Killer Inventory Management Methods for Your Pro Shop

Here’s how golf pros can get ahead of the game and prepare for year-end.

Inventory — in retail, that’s a four-letter word.

It refers to the stock you carry, and inventory management has to do with minimizing its costs by knowing what you have, and often, by simply counting it. It can make you cringe worse than an early morning foursome playing a five-hour round.

Still, it’s crucial to the health of your pro shop business. (Inventory management. Not the five-hour rounds.)

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According to a study from Veeqo, 43% of retailers rank

inventory management as their number one day-to-day challenge.

Are you one of them?

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Here’s the good news: We have a few great pro shop inventory management tips to share with you. And we’re going to do it in a way that doesn’t bore your golf pants off.

Last in, first out

Taxes are like golf: The lower the better. A method you can use to lower the amount you pay in taxes is called Last In, First Out — or LIFO. Under the LIFO method, you sell your newest items first rather than trying to desperately sell old inventory to make space.

Let’s say you receive a shipment of Nike golf shirts. You sell about one-third of them, leaving a good chunk still on the shelf a few months later when you receive your next scheduled shipment. This new shipment though, cost you about 20% more. (Maybe they’re made with a new fabric, or maybe your supplier just raised their price.) What do you do: Pull the old product off the shelves and replace it with the new stuff, or keep the new gear in boxes while hoping to offload the old stuff first?

Under the LIFO method, you’d favor the newest product. So how does this affect your taxes? When it’s time to calculate inventory for tax purposes, you’re left with the cheaper product on hand, so you can value your inventory lower and pay less in taxes.

Move Stale Inventory

Despite the LIFO method being an effective way to lower taxes, we advise against holding too much stale inventory — or dead stock — at year’s end. Instead, hold a liquidation sale, offer big discounts or call upon a liquidator to unload that stock and convert it into cash.

If a particular product didn’t sell in one year, it’s not likely to magically become a good seller the next year. Putting it back on the shelf and hoping for a miracle is not a good strategy. Here’s a good way to look at it: You’ve paid money (whether you purchased or produced it) for each and every item in your shop. And you’ll get back that money (and more) when you make a sale.

But what happens when something doesn’t sell? Well, you don’t make profit on it, but you don’t lose either — right? Wrong! There’s something called carrying costs, and it’s the amount of money you’re effectively paying to store an item on display. When a product stagnates on your shelf, it decreases in value over time and takes up space that could be used for a hotter item.

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A note on Carrying Costs

This intangible cost takes into account several factors:

Warehousing costs: Your rent, utilities, and salaries

Financial costs: Opportunity cost

Inventory costs: Perishability, shrinkage, and insurance

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An item’s carrying cost is generally between 20-30% of its value. So by holding onto unpopular products, not only are you forgoing profit, you’re also costing yourself.

Drop shipping

Drop shipping is a popular e-commerce method you can employ to keep from overloading your shelves and avoid tying up cash in stock. In a drop shipping arrangement, you’d sell products online without actually holding those products in your retail space. As a third-party seller, you attract the customer and you make the sale (and get the recognition). But the order would go directly to your manufacturer, who would fulfill the order and send the product directly to the customer. You sold a product you never even touched, and your partner unloaded an item without doing anything. Everybody wins.

Use Data

No matter how long you’ve been in the business, you can’t stock your shop exclusively on gut feelings. It’s important to rely, at least to some degree, on data. You should constantly collect information about your inventory: What sells? What doesn’t? What do customers want that you don’t have? Which brands will sell best? By using a digital inventory management software or your point of sale system, you can have those numbers available to you automatically. By pulling reports on your sales history, you can make future decisions based on proven success.

Human Touch

On the other hand, human feedback and word of mouth are important too. The golf industry is a tight-knit community that you should take advantage of. When deciding what equipment, apparel, and accessories to order, talk to your peers at the other clubs in your area. Find out what’s selling well for them or what their customers have been asking for. That can be a good indication of what will work at your club.

Just as important, look inward to make informed decisions. Circulate a survey to your membership to find out which brands they like, which products they can’t live without, and what they wish you had on hand. Make it a habit to ask the opinion of some of your most active members — or ask your assistant professionals and employees what they observe when they’re in the shop and you’re not.

Last word: How often should I track my inventory?

While it’s important to be able to produce accurate inventory figures for your financial figures at the end of each fiscal year, you shouldn’t overhaul your entire operation around counting how many headcovers you have left.

Tracking inventory daily, weekly, or even monthly may not be the most efficient use of your time. We typically call for your team to produce a solid inventory estimate on a quarterly basis. Time management is important. And just as unsold goods cost you extra money in carrying costs, spending too much time counting inventory can cost you in employee salaries — not to mention headaches.

So count it up four times a year, start using some of our killer methods, and look forward to a smooth-running pro shop for the foreseeable future.