How much inventory should I carry?

As a retailer, your overarching goal is to sell as much as possible. 

To achieve this, you need to know how much inventory you can carry without having to drop prices or get rid of excess stock. This is easier said than done, especially as most businesses experience seasonal changes in demand. 

Most would agree that it's better to sell out than have stock leftover. Then again, you want your inventory to match consumer demand so that you make as much money as possible without having to reduce prices. 

There’s no standard formula for working out how much inventory to carry. However, there are some basic principles to keep in mind, especially in the lead up to the cyber weekend and festive period. 

1. Be strategic about your inventory

You’ve probably already got an inkling about what is going to sell well during the cyber sales and Christmas period. If not, head over to social media to get an insight into what’s trending. 

As well as looking at current trends, you should analyse your historical sales data and use these findings to inform this year’s inventory strategy. 

2. Sync up your online and in-store inventory 

If you’re an omnichannel retail business, you might want to integrate your software in a way that allows you to sync online and in-store inventory in real-time. 

Doing so will help you pivot more easily if you need to predominantly sell online, and it will provide your customers with more opportunities to purchase your goods. 

3. Create a mini distribution centre

During exceptionally busy periods such as Christmas, you might find you need more space to pack orders. You could consider transforming part of your premises into a mini distribution centre to help you to fulfil more orders in a timely way.  

Black friday sales shopping online

Need to fund an inventory order?

If you need to stock up on inventory ahead of the cyber/festive rush but just don’t have the working capital to spare right now, the following types of business finance could help. 

Merchant Cash Advance

A merchant cash advance (MCA) can provide your business with the short-term cash injection it needs to buy more inventory. You don’t need to provide an asset as security because MCAs are loaned against your future customer card sales. 

Each time you process a customer payment, a percentage of the money (usually 10%) is repaid automatically. That means there are no fixed monthly payments to fret over because you repay the funds in line with how much money you make. 

The more customer payments you take, the quicker the finance is repaid. Typically speaking and providing that you’re eligible, the lender will advance you an amount of capital that matches your business’ monthly turnover. 

eCommerce Finance

As the name suggests, eCommerce finance facilities are specially designed for businesses that operate an online function, such as online shops. 

If your application is successful the lender will provide you with capital based on your future sales. You can use the funds to purchase extra stock ahead of the festive period or invest in ads and affiliate programmes. It’s up to you!

Revolving Credit Facility

A revolving credit facility is a type of credit that enables you to withdraw money, use it to fund your business, repay it and then withdraw it again when you need it. 

You can use the money to fund the purchase of additional inventory in the run up to the cyber and festive periods.

Interest rates are fixed and are usually paid daily, enabling you to manage your cash flow effectively. The limit that you can withdraw is likely to be the equivalent of one month of turnover for your business.

With so many new funding types out there it can be difficult to know where to start. At Funding Options, the synergy of our technology Funding Cloud ™ and team of Business Finance Specialists do the searching for you. Just tell us how much money you need for your inventory and when you need it. We’ll find suitable options for you!