Operation Educate is part of a ongoing effort from Ensign Systems Inc., to help better educate POS•IM users with some of the basic features of POS•IM software.

Best Selling Items

Effective inventory management is key to successfully operating a retail store. This can be done by making sure every dollar you invest in inventory is effectively earning margin dollars.

Have you ever heard of the 20/80 rule? It is a concept that has been applied to almost every element of life, and it applies equally well to retail. The 20/80 rule states “20% of the population generates 80% of the solution.” When you apply it to retail, it means 20% of the department’s inventory generates 80% of the margin.

There is a tag along rule that says “the bottom 5% will never be missed.” This concept can also apply to retail inventory management.

Effective retail stores use these two rules to manage their unproductive inventory. The result is a significant increase in inventory turns and the return on investment percentage.

Here is how it’s done:

Start by identifying items in the three areas (top 80%, middle 15%, and bottom 5%) using your point of sale system’s best seller report. This report should rank items for a department by margin dollars earned during a selected period.

1. Promote the items that make up the top 80% of margin, and make sure you have plenty on hand for people to buy!
2. Merchandise or discount the bottom 5%, and do not reorder these items.
3. Selectively review the middle items, and limit your inventory investment in these items

The use of these rules and an effective POS system’s best seller report can help you maintain a lean and productive inventory.