For those who do not follow the antique trade, let me bring you up to speed: the antique business is in the toilet. Prices are at their lowest level in a decade, following the boom of the 1990s. Antique furniture is selling for 70-80% less than it sold for in 1998. Inventories are piling up. The customer base is shrinking, because the new Gen X buyers are not that interested in antiques, especially large furniture pieces.
Many antique dealers are giving up the trade. Other dealers swear that the downturn is just part of the normal business cycle, and that sales will rebound. These optimists point out that with prices so low, new buyers are attracted to collecting antiques.
Certainly the market has dropped; I cannot argue that point. And, certainly many dealers are going out of business. The question on everyone’s mind is: which dealers will survive?
My opinion is that what we have in the current market is a weaning out of weak dealers. When I owned retail stores, I saw new dealerships jump onto the “good times” bandwagon when the economy was booming, and fall out when times got tough. I also saw well-established dealers get lazy and ignore the principles of good retailing. Those lazy dealers did not survive tough times either.
What does a dealer need to do in order to survive in the present climate? There are three basic principles of good retailing that, when applied consistently, will always work in these circumstances. They are: 1. Increase inventory turnover rate 2. Adjust your inventory mix. 3. Expand your customer base. Right now I hear a collective groan, as if the entire retail universe is saying “Duh!”. So, let me explore each of these in more detail and you will see where I am going with this.
For those that are new to the concept of inventory turnover, let me start by explaining what inventory turnover is. Inventory turnover reflects how often your inventory is sold and re-purchased (turned over) within an accounting period. The formula is Inventory Turnover = Cost Of Goods Sold / Average Dollar Value of Inventory On-hand. Turning inventory fast is good for cash flow and profits. Here is an example; (these figures are made up to make the math easy). Let us say you buy a table for $1000, and you plan to sell it for $2,000. Tables are not selling well, and it takes you one year to sell the table for $2,000. Your gross profit is $1,000 on your inventory investment of $1,000. But, let us say you sell the table in six months for $2,000, re-invest your original $1,000 into another table, which you sell six months later. You have turned your table inventory twice. Your inventory investment has remained at $1,000, but now in the same period (one year) you have made $2,000 gross profit on your original $1,000 investment. The key here is to turn your inventory as fast as possible. That way, you get a bigger return on your inventory investment.
Turning your inventory quickly leads right into the next principle: adjust your inventory mix. This is the point on which many retailers fail. Truth be told, too many retailers are in love with their inventory. They have a store full of “neat stuff” that makes their store look good. They insist on getting their price. So, the merchandise sits on the shelves. If merchandise sits on the shelf, inventory turns slowly. If inventory turns slowly, cash is short. If cash is short, they cannot pay their bills. If they cannot pay their bills, they are out of business. Lesson: your inventory should be turning at least four to six times per year. You can keep a few premium items in stock, as long as you can afford the investment. Break your inventory down into profit centers, and track the performance of each profit center. Profit centers that do not meet your turnover requirements have to go. Liquidate the inventory if you must, but put your inventory dollars into something that will sell quickly. There are software programs available to help you track demand on ebay and other internet sales sites. Buy some and learn how to use it.
Lastly, expand your customer base. This would seem an obvious way to increase sales, but you would be surprised how many bricks-and-mortar stores are still focused on foot traffic and not their internet presence. I am not talking about selling a few items on ebay; I am talking about making your entire business focus on internet sales. If you are stocking a lot of large items that cannot be easily shipped, get rid of them. Aggressively plan an internet sales campaign and include as many online sales venues as you can afford.
Summary: adjust your inventory mix to carry easily shipped items with established demand, and promote your sales in as many venues as possible.