Confucius-Originally Kong Fuzi. c. 551-479
Chinese philosopher who dabbled in rental purchase

Confucius said...

Roughly translated...
"Give a man a warehouse, and he'll fill it up"

Well, maybe it wasn't Confucius, but it was a very wise man.

My dad was in furniture manufacturing and sales for 40 years. He had many employees in that time, and none of them ever had an office. As I looked forward to joining the family business (and getting a big fat desk), I  inquired as to the logic of this policy. His answer..."If you give a person an office, they spend time there...and you don't make money in the office".

The same logic applies to a warehouse. If you give a store a warehouse, it will fill up...and money isn't made in the warehouse. Reduced to simple math..."A stores idle inventory is directly proportional to the size of it's backroom."

There are some very intelligent people out there that say 'merchandise depreciates at a lower rate when idle'. On paper this may be true...but we don't do business on paper.

Look at it this way, for every 7 days a washer/dryer sits idle, you lose $18.99. That's more than 4 times the rate of depreciation when on rent. And that's if you can fully depreciate in 24 months.

Dollar amount of idle inventory divided by 20
Most companies price merchandise in such a way as to recover cost in 20 to 26 weeks. Using 20 weeks as a benchmark, idle inventory carries a direct (lost revenue) cost of $50 per week, per thousand. If you have $50,000 of idle, your cost of idle is $2,500 per week or $10,825 per month (put that in your bonus calculation and smoke it). Reducing idle by as little as 10% can increase your margins by over 2%.

Of course, it's unrealistic to eliminate idle, we have to display merchandise. But we can control the length of time between return and re-rent by following some simple rules.

• If after re-furbish, you wouldn't rent it to your mom, cash it out
• Nothing should be in the backroom for more than 48 hours.
• If your service vendor takes longer than 2 days to repair and return merchandise...find another one.
• Anything idle for more than 30 days should be reduced, packaged, or discounted until it rents.
• Anything idle for more than 60 days should be cashed out
• Anything idle for more than 90 days should be sacrificed to the rental gods.

Refurbishing used merchandise is an art. No two returns are quite the same. Some merchandise may only require a little Windex, others may require 4 hours of hard labor. The bottom line is 'Get it done quickly, and to your Mom's standards'.