Free Arora Cloth House Inventory Management Analysis Essay Sample
Arora Cloth House is a family owned clothing store that was opened 1987 and specializes in women’s Indian clothing such as saris (Indian dresses), Punjabi suits, and loose fabrics. The store will purchase its inventory three to four times in a year and the inventory arrives by air or ship, depending on the urgency of the inventory and the cost of freight. The problems faced by Arora include the inability to travel to India to purchase new stock, business losing profits and market share and customer dissatisfaction of not having new inventory. To enhance success and smooth operations, Powan Arora has to consider opening a second store, holding a clearance sale, utilizing social media and purchasing an additional storage facility. By opening an additional store, Arora could get enough space for more inventories and having separate stores increases the likelihood of total sales revenues as well as the total market share. Holding a clearance sale, would attract a large number of customers and at the same time old stock could be sold to make room for newer stock. By purchasing additional storage facility, Arora will be able to increase the amount of fabrics it orders and not have to worry about stock overflow. Finally, social media such as facebook will be used to promote and market to their specific target market online.
Arora Cloth House is a family owned clothing store, which specializes in women’s Indian clothing. The company sells saris (Indian dresses), Punjabi suits, and loose fabrics. Arora Cloth House was established in November 1987 and has been operating for over 24 years. Throughout its entire existence, Arora Cloth House was located in the Punjabi market on Main Street in Vancouver, British Columbia. The owners of the store are Pawan and Anita Arora. Arora Cloth House has a 3,500 square foot store, employing three full-time workers.
Arora Cloth House has a 2,000 square foot warehouse in Surrey, British Columbia where they keep their inventory. The owners go to the warehouse everyday to collect inventory for the retail store. The owners have streamlined their purchasing process by only purchasing inventory in India. Currently, Pawan Arora travels to India three to four times a year to buy stock for the coming seasons. With Pawan travelling to India so frequently, he believes he has an advantage over his competitors because he is able to pinpoint the latest product styles for which his customers seek.
The current process of purchasing and inventory management is that Pawan Arora will go to India three to four times a year to purchase for each upcoming season. The owners have eliminated purchasing from local suppliers as they feel they can buy higher quality merchandise from India. The inventory arrives by air or ship, depending on the urgency of the inventory and the cost of freight. Once the inventory arrives, Pawan and Anita price each item individually at their warehouse. This can take many days depending on the quantity of goods. They hire temporary labor for up to two days to help them. To speed this up they will price the goods based on what is needed at the store at that moment. Then the less urgent inventory is priced at a later time and delivered to the store as needed. Once the new inventory is put on the shelves, the older inventory that was unable to sell is sent back to the warehouse. This older stock is beginning to consume valuable space at the warehouse, which is causing fewer purchasing, as there is becoming a lack of space to hold stock.
Owner’s inability to travel to India to purchase new stock
Pawan Arora cannot go to India and purchase new inventory. He has to do his research on the latest trends by using the internet and watching television and Indian films. This causes Pawan to buy small orders over the phone with wholesalers, whom he has a working relationship with. This is difficult for the owners because they find that the wholesalers are not really purchasing items they carry at their retail store. They are buying items that cost more because the wholesalers are only trying to make bigger profits on the items they are sending over. The owners feel they need to be at the Indian markets themselves to see the actual inventory they are purchasing and to negotiate themselves overall costs. On average having wholesalers purchase on the owner’s behalf costs them an extra fifteen to twenty five percent.
Business losing profits and market share
Arora Cloth House is losing market share and sales. They cannot buy new inventory in major quantities. This is affecting them drastically because the retail business is in its slowest sales period which is between October and January.So far in the first six weeks, the owner’s estimates a decline in sales by twenty percent when usually during this period it would be between twelve to fifteen percent based on their historical data. The sales they would normally be getting are now going to their competitors because they are able to provide newer inventory at their stores.
