Inventory Management Part V: Strategy

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Welcome to the fifth and final part of my Inventory Management series.

Last week I took a break to write about counterfeits, and I really appreciate all the feedback and conversation. I thought it was worth breaking up this series to get that article out faster.

Today we’re talking general inventory strategy and some miscellaneous closing thoughts thrown in for good measure. I’ve written quite a bit about inventory management over the past six weeks, so there won’t be too much heavy lifting in the final installment. You can find the first four articles below and you should read them before you continue if you haven’t already.

Part I: The Basics
Part II: Tracking
Part III: Turnover
Part IV: Sunk Cost

Aligning Your Business

The first four parts of this series covered some important inventory management concepts, but they were somewhat out of context. Now it is up to you to put them together and craft the inventory strategy that best supports your business.

Some things to consider:

How much capital do you have? When and how will you be selling cards? To whom? What are your overheads and total cash flow requirements? The answers to these questions will dictate what and how much you carry in inventory.

Store owners, for example, have much higher overheads than traveling traders or casual speculators. For a store owner, keeping the doors open (paying rent, bills, the employees, etc.) is the most important thing. Steady cash flow is absolutely critical so you need to move a certain amount of inventory each month just to keep going. That probably means plenty of sealed product as well as Standard and casual singles. Maybe you have a Modern crowd, maybe Legacy, maybe other games, but the point is that your overheads dictate reasonably good inventory turnover even if the margin isn’t as great as you would like.

Conversely, you may have a day job and deal cards out of your house on the side. You have plenty of cash but limited time to sell cards at tournaments or shops or even to list cards on eBay. This is definitely grounds for tilting your inventory back toward slower moving, higher returning items. If you have the cash, why not buy in to some duals or other Reserved List favorites? If the rent money is coming from somewhere else, you can afford to sit on them for as long as you need.

Remember, your inventory is there to support your sales, not dictate them. The goal is not buy a bunch of stuff and then try to figure out how to sell it. Instead, think about how you are going to sell and then buy inventory that compliments that approach. If all you do is buylist, then MP or HP Legacy staples are going to be tricky. Maybe try snapping up casual collections instead. You get the idea.

The Price Is Right

In Part IV, I talked about sunk cost. One of the takeaways there was that the buy decision is over and done with by the time you sell, and you shouldn’t let that influence you. What you can do is ensure that you are making solid buy decisions in the first place.

The majority of making good buy decisions boils down to one little word: price. Anything can be a good buy if you get it cheaply enough. Do your homework and put some effort into acquiring your inventory as inexpensively as possible. The art of finding a good deal will never die. Leave no stone unturned and work on your negotiation skills. When you do spot a good deal, don’t hesitate to pull the trigger (if you are doing it right you will have some cash on hand for this type of thing). Your future self will thank you when it comes time to sell.

Diversification

It’s a basic concept, but it too often gets overlooked. Diversifying your inventory will take a significant amount of risk out of your operation. It’s going to do this in two ways.

1. If anything really bad happens, the damage will be limited in scope.

2. It will help smooth out the peaks and valleys in your sales.

I talked about some risks in Part I of this series so I will only discuss them briefly here. Risk of loss, damage, obsolescence (like rotation), banning, etc. all fall into the first category. If you can identify one single thing that will really ruin your day, you need to diversify now. And I’m not just talking about the guy who has 400 copies of Snapcaster Mage and nothing else.

If your entire inventory is for the same format, you risk that format falling out of favor or losing tournament support. If your entire inventory is in one room, you risk losing everything to a fire or the sprinkler system or a break-in (are you insured?).  Heck, if all your money is tied up in Magic cards, you risk Magic losing popularity. It can happen. It’s not likely, but you should make sure that you can survive it if it does happen.

This might seem overboard if you are a casual speculator with a few long boxes of cards, but you wouldn’t feel that way if your livelihood depended on it. It’s worth the time to ponder all of these “what if” scenarios. Inevitably, you will find that you can reduce your risk exposure with relatively minimal effort.

Diversifying can do even more than that, however. Normal fluctuations in demand can be tougher on a business than you might think, and diversification can help smooth that out. I’m not talking about anything catastrophic, just a Standard season that isn’t particularly engaging (like this one) or a Modern season that sees low turnout because it got moved to the summer and everyone is at the beach.

Depending on the structure of your business, it doesn’t take much more than a few slow months to find yourself in an awkward position. A narrow inventory will make these scenarios even more likely. If you can stock at least something that moves well at each point throughout the year, it is probably a good move and worth going out of your way to do, even for casual speculators. It will keep the cash flowing which is super important for everyone, not just those paying for a brick and mortar store.

Wrapping Up

I’ve had a great time writing this series and I feel like I addressed the topic (specific to Magic) in more detail than previously available. That’s not to say I covered it all. I am going to explore the possibility of tackling other general business concepts and applying them to Magic in the future. All suggestions are welcome.

If you have any questions or thoughts, as always, find me on Twitter (@acmtg), on Reddit (acmtg) or write me here in the comments.
Thanks for reading.

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Anthony Capece

@acmtg   -    Articles
Anthony is your typical started-during-Revised-then-quit-then-came-back-years-later Magic player.He enjoys the financial aspect of the game the most, mainly because it lets him use his analytical side but also because it makes up for the money he hemorrhages drafting on MTGO.
Anthony Capece

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