skip to main |
skip to sidebar
Question: "We must keep bringing in new items. But, how do we keep from being over-bought?"
Answer: "Very carefully!"
Ahh, the appeal of new items. Or, your customer's ever-growing "wish list" items. But, when you are also trying to control inventory, and keep turns up, the challenge is, "Really, which should you buy?"
- As many retailers are only too aware, if you are not vigilant, you may experience bloated inventories, which can cascade very quickly into cash flow problems.
Here are 6 key questions for you and your buyers to ask yourselves as you consider new items. We think of it as an "entry exam" for merchandise. It's a very quick way to identify which items actually deserve to be in your store.
#1. Can my customers get this item at other stores in my market area?
If yes, it probably has no pulling power.
#2. Is this a good margin item, or is it subject to a lot of price competition?
Slow turners with weak margins are double trouble.
#3. Does having this item in stock help me sell other higher-margin merchandise?
If not, you may not need it.
#4. Can I get faster delivery on this item than I am now getting?
If yes, you may be able to cut back on your stock.
#5. Do I order larger quantities of this item than I actually need in order to take advantage of price breaks?
If yes, you may be coming out on the short end when you figure in all your carrying costs.
#6 Do I have an emotional attachment to this item that reflects my personal taste rather than a business-like response to my customer’s desires?
If yes, get rid of it!
Go here in the Library for Owners at The Retail Owners Institute(R) for more useful and practical insights and tactics about protecting your store from inventory bloat. See how quickly you can achieve greater control of your inventory!
New items? Oh my, yes.
Too much or too many? Not any more!
Recently, we heard how the cafe/bar in the recently-opened Whole Foods store in downtown Los Angeles had a live jazz combo playing on a Friday night. "And the place was packed! Can you believe it? All the cool clubs in downtown LA, and people come to the Whole Foods for live music?!? A grocery store??"
Actually, yes. We CAN believe it. Here's why.
- These folks trust Whole Foods because of the customers it attracts. They know they will be comfortable there; they want to be around people like themselves.
- And, they may not know much about who they might find in any of the "cool clubs".
Specialty stores are particularly suited to expand on this kind of engagement with your customers. You already have been selecting and editing product assortments - what's known today as "curating" - that speaks to a certain taste level. And attracts a particular group of shoppers.
And thereby, you have also been "curating customers"! You see, it's your customers – not just your merchandise – that really make your stores "special".
And these folks - your "best customers" - might like to hang out with each other when they are NOT shopping.
- This is your opportunity to engage in real life(or IRL, as they say) with those who care about your merchandise - and what it represents - the same way you do.
- Make your stores more than a great place to shop. (Remember, there is the internet, after all.)
- What experience can you offer that will make your stores the place to be for folks like your very best customers? (They're what really make your stores "special." And don't they love to hear that about themselves?!)
We believe you will find it energizing! One more way to put the fun back into retailing!
Recently we received an email from a long-time follower of The Retail Owners Institute®. It included a comment and a question that you, too, may have wondered:
How do you go about changing the mindset of the owner/CEO about GMROI, inventory management best ideas, etc?
Our CEO stills buys by intuition, hunch, seat-of-the-pants. He likes to use phrases like: stack-em-high, watch-em-fly. One-to-show, one-to-go.
Can CEO's go from mediocre to great, or do they have to pass through the valley of bankruptcy first?
Wow! Quite a question, speaking volumes about the underlying concerns.
Those Owners & CEOs who still "stack-em-high, watch-em-fly", who buy by hunch and intuition are in fact disappearing. It's what we call "Retail Darwinism". But, must owners pass through the "valley of bankruptcy" in order to change?
Every case is different, of course. In our work with retailers in "turnaround" situations, we've found that the fear of impending failure, the acceptance of being on the brink of bankruptcy, can prompt changes. Unfortunately, sometimes it is too little, too late.
So, how can Owners and CEOs be motivated to change?
- It starts with increasing their financial skillset and confidence.
- Enabling them to have a positive answer to "Am I running this business…or is it running me?!"
- Doing integrated financial projections can be eye-opening.
