All of the things I’ve talked about so far are important. But none of them matter—unless you can get control of your inventory.
I will never be able to understand why any sane individual would invest $250,000 to $1 million in a convenience store that returns only 2% profit. Maybe I’m just too much of a penny-pincher. For all I know, you think owning a convenience store is an exciting gamble.
But the real question is, why is the profit so low? Three words: poor inventory management.
Take a Good Look
If you ever see me in one of your stores, I’m the stranger who’s rearranging the shelves, picking up candy off the floor, turning bottles around in the coolers so the labels will show, and moving the damn pork and beans back to where they belong.
When I pick up a can and see a dirt ring around where it’s been sitting for five years or more, I shake my head and say to myself, “Surely the owner doesn’t know about this.” Once I took a whole box of candy back to the store manager and told him it looked disgusting. You know what he did? He wiped the dirt off with an even dirtier rag and stuck it back where I had found it. Drove me nuts.
But the real issue isn’t the dirt. Workers could clean and shine every item until the whole store gleams. But that wouldn’t solve the deeper problem.
Why do items gather dust? Because they’re not selling. Because you have too many of the wrong items. Because you’re not managing your inventory.
Take a good look at your own stores. What do you see? If the CEOs of most convenience stores were forced to count the inventory in just one of their stores, they would be ashamed and angry at all the old, outdated, dusty, useless items on their shelves.
How Did Things Get This Way?
Let’s face it—everyone likes to get more done with less effort. That includes me. Nothing wrong with that, I suppose. Why mow the lawn if I can get my teenage son to do it?
The same is true in the retail business. Store owners and managers have a lot to do and a lot to keep track of. Sometimes they have to delegate.
Well, that’s what happened when convenience stores got started. Retailers went to suppliers and said, “I can’t make a decent living selling gas and oil anymore. I’m gonna open a store. Somebody said you guys would keep my store full of stuff. Would you do that for me?” And so the games began.
Suppliers took over the job of “managing” their customers’ inventory. I put “managing” in quotes because the term isn’t really accurate. When it comes right down to it, suppliers are not capable of truly managing a convenience store’s inventory.
Don’t get me wrong. I realize that some suppliers really try hard. But they simply don’t possess the tools to know whether their next truckload contains what you really need.
Suppliers simply aren’t the best source for telling you what is selling for a profit in your store. Their job is to keep your store stocked. That’s what you asked them to do.
They make two deliveries a week to your store when one would be sufficient. They carry back more spoiled and expired merchandise than they take there, because they had no idea it would start growing mold before you could get rid of it.
The act of “managing” your inventory became, “Find a hole and shove some more stock in there.” I have often said that if you paint a door at the far end of the cooler, a presales person will stand there until he freezes to death, trying to figure out how to open it so he can shove more junk through it.
What seemed to be a good idea has become like air traffic control without computers. “Can I take off now?” “Beats me, give it your best shot!”
If you’re not happy with your supplier, I’ll bet the feeling is mutual. Suppliers and retailers are both beating themselves up, trying to figure out how to stock stores with the right amount of the right items.
But it doesn’t have to be this way.
To the majority of experts and consultants, the solution is: Get control of your inventory.
There should be a simple way to do that. They call it supply chain management. And all that’s required is that you and your suppliers converse with each other. Not with words—with data.
But, there is a big problem we have to solve.
In my next article, I’ll show you why Supply Chain Management alone cannot work for you; and the best part, I am going to reveal the solution.
Bill Scott is the author of two retail books, a convenience store retailing consultant, speaker and president at StoreReport LLC.