Inventory – Breadth or Depth?

With the year coming to an end, I’ve been taking a look at our turn rates and our inventory.  Some parts of our inventory (clothing, media products) have been somewhat lackluster in terms of their turns. Others are running too hot (our general board game inventory probably could be beefed up, though I’m considering ‘splitting’ the category further to give us better insight).   It’s all the usual part of running a business, where you review your turns and sales and decide what to do.

The question that came to mind, more than anything else when dealing with our game inventory is whether we’d be better off increasing our breadth or depth.  It’s one thing to say ‘increase inventory dollars in board games’, and another to decide whether to do so by:

  • buying more unique products (increasing breadth)
  • buying more of our hot-sellers (increasing depth)

Increasing Breadth

When increasing breadth, we are looking to bring in more games than we have now.  This could be a return of older games that have been ‘cut’ due to low turn rates or by bringing in more new games, relaxing our normal restrictions on what we think should (or should not) be brought in to the store.

The advantage of bringing in older games is that many of those games were once good sellers.  While sales might have slowed, the demand was once there and because the games were once bought /are in people’s collections, there might be latent demand for these games (or slow trickling demand).

On the other hand, bringing in newer games allows sleeper hits to make their way into our portfolio.  Some of our better sellers have been games we’d never expect to sell and so, by bringing in more independent / small games, we might hit on more of these.  However, the disadvantage is that we might see a significant increase in games that we need to clearance.

In both cases though, we are able to have more stock and potentially increase the likelihood for customers to find eactly what they are looking for, particularly customers who have a specific idea of what they want.

Increasing Depth

pandemic_new_ed_Increasing depth on the other hand focuses on our ‘bestsellers’.  This is a hedge to ensure we never, ever run out of stock.  With many bestsellers already, we have started carrying 3 weeks worth of sales (i.e. if we expect to sell a copy a week, we’ll keep at least 3 copies on hand).  This is mostly due to the restock period for many games.

However, this doesn’t take into account stock-outs.  Scythe for example is currently out of stock again.  3 weeks of stock would (at our last week worth of sales when we had stock) be around 20 copies.  However, with the game out of stock right now, when we could have restocked it, perhaps we should have restocked at the 3 month level.

Of course, Scythe is rather unique (it is the hotness).  Let’s try Pandemic instead.  We sell around 4 copies of this game every week at least, so our regular stock level (or the stock level we try to keep) is 12 copies.  However, there are weeks when our ‘normal’ estimate is off, and like now, we are out of stock of this game (again!).  Perhaps instead of keeping 3 weeks, we should be at 2 months? That’d mean we’d have to stock 32 copies, but we’d never have to worry about the game running out of stock on a day-to-day basis and as importantly, stock-outs at the manufacturer level wouldn’t affect us either (well, for 3 months at least).

This tactic would give us the ability to continue to cater to our customers, but it does target more ‘new’ customers (i.e. customers looking for the ‘staples’ of our business like Pandemic, Dead of Winter, etc.).  It doesn’t cater to ‘alpha’ gamers who have a specific independent game that they really, really want.

It also has the disadvantage of being really expensive.  Even going from 3 weeks to 4 weeks for say our top 30 bestsellers (and assuming average cost of $30), we’re looking at $2700 ($30 x 30 SKUs x 3 copies a week) increase in capital cost.  If we decided to do 3 months, that’s a $27,000 increase in our inventory!

What Will We Do?

Well, firstly we’re going to pay all our Christmas bills off and ensure we are caught up on any bills.  After that, we’ll review to see how much additional funds we might have to put into play any of the above strategies.  It’s clear we need to increase our inventory value in our board game side and I’m personally leaning to a ‘mixed’ option, with a slightly heavier focus on increasing depth.  If we can shift some funds from our slower-selling categories, we probably will do that too.