What Happens When.U Oen Stock Of A Company That Delists The Small Retailer’s Survival Guide – Part 9 Range Changes and Range Extensions

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The Small Retailer’s Survival Guide – Part 9 Range Changes and Range Extensions

In the past, many small retailers sold the same products week after week in roughly the same quantities. This was especially true in some remote areas where there was only one ironmonger, one jeweler, one butcher, etc. Things are a little different in most western countries these days

economy, as well as in many other countries, where retail trade is increasingly becoming a battle of the fittest and, for miniatures, often a struggle for survival. Small retailers have limited means to compete with large chains. They cannot spend large sums on advertising or on deep and sustained price cuts. Where they can match and sometimes surpass their larger rivals is in range selection.

Big chains are great systems – when they don’t go wrong

In the larger chains, the range will be reviewed and changed regularly. The assortment may change regularly, such as once a week for some chains, and usually once a month for many. Reasons for range changes and extensions will include the following:

1. Reflecting seasonal changes in shopping habits

2. Increase or decrease in popularity of individual product groups

3. Upcoming promotions

4. Tests of a new product

5. Long-term shortage of products

Established chains rely heavily on actual sales as a way of allocating shelf space in a store. They will accumulate sales history over many years. With this data, they will estimate the best times to bring in seasonal, promotional and trial products and know which lines can be compressed or dropped to make room for them. New products are often tested in a few selected areas to gauge sales potential. Manufacturers of new products are expected to heavily subsidize the price the retailer pays for them and finance most, if not all, of the advertising and promotional materials. In some stores, you can expect manufacturers to rent shelves from stores and have a full sell-or-return policy, which means neutralizing any risk to the retailer.

When it comes to launching new products, the established system of using historical sales as a guide for range distribution can go awry. This system relies heavily on a huge database, which usually works well for large networks unless a new line is rushed. If this does Sometimes, the normal inventory and ordering system can be disrupted for weeks due to the impact on many closely and distantly related product lines, and this happens despite the computer simulation tools that are available today.

This is a typical problem caused by the introduction of a new product line. Let’s say the product is a new shampoo for women.

1. After discreet testing in a few stores, the sales forecast arrived for the entire company’s product inventory

2. The manufacturer offers the retailer a deep discount on the product and an increase in the stock, provided that the shelf space will increase in the future

3. A competitor’s women’s shampoo sales are expected to decline due to the new arrival, so a modeling system is used to try to predict this jump. As a result, the orders of competitors are reduced. No one trusts the modeling system, so orders for competitors’ products don’t drop as much as the modeling system suggests

4. A competitor’s shampoo shelf space is reduced to make room for a new arrival

5. The product is available for sale at a very low price after additional discounts from the manufacturer

6. Sales of competitors’ women’s shampoos increased, but not as much as predicted. why? Because competitors are quick to react, cutting prices and agreeing to take the entire hit on margins. The chain of stores will not argue with this, because it is a win.

7. Customers take advantage of the low price in addition to promotional traction and simple curiosity and stock up on the new product. However, not trusting the new brand, many continue to buy regular shampoo as a backup, especially since it is also at a lower price.

8. Due to the fact that the space on the shelves of competitors’ shampoos has decreased, the cases of lack of stock in some lines have become more frequent, which has led to destabilization of the sales structure for the entire product group.

9. To make matters worse, sales of men’s shampoos have gone down as customers, mostly women, have decided that a new, inexpensive shampoo will suit them!

10. Result: destabilized sales structure in all shampoo lines. Since sales data cannot be relied upon, the data set for this time and last year is used, accounting for the total variance of the product area over the year, and the sales pattern for the new product birth period and the promotion period is not contained in the database for

reference to the future. The end result is that many lines are out of stock in many stores. Just as stocks are replenished, the system triggers additional orders and more shelf space is allocated to the entire range. Too late: Customers have stocked up well on shampoo and sales are falling, leaving the company with excess inventory. Not only that, but the inventory and order structure has been weakened over the next few weeks

and in the same period the following year, if the annual change in sales forecasts is not available.

This is a common occurrence and a common reason why buyers/marketing people and people running promotions are often at each other’s throats. Inventory managers would like to avoid Christmas, Thanksgiving, weather changes, promotions, promotions and customers. Okay, I didn’t mean the last two – I didn’t mean either of them, but I hope you get the idea. The sad story of out-of-stocks and overstocking would be repeated in all the chain’s stores. This is because once the machine starts working in one direction, it cannot be stopped from branch to branch. That’s where the small retailer comes in (in case you were wondering). Remember: inventory management is an art, not just a science. Small retailers have less access to science, but more opportunities to practice the art of good inventory management. Major retailers have yet to find a way to put a common sense button into their computer systems, and they are increasingly reluctant to allow people to override their systems, a key factor.

As larger stores get better at handling system orders, they are less likely to allow human intervention. It’s a great irony that the more people mess with the system, the less reliable it is in the long run. As each major inventory imbalance is analyzed and the cause determined, another item is added to the wish list for changes to the system. Eventually the changes are made and the edict goes out: no tinkering! Let the system do it. Human controllers are reduced as there is less need for them. Then a combination of events leads to another inventory problem. Fumble again, and the system – now an extremely delicately balanced box of tricks – is out of balance.

Retailers have speed and flexibility

Small retailers are less constrained and less dependent on systems. Some have sparse – or no – inventory and ordering systems at their disposal. If a small retailer is experienced in their work, the human touch can be much better than the best systems available. The point is that the retailer can exercise great flexibility in diversifying the product range. They may make short-term changes to merchandising to reflect a promotion or

the beginning of the sales season. They can identify a product that needs more space. They can also identify a promotional product or new product whose sales are meeting expectations and cut orders more quickly. A good small retailer also listens to their customers and maybe monitors how the store is doing. They can make subtle changes to the display to move customers to the new line

which may not have been noticed. The most important thing is that they can react instantly. Large retailers cannot.

As a small retailer, the plan can benefit from assortment changes and new assortments, but the plan can be changed or even canceled if necessary. For large retailers, systems that work so well day in and day out tend to bleed when confused by the disruption of assortment changes. A small retailer’s reliance on a hands-on approach – which can be time-consuming and error-prone on a day-to-day basis – can give you a big advantage when changing assortments. As a result, you may find that three weeks before Christmas you are fully stocked with seasonal lines and have a full range of regular staples, while your larger competitor subsequently suffers from a lack of stock while the store manager looks helpless.

As a small retailer, remember to keep a close eye on slow sellers. If the product is slow, try to rationalize the problem. Has the price gone up recently? Has your competitor recently lowered prices on this product or perhaps a popular online store? Does the relevant product compete? For example, if you run a convenience store, don’t forget that the fresh products you sell are linked to frozen products that you can also sell, or some dry products. If you’ve launched a new line of frozen broccoli, expect sales of the fresh variety to drop. Remember that slow sellers can take up valuable sales space. If, after reviewing your options, it is decided that the product is not selling because it is simply less popular, then you may want to consider removing it.

Sophisticated forecasting, planning, and inventory systems are great for large networks. For smaller retailers, such systems will not only be disproportionately expensive, they can rob you of the one advantage you have over your larger competitors: speed, flexibility, and of course, the human touch. You have to get into the minds of the customers. Find out what they want and when they want it; better yet, find out what they want BEFORE they want it.

Check out the last part of this series – if you’re struggling as a small retailer, this may give you a lifeline as I look at the future of small retailers, where things could look bleak… for big retailers. Stay tuned for updates.

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