Spa Retail Inventory Management

Spa Retail Inventory Management

In some spas I know, spa retail inventory management works like this:

“Manager, we are out of this product!” 

reply: “Ok, thanks, I will place an order.”

Or even worse, orders are only placed once accounting is able or ready to free up some money…

Short and excess inventory can mask a variety of other problems that the spa may have. Inventory carrying costs for example can be high due to:

Spa Retail Inventory Management   depreciation

Spa Retail Inventory Management  insurance

Spa Retail Inventory Management  taxes

Spa Retail Inventory Management  obsolescence: product deteriorate when sitting on shelves for too long. Selling more perishable items leads to a higher turnover.

Spa Retail Inventory Managementloss of sales: occurs when products are demanded yet the company is out of stock

Measures spa managers need to take

There is a variety of best practises in measures that spa managers can take to ensure successful and profitable inventory control:

  • developing an accurate retail sales forecast
  • developing a plan to make inventory available when and where customers want it (this is all about convenience!)
  • building relationships with quality suppliers
  • setting realistic inventory turnover objectives
  • defining cost of carrying inventory
  • reviewing order timing
  • increasing availability of goods on commission
  • teaching employees how inventory control systems work so they can help manage inventory on a daily basis

Spa Retail Inventory Management

Inventory Turnover Ratio

The turnover ratio is one of the best indicators and key measure of how efficiently a spa is turning its inventory into sales and how efficient spa management is at managing the inventory. 

Even better, the days inventory ratio puts it into a daily context.

The inventory turnover basically shows how much inventory is sold over a period of time:

 

Spa Retail Inventory Management

We prefer a higher inventory turnover ratio as it indicates, that more sales are being generated from a certain amount of inventory or to say it the other way around, for a given amount of sales, less inventory is being used.

However a very high ratio could lead to loss in sales, as there do not seem to be sufficient items to meet demand.

Hence it is useful to compare ones own ratio to industry benchmarks in order to assess whether the spa is successfully managing its retail.

Spa Retail Inventory Management

The ABC method

The ABC method applies the following calculation:

Dollar usage volume = cost per unit x annual quantity used

To apply this method and to receive a valuable output, we distinguish different types of items. 

Pareto’s Law

As I have recently mentioned in my article about Spa Retail Facts, Spa Managers must recognise the importance of Pareto’s Law, the 80/20 rule: about 80% of a spa’s retail sales are generated by about 20% of its inventory. Hence the goal of spa retail inventory management should be to focus efforts on those 20% of items.

A-items, are items that account for a large dollar usage volume (typically the top 10% of retail items)

B-items, are items that account for a moderate dollar usage volume (approximately 30 to 40% of retail items)

C-items, are items that account for the remaining 50 to 60% of retail items

RFID Radio Frequency Identification and Bar Codes

Radio tags attached to individual items transmit data to a company’s inventory control system.

Spa Retail Inventory Management

Tiny microchips or bar codes store unique electronic product codes which provide highly accurate, real-time information and allow managers to track items at any point in the supply chain.

Handheld scanning devices make inventory control quick and efficient and eliminate human error.

Spa Management Software

Suitable software can help greatly in managing inventory. My personal favourites are SpaSoft and TAC.

Ines Sieder from TAC GmbH explains:

Our Software Reservation Assistant stands for inventory management software of newest technology, as our system had been developed specifically for demands in Spa & Wellness businesses. The module inventory management reports within only a few clicks about supplier details, product information, order processes and real time stock volumes. 

Interfaces with other external inventory control systems realise flawless processes under only one program.

With each product sale at point of sale, the stock volume is automatically updated, which means that real time amounts are constantly available. Once stock volumes have lowered to a customised minimum level, Reservation Assistant automatically generates order suggestions.’

Spa Retail Inventory Management

(c) www.tac.eu.com

When looking at technology, this is what we expect from professional and successful inventory management software:

  • managing all stock and supplier details
  • inventory processes by barcode scanner including extensive inventory reports
  • automatic order suggestions on pre-defined optimum, minimum and maximum stock volumes
  • detailed stock movements as well as order receiving reports
  • detailed reports and analysis
  • average price and cost of goods
  • label printing
  • handheld scanning devices
  • direct integration to Reservation Assistant
  • professional product stock management
  • guest purchase history
  • flexible individual or defined discounts
  • gift certificate sales and redemption

Conclusion:

Managing inventory levels is important for most businesses and this is especially true for spas that sell physical goods, as retail sales and up-selling can be big boosts to a spa’s bottom line.

Anja Eva Keller Spa & Wellness Consulting

I hope this article was useful to you and you have enjoyed reading.

If you have a friend or colleague that you think may also like to read my article, please feel free to share.

pictures (c) www.tac.eu.com, pixabay

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1 Comment

  1. dear readers, I have received the following comment to this article by email and felt I need to share this with you:
    ” I like the points you covered. I would emphasize that given most SPA products, as you cite, are shelf life sensitive, that managing the inventory should be based on first expiry date not first in/first out (date the product arrived in the store) and that no inventory items with less than a year shelf year should be excepted if it arrives at the retail location with less than a 120 day shelf life if it is a fast mover, ideally nine months or one year shelf-life is preferred.

    Also I agree that reviewing order timing is critical to managing the shelf-life of products being held in inventory and knowing the lead-times (from production, transit time , and receipt of product) for the top sellers is important as well . These 3 factors can easily reduce the shelf time when a product is received at the retail outlet if not watched and monitored.” L.

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