The title of this content on the left side of a graphic depicting two nonprofit employees managing their store’s inventory.

4 Tips for Managing Your Nonprofit Store’s Inventory

Although stores are generally associated with businesses and corporations rather than nonprofits, various mission-driven organizations run stores to generate sustainable funding. Just think of the gift shops in art museums or bookstores run by schools or colleges.

However, running a nonprofit store presents unique obstacles that your organization may not have experience handling. Key among them is inventory management. Much like with product fundraisers, it’s crucial to keep the items you’re selling well-stocked to meet customer demands.

If you’re feeling out of your depth, don’t worry — this guide will cover four tips for managing your store’s inventory. Let’s get started!

1. Set up an inventory organization system.

When you’re first starting your store, most or all of your inventory may be on the floor. In that case, it’s less about storage and more about creating visually appealing displays that draw customers in and entice them to make a purchase. Once your store grows and begins to store more inventory, that’s when it becomes complex.

Effective inventory management begins with an organized storage system. Start by purchasing physical storage solutions for your backrooms, including:

  • Shelving units
  • Storage cabinets
  • Storage bins
  • Wire shelving

Additionally, purchase a label maker and label your storage systems accordingly. This will help you locate items in the future, making restocking more efficient. Since you’ll be selling and acquiring inventory constantly, don’t be afraid to invest time into organizing your storage well. This is especially important for nonprofits that accept in-kind donations (think food pantries or thrift stores, for example), as you may acquire stock at unpredictable times.

As you continue running your nonprofit’s store, feel free to rearrange your storage until it makes the most sense for your unique needs. For example, if you have any particularly popular products or items, it might make sense to move them into a storage compartment nearer to the front of your back room. By doing so, you’ll make it easier for you and other employees to restock this particular item.

2. Monitor inventory regularly.

To ensure your store is never significantly under- or over-stocked, stay apprised of your needs by regularly monitoring your business’s inventory. We recommend implementing a dedicated inventory management method to help you stay on top of your stock levels, such as one of the following:

  • First-in first-out (FIFO). This is a common inventory management method wherein stores sell items in the order they are acquired. It’s most beneficial for stores that sell perishable goods, such as flower shops or bakeries, but it can be useful for other stores as well.
  • Just-in-time (JIT). With the JIT technique, your nonprofit will only order enough stock to meet current customer demand. This is a great technique if your store has limited storage space and can’t afford to hold excess items for long periods. However, it requires you to have a good understanding of customer needs at all times.
  • Economic order quantity (EOQ). EOQ refers to a formula companies use to calculate the ideal quantity of items they should purchase to meet customer demand while minimizing inventory costs. However, it assumes that demand and holding costs remain constant, making it an inventory management technique best suited for stores that expect steady and consistent customer behavior.
  • ABC analysis. In ABC inventory management, you’ll determine the value of your inventory based on the items’ importance, ranking items based on demand, costs, and risks. “A” items are high-value, high demand, and high cost, whereas “C” items are low-value, low demand, and low cost, with “B” items falling in the middle. Based on this system, you’ll know which items to prioritize purchasing and restocking.

Ideally, you want your store to implement the perpetual inventory tracking technique on top of the aforementioned methods. This requires inventory management software (more on this later) that provides real-time information on your inventory levels, so you always have accurate data to back up your decision to order new products.

3. Analyze inventory trends.

As some of the techniques in the previous section alluded to, another crucial aspect of inventory management is analyzing trends in your products and sales. Track key metrics such as days sales in inventory (DSI), gross margin, and inventory turnover to obtain an informed perspective of your inventory.

In particular, you want to determine your:

  • Most popular items. Stay informed about your popular items to ensure your store always stays stocked to meet demand. You may also conduct surveys and research into why these items are so attractive to help you offer similar items that will also sell well.
  • Least popular items. Similarly, knowing which items don’t sell well will help you keep your inventory moving. You can stock a smaller number of these items or even choose to discontinue them if your audience shows especially low interest.
  • High sales periods. This could refer to a time of day, day of the week, or a specific period in the month or year where sales are the highest. Knowing these periods allows you to strategically time your marketing efforts, ensuring that you offer discounts and promotions when customers are likely to buy.

After your nonprofit becomes more comfortable with analyzing this information, you may consider tracking other inventory trends for further insights. For example, you can calculate your inventory turnover ratio, track overstock incidents, assess supplier performance, and consider inventory aging and obsolescence.

4. Purchase inventory management software.

Usually, inventory management comes packaged as one of many features within larger point of sale (POS) systems. According to ThriftCart, POS systems usually have these core inventory management capabilities:

  • Real-time inventory tracking. With barcode scanning and an inventory database, nonprofits that use POS systems can track their stock levels in real time so that they always know when they’re running low on merchandise.
  • Inventory syncing for physical and online stores. A common challenge for organizations that run both brick-and-mortar and online stores is ensuring that they don’t accidentally sell products they don’t have. A robust POS system will include inventory syncing features, ensuring that you only sell items you have in stock.
  • Discounting and promotions. If you need to move products that haven’t sold, discounting and promotions are the way to do it. With this feature, you can easily mark down items that you want to sell while providing customers with an excellent buying experience.
  • Receipts. While not directly related to inventory management, receipts are important for your customers’ records. Plus, if a customer makes a donation on top of their purchase at your nonprofit’s store, eCardWidget recommends sending them a tax-compliant donation receipt within 48 hours. A POS system not only makes receipting possible but also extremely convenient.

Once you purchase software, be sure to train your staff on how to use it. Schedule an onboarding session with the software provider, asking questions about areas you need clarification. Then, put together a guidebook to ensure everyone knows how to operate the system and use it for accurate inventory management. You can also use it as a helpful resource for future team members during their onboarding.

Nonprofit fundraising takes many forms, and stores are a great way for nonprofits to generate a sustainable stream of income. With proper inventory management, you’ll ensure your store runs smoothly, raising an increased amount of funds to further your mission and aid your beneficiaries.