Inventory is rarely top of the mind for newly-trained optometrists, but it's something they have to contend with when beginning their own business.
Las Vegas-Inventory is rarely top of the mind for newly-trained optometrists, but it's something they have to contend with when beginning their own business. Unfortunately, few are ever trained in inventory management techniques, and so they're left on their own to figure out the best methods for running their practice while making their frame dispensaries profitable. With this in mind, REM Eyewear Senior Director Sherrie Rogerson shared her six-step process for an optimal inventory while speaking at Vision Expo West.
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1. Know your customer, industry, and office needs
Knowing one's customer demographics is obvious advice that spans across industries, but equally important is understanding industry trends in frames, such as popular colors, styles and designers. Additionally, it's important to keep in mind the office's needs to be able to meet the intended profit margins, cost control, number of frames on the board and so on.
2. Segmentation and categorization
When placing product around the store, categorization can make or break a selling cycle. Rogerson recommends segmenting product by designers and brands.
“Most customers walking in the door, no matter what their demographic, have some sort of idea as to a brand they like,” Rogerson said. Categorizing based on other criteria such as style risks having a wall that looks the same everywhere, she said, and perception of choice is vital to any consumer.
Physical space is always a limiting factor that one has to contend with, but filling the room wall to wall with frames is not only an expensive proposition, but an unnecessary one, too. The key is to keep track of one's turn ratio-a metric that describes the frequency of sales and turnover of inventory. Frames that sell on average twice a year would have a turn ratio of two, which is good, Rogerson said. However, this can always be improved. Knowing which brands or even individual frames have a high turn ratio is key to knowing which ones are the winners and which ones need to be replaced.
In addition, Rogerson also says to investigate whether lessening one's inventory is the right move. She recalls situations where cutting the low-selling stock from a dispensary's inventory actually increased not only the turn ratio, but sales, too, perhaps due to less confusion for the buyer.
Vendors are people, too, and negotiation is always an option, Rogerson says. She recommends starting by analyzing the must-haves from vendors-what must they do in order to be considered. This would include things like reliability, warranties, and quality products. After that, list the negotiable things, such as price, terms, co-ops, marketing assistance, and board management. Once a list is made, only then can a practice determine which vendors fit the criteria that match the business's vision.
As for the number of vendors to keep, Rogerson recommends no more than three to five major suppliers (not brands) and one or two specialty vendors in order to increase the practice's buying and negotiation powers.
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Perhaps the most important step, management is dependent on inventory control. Knowing what is in stock, what’s needed, and having this information at the tip of one's fingertips is key to any sincere effort at improving a frame dispensary's return on investment. It also empowers the practice to order frames on its own terms, rather than allowing vendors to force conditions whenever they show up to ask for new orders.
Rogerson recommends staying away from ordering only when vendors visit, as it takes some of the power away from the practice. It's best to negotiate a consignment deal instead, so that inventory can be display-only. After all, when a rep visits, "What is his goal when he's there?" Rogerson asks. It's likely that it's not necessarily the practice's best interest, but the vendor's.
Marketing can manifest itself in a variety of ways, but product placement is perhaps the most important. Rogerson recommends several retail industry tactics, such as placing high-profit items at eye level, using up-to-date lifestyle images, and placing items one most wants to sell in the front right part of the store-an area she referred to as prime real estate.
In terms of advertising, Rogerson recommends using store window displays, showcases, and cross-marketing with other businesses, such as hair salons, spas, fitness centers, and children's boutiques. She also stressed the importance of social media-which tends to be a very effective free medium-and email marketing, in addition to any internal marketing efforts. She recalled how at one store they enjoyed casual Fridays, when employees wore casual clothes and sunglasses atop their heads.
But while all the tips she mentioned are important pieces of the success formula, ultimately it comes down to understanding one's business and taking control of one's inventory away from vendors.
"It doesn't matter what you do with your dispensary if you're not in control of your stock," Rogerson said. "Controlling inventory is the bottom line."