In recent times, there has been much debate about the Stock Model versus the Indent Model.
In a newsletter deployed by Folklore to their stockist database, Vincent Kennard-Davis shared the following commentary which is some food for thought on the subject.
A few months back we did a mailout of why stock service is better than indenting. If you have not seen that mailout I have included it at the bottom of this one.
One of the reasons why stock service is better than indents for hardware is because you never really know what is around the corner i.e how well the particular item will sell once you have it in stock. If you got say item and it hasn’t sold well, for some retailers the obvious thing to do is try clear it.
Take this for example:
Hopefully you are not sitting on a lot of these completes. Sometimes it seems like it is a race to the bottom.
Back in February we sent this email out about Indents vs stock service. Unfortunately not a lot has changed in the market since then so we feel that it is still relevant. We would be keen to hear any of your ( the retailers ) thoughts on this issue!
As I am sure most of you are aware, the indent programs for hardgoods has increased quite considerably over the last couple years. With the lure of bigger margins and guaranteed stock you might think that this is the best thing since sliced bread. But is it?
As another indent period is upon us, you may find yourself allocating more and more of your hardgoods budget into indent programs, but, if the last couple months is anything to go by, the only thing that is certain in these uncertain times is change. More than ever before we have been hearing from retailers from the East Coast to West that they have a surplus of hardgoods left over from December (even now, 10 months later we still have retailers saying that they have certain completes left from December!) . So let’s be honest here, Skate hasn’t fired up for a majority of us this year. Maybe kids may have got the latest drone, playing Fotnite or a scooter but a lot of retailers out there are left with stock from previous indent seasons. With wholesalers trying to minimise their risk by getting you to commit to hardgoods 4 to 8 months in advance with the lure of extra margins, you need to ask yourself. Do I know what will be hot in 4 to 8 months’ time? If this product doesn’t sell will I have to discount it out to recoup my initial investment costs? Are those extra margins I have been promised guaranteed? Even if this category does fire up, will I have to discount it to compete against online markets ? Online markets whose sole business plan is to discount the products! The added incentives that the indent programs offer are only beneficial if the products sell when they are in season. Also, a lot of the extra margins simply come from increasing the RRP of the product, not the quality of the product.
Do you know what the next hot trend will be in 4 to 8 months’ time? If yes, Great, please let us know. If you are not 100% sure what the hottest trend will be in 4 to 8 months’ time then why take the extra risk with indenting hardgoods. You already have to indent softgoods multiple times a years. Do you really want this to become the standard for hardgoods too?
We at Folklore believe the burden of risk should be shared between us (wholesalers ) and retailers and not put solely onto you. That is one of the reasons why we believe that the indent program for hardgoods is unsustainable in the long run. Don’t get sucked into the hardgood indent programs, once that genie is out the bottle it will be very hard to put it back.
Pro’s for stock service
- Buy what you need when you need
- Not committed to stock that may not sell
- Allows retailers to be quick and effective in their purchasing toward current trend
- Minimise your financial risk that is allocated to hardware.
Cons for indenting:
- Stuck with stock you may not sell
- Taking the financial risk for you wholesalers
- Asked to predict the unpredictable
- Ties up your budget and prevents you from being fast and effective in acting on trends that are current.
Not much has changed since we emailed this out in February..
Before you even get to see the home page they are offering you $20 off you order.
(below screen shot taken today, October 19th)
(below screen shot taken in Feb)