By Bill Scott, President, StoreReport LLC
WE ALL KNOW that beer sells better on a hot weekend, don’t we? And sticky-buns sell better in the morning than in the afternoon and evening. Depending on your area, Coca Cola 16 ounce may be the best seller, and Marlboro Light 100’s — you can’t keep enough of those products on the shelf; but, other than the general knowledge that’s obvious, do you know that every item in your store has a profile that you can fine-tune and manipulate into producing substantial profits you would not receive otherwise? Well why don’t you do it? I mean we’re all into making big bucks, aren’t we?
Did you know that every product in your store has its own unique DNA? And all products are related in some way? Products have a relationship most of you don’t even think about. If all products have a DNA footprint, it’s only natural to assume that every store has its own DNA as well. The truth is that inventory + employees + location + prices, all of these things add up to a store’s unique footprint, or DNA.
The Devil’s In the Details
My buddy Mel Haynes, has been educating me lately on the relationships between products, and you know what? Not only is it unbelievably interesting, it’s a heck of a lot of fun.
He has proven to me that certain products in certain stores have a stronger effect on some products’ sales than others. For instance: In one store, Hunt’s Pizza, Little Debbie products and Golden Flake chips drive Coke sales through the roof. Take a guess. Of the three products affecting Coke sales, which one would you think has the strongest effect on Coke?
I’ll give you a little hint: It has the color ‘golden’ in its name. Do you think Coca Cola knows this? Of course they don’t. Since every store is unique, how could they possibly? In this store, Lay’s chips effect Coke sales, but much less than the other two products I mentioned. You ready for this? Mountain Dew drives Coke sales too. Huh? It does. In fact, Mountain Dew’s effect on Coke sales is almost as strong as that of Hunt’s Pizza.
Don’t you think if you knew these things, and utilized this kind of information for your benefit, it might put more cash in your till? Has the industry convinced you it’s something you don’t need to know about, your managers have stated it’s too much trouble, and the people working in your stores say, ‘I couldn’t care less?’
So you have a tendency to assume it’s a bad idea before you even consider it. But, if you’ve been reading, you probably already know how I feel about ‘Ass-U-Me.’
What you don’t know about your inventory may be driving you to the poorhouse on a high-speed ‘Supertrain.’
If you’re like most retailers, you’ve tried everything your bloodhounds have driven you to – customer loyalty programs, buying shippers at trade shows and signed onto more than a single one-sided contract to get those irresistible rebates. You’ve got your employees greeting the customers when they enter your stores, keeping your coolers full, cleaning the bathrooms … and on and on. But most retailers look around the store and think ‘looking good’ is the key to success… that’s not even remotely close.
By now you may have tried every cost cutting scheme to the point where there’s nothing left to cut out, save your customers. You already pay your employees just enough to sustain human life, but the government is saying you’re gonna have to pay them more. It won’t be long before you’ll be expected to give them basket-to-casket health care. Many of you in the convenience store industry probably dream about a recent immigrant buying your store more than you dream about winning the lottery. What retailer hasn’t thought about passing his nightmare over to the next unsuspecting sucker? You can’t make money this way? Instead, you should be on your way to riches, and having a ball doing it.
Now, what about your image? After all, who can think about image when the light bill needs to be paid, right? That payroll tax deposit overshadows cigarette sales, right? The more you cut, the more your image suffers, and the money you have to turn over to Uncle Sam is more important than counting Beanie-Weenies, am I right? But I swear, it’s the little, tiny things you do, or you do not do, that is the difference between overall success or overall failure. Is your inventory trying to tell you, “That’s where the big bucks are”? Your inventory may be calling your name, but you can’t hear them screaming over the white noise that pulls at you in every direction.
