Booth Camp Day Five: Inventory (Volume)

So now that you’ve taken some time to figure out the variety of product you are going to stock your space with, today we care going to do some math and talk about how much inventory you need to have in your space. The key to a profitable retail business is volume. 

We’ve talked about pricing for profit and growth. So as long as you do that, this next formula will work for you to ensure that your sales goals are helping you make money & grow your business.

Sales alone do not equal profits. For starters you have to pay for the materials that go into the product and you have to cover your overhead expenses (rent, website, subscriptions, etc). Then you need to pay yourself for the time that you’ve put into making the product, and after those things have been paid, you can see how profitable your business is.

The Math

So at the end of day, it is a numbers game. If you are using The Perfect Price Prescription we know that material & labor cost account for 25% of the sales price. So in a booth rent scenario, being profitable isn’t just about getting a check at the end of the month. It’s about getting a large enough check to cover all of your expenses (including your labor) and then some.

For this example we’re going to say that rent is $150 and the store takes a 15% commission from sales. In this scenario, selling just enough to cover your rent means a minimum financial loss of $60/month. I say minimum because we didn’t factor in other expenses you might have such as subscriptions, website fees or tools.

In my opinion, “breaking even” in a booth is gross sales of double your rent. With this example that would pay for the booth related expenses, pay you for your labor costs on the items sold, and net a profit of about $30/month for you to reinvest in new materials. Now, that is a bare minimum. This should be the goal for the hobbyist who doesn’t need to really make money to support themselves, only needs an outlet to move product so that they can make more.

The maker or artist who is trying to grow a profitable business that actually provides income should have a minimum monthly sales goal of gross sales that equal five times the rent of their booth. Again, in this scenario that would sales of $750. Deducted from that would be $150 in Rent, Commission of 112.50, and $187.50 that cover the time and materials you have in those products (this amount should always go back into your business for more materials) That leaves you with a net profit of $300/month. Depending on your goals you may keep half for yourself and put the rest back in your business, or you may reinvest it all to grow your inventory in an effort to grow your sales!

Since that is what I consider a minimum goal, I will tell you that I believe your push goal would be 10 times your monthly rent. Once you are hitting that goal and still building volume I think it is time to increase your space to see if you can scale in the location you have. Most locations will have a bit of a ceiling. You can work on your marketing and display and still there is only so much traffic you can get in a single location. At this point you can choose to stick with one location that has an amazing presence and display and add an online element that you can scale to almost unlimited volume, or you can add a second booth location. That is definitely a question for another day and exactly the kind of thing we can talk about more in one of our Zoom Calls inside the membership!

Volume

Now that you know your sales goals, let’s talk about how that translates into volume of product. If you have a Sales goal of $1500/month. You need a minimum amount of $3000 worth of product in your booth space at all times. I say minimum because depending on the size of your space, you may need more than that.

Here’s the first rule you need to know; You will never sell more than half of the product in your booth at any given time. There are a few exceptions to this rule but they are few and far between. Once your ‘storefront’ is half empty it appears picked over and customers make a mental note that ‘the good stuff is gone’ and if they are shopping your product at that point, they are usually looking for deals.

The second rule you need to know is this; a successful booth has a constant steady flow of new product - OR - a constantly changing layout. Any local store has a steady flow of regular customers and if they look at a booth space and it looks exactly the same as it has the past few times they have been in, they will keep walking. So it is important that you are always bringing in new product and moving your product and displays around in your booth. This can be as simple as changing which piece is on your front table with items hanging against the back wall. It’s just enough shifting to make sure that your customer sees something is different and chrome closer to investigate. If you have enough product, they are always sure to see something they didn’t see last time, but you must get them into your space in order for that to happen. 

So you have your worksheets from yesterday where you grouped your items into size levels and price levels. I’m not going to ask you to do detailed math and add every single price up to see where your retail value is. Though if you have a good inventory management system you can do that. For our purposes though average prices will do. So look at the list of your price levels and assign average prices to those levels. For this example we’ll use $10, $50 & $150. Remember the average ticket items are what you create the most of and what you are marketing the most, so we want about 50% of our inventory to consist of this price point. Then the remaining half will be spit between high ticket items and low price points from a price perspective. Here’s what that looks like.

Your Rent is $150, so your initial sales goal is $1500, and you need $3000 of product in order to hit that goal. 50% of that is $1500 of $50 items, so you need a minimum of 30 average priced items in your space. 25% is $750 in high ticket items which means 3-4 high-ticket pieces available. Last you have 25% or another $750 in low ticket items or 75 low priced items. Once you have that volume, work on doubling it, because remember, you can sell 10 times your rent if you have enough product, create beautiful displays and market your business well. We will get more into displays and marketing next week but those things don’t matter if you don’t have product, so the first element we have to build up is product volume.

