is in an area that hosts a popular music festival annually, you might want to increase your stock of festival-appropriate attire like bohemian dresses or band t-shirts during that time.
Customer Demographics and Preferences
Understanding who your customers are is crucial in deciding what types of clothing to stock. Different demographics have varied tastes, preferences, and spending habits.
For instance, if your store is located close to a university campus, you will likely enjoy higher sales if you sell casuals and tees than if you sell formal clothes.
Streamline your processes with a tailor-made inventory management solution.
How to Calculate How Much Inventory to Carry for Your New Store
Unfortunately, there is no clear-cut formula for calculating the right amount of goods to stock the first time you launch your store.
Nevertheless, there are certain key metrics you need to take into account so as to properly calculate how much inventory you need to order.
Economic Order Quantity
This describes the ideal amount of goods you need to order to meet customer demand and minimize inventory handling costs while staying profitable.
We’d say, don’t worry so much about this now you are just starting. But you can read more about economic order quantity.
Safety Stock
There are times you may experience delays when you place an order for goods. If you are completely out of stock and this happens, you will miss several sales opportunities.
To avoid this, you need to have what is known as safety stock, which is just a form of emergency stock you sell during supply chain disruptions.
Minimum Order Quantity/Factory Minimums
Many manufacturers have a minimum order quantity rule. This is the minimum number of products they can sell to you as a retailer. It’s also important to factor this in too.
Conclusion
The simplest answer is to start small. Knowing the right amount of stock to order is a skill that takes years to build – even professionals with years of experience still struggle with it.
When starting, it’s best to start small. As a rule of thumb, commit 40% of your initial capital to purchasing inventory. Let’s say you have $1000 in initial capital you intend to commit to procuring inventory. Start with $400.
That way, if you end up purchasing products people won’t buy, your losses will be minimal. Plus, you will have enough cash to try a different assortment strategy.