All Inventory Is Not Equal
Did you know that some items sell well Monday through Friday, but sales fall flat over the weekend? Yet they occupy the same shelf space seven days-a-week. Do you know that it might be that one item’s price is too low, which affects its ‘value’ in the eyes of your customers as the low price is telegraphing: “Look at me, I am cheap junk”?’ Did you know that an item’s value may change from month-to-month, season-to-season, day-to-day and even from one hour to the next?
Every tiny little thing you may not notice can be having a huge impact on sales. It’s exponential you know. Consider the mighty Mississippi. It’s HUGE. Every now and then it leaves its banks and destroys billions of dollars of infrastructure, but it all starts with a tiny, little trickle in Minnesota. Along the way it gets bigger and bigger, and more destructive. Then one day you look out over the horizon, start filling sand bags and yelling for the Corps of Engineers. You know the idiom, “When you’re up to your armpits in alligators, you remember your main objective was to drain the swamp.”
The Only Constant in Retail is ‘Change’
And you are allowing change to determine your fate. You may be against change and ignore the fact that change may be against you. Take rainy days for example. The wedding industry , ski resorts, electricians, amusement parks, some restaurants, photographers, postmen, most farmers if they’re not in a drought, police, builders, outside painters — by the most part, all these guys hate rainy days. But rainy days are a windfall for department stores that sell umbrellas. If I owned a department store, I’d automatically raise all umbrella prices by 15% at the first sign of dark clouds. “The animals are grouping in pairs, Ms. Barkley. A storm is coming. Good opportunity to sell boats, don’t you think?”
Last week, I went to a home show. It’s tornado season you know. There sure were a lot of people looking at storm shelters. You want to sell something? Don’t miss a golden opportunity when it’s staring you in the face.
The point is, if you want to make money, every item in your store deserves your personal attention, because each item is a tiny little machine that either generates profits or drains money out of your business like a tiny leak that goes undetected, until you get the water bill, or worse – the ground caves in beneath you.
If you have 4,000 items in your store, most of you can’t recall the names of 30 of them without an invoice. You probably don’t know the retail price of anything at this moment, and the money you make or lose on your inventory, if and when it sells? If you can recall the prices, I’ll bet you every bar of candy of a certain size is $1.09, $1.19 or $1.29, etc. Why not $1.08, $1.22 or $1.27? What’s the fascination with the ninth cent? I know. You are not scanning and/or your store employees don’t want to fidget with that last digit on the label guns. Every item in your store has its own DNA, its own value and its own perfect price; a price that will cause it to turn at its maximum profit. And who’s kidding who, with this ninth cent deal?
You wouldn’t hire an employee without knowing anything about them.
Yet, you let your suppliers put these little leeches on your shelves every day, costing you money, draining your profits, eating away at the foundation of your business. Some items are there merely because they have to be someplace, and if your supplier finds a careless retailer to sell his overstock to, he’ll do it, because he knows you aren’t paying attention. Some are there because they look good (customers like that), but they never buy them. Others are there simply because you don’t know they’re there. And, some are there because they’ve been there since you first turned on your electricity. None of these little leeches produce profits. Almost nothing is priced correctly. The damage they do to your business is insidious and sadly permanent. You will not make up for the money lost yesterday – ever.
You need a tool that sets off an alarm when these little guys aren’t paying their way.
Some examples are:
- If an item has been there for 90 days without selling
- If the unit count of a popular item falls below zero
- If the margin is not high enough to produce a reasonable profit, or too high to produce a profit
- If you have more inventory than you need to last before the next delivery
- If you will run out before the next delivery
- If the number of units were adjusted during the previous audit
- If sales of the item suddenly stopped
- If the selling price has remained the same for three months or longer
- If the selling occurrences of an item falls below that of other stores
- If you received more than you needed on the last delivery, or didn’t receive enough
These 10 indicators, and more, should raise a red flag. Inventory is what generates profits for your business. Why do so many retailers think so little of it and know so little about it? Is it a matter of money? You bet it is. Inventory is money you’ve spent and if you don’t sell it for a profit, you lose.