So let’s get into the visuals. Download today’s worksheets to plug in your own numbers and determine what kind of product volume you need to be aiming for!

Booth Camp Day Four: Inventory (Variety)

In tomorrow’s Inventory lesson we will talk about volume levels in Inventory, but today I want to talk about the products themselves and what to consider when creating a product catalog. I will talk a lot about art, decor and handmade products, but the same rules apply if you are curating collections for resale.

There are two categories into which you can split your inventory in three levels; Price and Size. Sometimes they will correspond with one another, but not always. 

Ticket Price 

It is important when stocking a booth space to consider all of the different customers who will come through your space. Some will be looking to make statement purchases and others aren’t looking to spend money at all, they are just browsing. You want your booth to invite everyone in, the active shoppers and the browsers. Because once you have them, if you have great products and a well designed display you can turn browsers into buyers and paying customers into collectors of your work and products.

High Ticket Items 

Depending on what your product offering is, this price point could be anywhere from $50 - $5,000. These items typically take longer to sell, though not always. The point of these big ticket items is to catch your customers eye and really pull them into your booth to see not only this piece but the rest of your work.

Average Price Point

Again, it depends on if you are selling soap or furniture what this price will be, but these are the items that you generally sell the most often, and they are usually the focal point of your product offering. Having plenty of options in this price point is a must, since this is what you are producing most often and trying to move at a higher rate.

Quick Sales/Impulse Buys

These are small versions of your work. Perhaps items creates from scraps of larger products or if you are buying for resale these are things that compliment your main products but make an easy grab and go. Customers don’t have to think about whether they can afford these items. It’s an easy, “love it, buy it” decision. These are for the people who love what you have, but don’t want to spend much money or don’t realy need anything, but just want to support you.

Product Size

It’s important to create a display with depth and interest. That means, you don’t want 200 of the same sized thing peppering the space. That is done a lot in big box stores and if you’ve built your brand to the point that the demand is so high you can’t keep up with it, then maybe you have a product you could do that with. MOST of us though, need visual interest to pull our customers into our displays. 

Oversized Items

These are large pieces that once again will really serve the purpose of drawing people into your space. These are pieces that a customer knows exactly where they are going, and sometimes takes time to consider and come back to pick-up. Again, you won’t sell as many of these most likely, but they are perfect for pulling people into your brand to see what else you have to offer.

In some retail spaces these items are display only. Think of a giant Wine Bottle that leads you to a wine section, or a huge Paper Mache Rattle hanging from the ceiling that indicates where the Baby section is. This is possibly a good option if all of your items are small, even if they are high-ticket items. But if you create your products and you can create a couple of oversized pieces that pull people in, I would put a price on them. You never know what someone’s space is like. These pieces are often bought by other business owners outfitting their own commercial spaces. We’ve sold these to coffee shop or restaurant owners and office spaces even.

Average Size Product

These are once again the pieces you will typically sell the most of in your space. Customers can usually pick up these items and carry them out of the store by themselves. Even if your main product offering is larger furniture pieces. It is often ‘smalls’ and tabletop decor that will sell most easily for this reason. If this isn’t your main product offering you don’t want to overfill your space with it, but staging for larger items is really important, and since these items can move quickly, it is important to have product available to refill the empty spaces quickly.

For most booths this is the main source of income and typically the primary item being marketed. Though if your focus is smaller items like jewelry for example, you may add decorative jewelry boxes or neckforms for staging to be the ‘medium sized’ item in your display. While it is possible that these items are not for sale, unless it is hard to replace and crucial to your display, I personally price everything. Customers get really disappointed when there is an item that they love that isn’t for sale. Another option for these items if your product is small is to crate gift bundles. Maybe as a Bath and Body Product Line you collect items of the same fragrance and package them in a box or basket to have a larger product - and price point - available for purchase. It also makes gift giving even easier!

Small Items

These are items that are easy to pick up without asking the question, “but where will I put it?”. These are usually going to be your low ticket prices also, but they don’t have to be! Smalls make great collections inside a display, and collections make customers subconsciously choose their favorite. Once they have a favorite it is hard to walk away. If you are creating a product you might be able to repurpose your scraps into unique small trinkets, or if you create soaps for example you could cut smaller bars to create sample sizes. Sample doesn’t necessarily mean free! Just an opportunity to try a smaller purchase before making a decision.

Next week we will spend a day talking about Displays and there are also three eye-levels to consider. For now though, gathering your inventory is the important part. So in today’s handout I want you to sort your existing products into these categories, and if you see gaps brainstorm the products you could add to fill in those spaces. Remember to keep your customer and your brand in mind when adding product. New Products should compliment what you already offer when possible!