I WAS HAVING a discussion with Grant Rogers and Mel Haynes Sr. this morning regarding the grading of products in convenience stores, and the way I see it, it boils down to four classifications. Without reading further, can you guess what they are?
Before we get into that, imagine pebbles of various sizes being tossed into a body of water. A small object, such as a golf ball, would have an insignificant effect when tossed into the Atlantic Ocean; but when the same object was dropped into a cup of coffee, catastrophic effects would cause the liquid to leave the cup and shower all of the important documents on your desk.
The same can be said for inventory in a convenience store, as opposed to inventory in a large retail store such as Walmart. Walmart may have RetailLink©, a computer network that made a huge splash (pun intended) in the retail landscape of America. But it’s been tweaked and modified for 30 years, and it’s certainly showing its age. Still, Walmart can get away with tons of junk in their stores without have a negative effect on their profits… well almost.
The fact is, if current reports are correct, all is not wine and roses in the offices of the world’s largest retailer. Overstocks and out-of-stocks is the bane of every retailer, and Walmart is no exception.
Recently, my wife and I toured several different Walmart locations while driving from Mississippi to Kansas before my wife was successful in acquiring a ‘Great Value’ brand of pretzels she simply cannot live without.
It seems like Walmart has many brands of products that arrive in caravans of tractor trailers once every few months or so, and then are forgotten about until it’s time to make another delivery.
“Last year, we sold 1,000 of these things, so let’s schedule 250 per quarter. That should be enough to meet the store’s requirements.”
It’s like getting your 90-day prescription of blood pressure medicine, and then taking it all at once, so that you can forget about them until the next quarter. Analytically it makes sense, economically you would only have to make one purchase; but veritably, your widow/widower, would bury you in a pine box the very next day.
Walmart, and most other retailers aggravate a great many customers by following this plan, but the environment has shifted dramatically since 1986 when RetailLink© was created. People shop more often, live in smaller apartments and have less money to purchase unnecessary products.
The four classes of inventory are:
Items that move fast and produce excellent profits
Items that should be considered for removal
Items that should be removed from the store(s) immediately
Slow movers, less profitable products, that drive the sales of other, more profitable products.
THE SIZE OF your budget, selling space and storerooms determine the hierarchy and weight of these four classifications. If the environment of your store is tiny, you must exercise more due diligence than you would if you were a store the size of a Walmart Supercenter. In other words, the larger your environment, the less impact on your profitability. But that doesn’t make it any less critical. Because, the results of not classifying your products can eventually become overwhelming, and threaten your very survival.
Our government has held back on raising interest rates for political purposes for far too long. As a result, many of us have become accustomed to a world without inflation.
Yesterday, I heard that the Fed will hold off on raising the interest rate until after the election. Politics again. But you mark my words, the pressure is building up, and the rubber band that’s holding our economy together is about to snap. And when you finally hear that snap, I sincerely hope you are prepared to deal with it. Because, if physics has taught us anything, the amount of pressure that can be tolerated has its limits, and retailers that are caught with tons of unsalable merchandise sitting in their stores and in their warehouses will be the first ones to go belly-up.
You don’t need a computer to do this. It can be done manually with a great deal of effort. But whatever you do, you need to take action now.
Somewhere in America, at this very instant, there is a warehouse filled to the brim with Pet Rocks and unused VHS tapes that will be there until 30th Century archeologist unearth them and try to figure out what they are.
Bill Scott is the president of StoreReport LLC. He is an author, speaker, cloud service provider and consultant to the c-store industry since 1978.