Customer dissatisfaction of not having new inventory
Arora Cloth House is finding that their customers are dissatisfied with the current stock. Customers are always looking to purchase what they see in Indian television dramas and movies. Customers are expecting retailers to always have the latest trends at their stores. With these high expectations, the owners are finding many customers are not happy with having to come in and see older inventory. When the store does not have those types of clothing customers tend to leave without purchasing anything. The retail store is known for having several brand loyal customers that only shop at their store because they are an industry leader in having new stock in their store throughout the year. They are only losing customers that would purchase smaller items at their store. However they are very concerned that this could lead to losing some major customers that shop at their store three to five times a month.
To address the three problems outlined above, the KPU Consulting Group has provided the following five recommendations:
Open a Second Store
Due to the excess amount of old inventory, Arora Cloth House is not only finding it difficult to make space for new inventory, but it is also starting to see a decrease in overall market share. By opening a second store that deals with specifically older styles and fashions, not only will it enable Arora Cloth House to make room for the newest inventories, but it will address the key issue of the loss in market share. Having two separate stores increases the likelihood of total sales revenues rising, therefore the total market share of Arora Cloth House will rise.
Hold a Clearance Sale
Arora Cloth House has had a large number of fabrics and unsold garments sitting in the warehouse, and consumers are unaware of these articles of clothing that were at one point available, but no longer found on shelves. If Arora Cloth House were to hold a clearance sale, it would attract a large number of potential customers and at the same time old stock could be sold to make room for newer stock. This clearance of stock would provide a revenue on some of Arora’s fabrics which otherwise, would have been left sitting in the warehouse. By selling these articles of clothing Arora is clearing up valuable space which can be used to store the newest styles of clothing which can be sold at a much faster rate than the older styles. KPU Consulting group recommends that this clearance sale should be held annually, so that there is a continual effort to create space for the newest stock.
Purchase another Storage Facility
By obtaining a second warehouse or storage facility, Arora Cloth House will be able to increase the amount of fabrics it orders and not have to worry about stock overflow. The current problem with the excess stock is a barrier in Arora’s way of purchasing the newest fabrics and styles from India, and this is harming the business because customers of Arora are constantly looking for the latest styles and fashions in the market. This storage facility can be as simple as a storage unit from Public Storage, or if need be another warehouse to keep a large amount of fabrics and cloths.
Utilize Social Media
Arora Cloth House operates in a very competitive market, and although marketing efforts are the same as competitors, we feel that Arora can utilize social media as a competitive advantage to gaining a larger market share. The Arora target market is predominantly females aged 24 to 48, and social media statistics indicate that over 50% of British Columbians have a social media account (Facebook Twitter LinkedIn). If Arora was to set up social media accounts and begin to acquire followers and fans, it could use social media as an effective tool to promote and market to their specific target market online, an area that has not been penetrated by any of Arora’s competitors. Social media would be a great tool to utilize when alerting consumers about the newest product arrivals. We feel that this social media presence will result in an increase in revenue and ultimately an increase in total market share.
Arora Cloth House is an established retailer of Indian clothing and garments, and through rapid growth it is experiencing a slowdown in stock turnover. Through the years it has neglected to employ an effective inventory system and this has resulted in stock overflow and disregarded inventory. Arora Cloth House operates in a very competitive environment, and it is vital to the business that the latest fashions and styles are in supplied, as consumers of the fashion industry will quickly disregard a retailer if expectations are not being consistently met. The KPU Consulting Group has outlined five main recommendations which will help Arora straighten out their inventory issues. These issues are the root concern for a list of additionally affected areas of the clothing retailer. In addition to Arora’s need for room to carry additional stock, it must address the growing concerns of the declining market share and associated revenue losses. Each of the recommendation addresses Arora’s main problems, and pinpoints how it will help Arora Cloth House grow in the long-run. Whether it is internal business processes or external marketing efforts, the overall objective is for Arora Cloth House to regain the lost market share and to function as an efficient and effective clothing retailer.