- Knowledge IS power!
Occasionally, however, fear is more paralyzing than motivating.
- These retailers simply do not appreciate how much control they could have!
- Not able to recognize their alternatives, they become frozen in the headlights.
- This is especially true for those who have delegated the "accounting and financial stuff."
That's not to say that Owners & CEOs need to do all of the accounting and bookkeeping themselves. Far from it!
But since Owners are responsible for projections, for playing "what if…?" about their business, they must understand the cause-effect financial levers in their business.
That's how they can be empowered, better able to respond as the business environment changes.
Emails such as that one cause us to redouble our dedication at The ROI to help any retailer, anywhere be able to look ahead, compare potential outcomes of their own financial projections, and then use those insights to inform their judgment and decisions.
Or in other words, empower retailers to "Turn on their financial headlights!"
A recent study by consulting firm Shipware LLC documented the commanding advantage Amazon has established in shipping. The "big shippers" - so-called Mega-Retailers like Amazon, Target & Wal-Mart - get dramatically more favorable rates from carriers such as FedEx and United Parcel because their volume is "guaranteed and predictable."
As a result, the costs absorbed by the Mega-Retailers to provide "free shipping" are breath-takingly less than those for their smaller competitors.
Shipware estimated the shipping costs that would be incurred by each type of merchant to ship a 10-inch square box weighing 3 pounds from New York City to a suburban residence in Atlanta.
But are the shippers relying on this "guaranteed and predictable volume" to offset the discounts they offer? Or, are the shippers looking to their smaller customers - with far less negotiating power - to bear a disproportionate share of the costs?
- For the mega-retailers, free shipping drives tremendous volume (and customer loyalty) while also enabling greater and greater negotiating strength with the shippers. A powerful dynamic: the big get bigger.
- And for the smaller merchants? Matching the mega-retailers' online prices and absorbing the "free" shipping costs are much higher hurdles. They represent the opposite but equally powerful dynamic, the downward spiral....
Will there be any relief for the Small-Medium Retailers as Amazon grows its own shipping fleets? That is, faced with reduced volume from Amazon, might FedEx and UPS be more willing to offer better rates to all the other customers?
SIgh. We wouldn't count on it.
Or, given this huge discrepancy in costs, might other shipping services emerge to fill this vacuum? Perhaps consolidaters of some sort? Or...???
The Internet of Things (IoT) – all the web-enabled devices for the home – is a dynamic and fascinating arena. One of the latest devices is the Family Hub, the "Smart Refrigerator" from Samsung.
The Family Hub has 3 cameras inside the fridge and a 21 inch touchscreen on the front that connects to the web. Samsung says they want to move your refrigerator beyond storage, and bring your kitchen into the digital age.
For that, the Family Hub comes complete with...its own family! (And you thought it was about your family.) It's all about the "home shopping vertical."
So, when you wonder (or are being asked), "What's for dinner?", the Family Hub has lots of partner-enabled help for you.
- First, you can look inside your refrigerator – from anywhere with an internet connection – and see what’s in it right now, including expiration dates.
- Meanwhile, the Groceries by MasterCard app has been studying your habits, and offers a grocery list of suggestions on specific items and brands.
- AllRecipes has recipes, cooking tips and suggestions for you (complete with shopping lists).
- Others in the household have been adding to the grocery list too.
- Once you approve your shopping list, items are added to a cart at a FreshDirect or ShopRite location, the payment is processed by the MasterCard app, and the groceries are delivered by Instacart.
Whew! It's giving a whole new meaning to "food chain", isn't it?
Our questions: Are these smart fridges - and all their connections - really cool? Or, really chilling?
- Is this a time-saving, technological break-through? The perfect blend of technology, merchandising, and convenience for today's consumers?
- Or, despite the amazing connections the technology can allow, Is it even solving a real problem?
- Meanwhile, as with all these technology advances, who actually will own all the valuable data these smart refrigerators are collecting?
It will be fun to watch, for sure.
And who knows? With the web-connected video screen on the refrigerator, the Family Hub may give a whole new meaning to “binge watching”!!
