"How can money be the root of all evil, when shopping is the cure for all sadness..." Elizabeth Taylor
Many people ask me what I see as the biggest problem area in retailing today and I normally have little hesitation in answering – RANGING. I believe that “if the dogs don’t like the dog food they won’t eat it!” And that really is what ranging is about – providing a range with sufficient width and depth that suits the target market.
The biggest problem in ranging? Lack of adequate range planning, which more often than not leads to width and depth problems, amongst the most notable being:
- Too much width in terms of classifications – literally trying to be “all things to all people”. This invariably destroys depth.
- Too much width in terms of the price parameters – trying to cover all income factors. Again, this destroys depth and often points up the fact that little thought has been given to market segmentation.
- Lack of depth in terms of quantity of best sellers resulting in out of stocks of basic core lines and those lines the retailer can ill afford to run out of.
- Lack of depth in terms of the choice offered within classifications – “if you don’t like that particular item – bad luck!”
- In some cases too much depth (depending whether we determine brands are a width or depth factor which often gets back to how we classify) by stocking too many brands without providing a point of difference in terms of features, price points, quality or whatever. In other words – unnecessary duplication of range.
- Failing to range with co-ordination in mind. Being able to merchandise co-ordinates is the obvious way to build the average number of items sold per person, and to me there is little excuse for unco-ordinated broken ranges. You see it happening a lot in apparel and furniture. So buying with co-ordination in mind is critical to effective range planning.
- Advertised lines that bear no relationship to the normal range and have no sell up when a low margin is necessary to draw store traffic.
- Crucifying “sell up” lines by slashing prices unnecessarily, indicating lack of thought in selecting promotional lines.
- Before I get off ranging, I always stress to retailers to get the depth factors right first before expanding the width. Obviously the objective is a balanced range with both width and depth but, invariably, I see retailers that are experiencing ranging problems addressing width factors first and then trying to achieve depth – often failing in the process.
One point, however, is that depth, of course, means different things to different styles of retailers. The little upmarket exclusive boutique would not want depth in terms of quantity so that exclusivity is preserved – and this would form part of their business philosophy and image. The major discounter, however, must have depth in terms of quantity otherwise they destroy their credibility.
Deleting Product Lines Featured
Every good buyer makes an occasional bad buy. Buyers must use judgement based on experience and be prepared to take risks. Nevertheless, many bad buys result from lack of discipline or analysis to complement or test that judgement.
Therefore buyers need to continuously seek information to better assess buying opportunities and work closely with their selling partners in the stores.
Inevitably buyers also need to delete products from the range. Display space is always at a premium and there is a continuous stream of new products.
To avoid over ranging and lowering stockturns, through excessive stock, buyers have to continuously monitor stock for poor performers that can be deleted.
The following guidelines offer points to be considered by buyers in approaching this issue.
Stock turnover is defined as the number of times during a specific period, usually one year, that the inventory on hand is sold. At a time like this a slow stock turn means that cash flow is lying on the shelves. It is not being turned into cash to pay your creditors and is a recipe for going bankrupt quickly.
In addition to cash flow, a high level of stock turnover in a business has several advantages for any retailer:
Merchandise on the shelves is always fresh.
Losses due to changes in styles and fashions are reduced.
Costs associated with maintaining stock, such as interest, insurance, breakage are lessened.
Your store has a limited amount of space. It must always be your objective to get the most profit per square foot out of your valuable space. Slow movers tie up valuable space.
Are you opening a retail shop? One of your important tasks is to design your stock room. Or perhaps you opened your shop but didn’t really give all that much attention to your stock room and now is the time to get your stock room in order
The high cost per square metre of many retail locations makes it tempting to devote almost every centimetre to the sales floor in order to maximise display space. Certainly the area devoted to merchandise display is the most important part of the shop, but few shops could survive without a rest room, unloading area, storage space and an office.
A comfortable and efficient office, stock area and employee break room make for a happy bookkeeping, buying and stockperson staff [even if it’s you!]. Few shops have enough room to make these areas as spacious as they should be. Remodelling money tends to get put first into the parts of the shop where customers can see it.
From a store's perspective, stock management means controlling the stock that is being bought so that customer needs are continually satisfied and maximum profitability is achieved.
Remember: Merchandise is typically the largest single asset in a retail business and, as such, its productivity is critical when determining a retailer's profitability.
Effective Stock Management is important because:
1) Stock is Money
Stock is money invested and the profitability and financial viability of the retailer depends on the return obtained from that investment.
No stock or the wrong stock means no sales and no income. Since stock is the prime generator of revenue, having the right stock in the right quantities at the right time for the customer is fundamental.