"How can money be the root of all evil, when shopping is the cure for all sadness..." Elizabeth Taylor
Profit and healthy cashflow come from having the stock that customers want, where they want it (ie platform or location) and when they want it. The consequences of allowing stock to get out of balaqnce with demand can be likened to a seesaw. You will go broke if you have either of these problems: too much stock or not enough stock.
Inadequate or Lack of Wanted Stock does the following:
- Creates out of stocks
- Frustrates customers
- Loses store credibility
- Loses sales and affects your cashflow
- Is the pathway to bankruptcy
Unwanted or Excessive Stock:...
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.
Clearance merchandise consists of products that have been permanently marked down for quick sale. These items may be handled in several ways:
- Clearance items may be pulled together at the rear of each department. For example, clearance suits may be positioned on one or more fixtures at the rear of the career department.
- Clearance merchandise from all departments may be pulled into one area of the store to form a permanent clearance department. This catch-all clearance department should be positioned in the rear of the store.
- Clearance merchandise in specialty stores may be pulled to the front of the store for traditional major clearance events in January or early July.
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.