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Stock-turn and virtual stock in the real world
This series seeks to apply lessons from web traders to traditional ‘real' shops. We've looked at breaking the delusion that our customer relationships are stronger just because they've met us; how to use loyalty schemes; active communications and using mailing to build on the advantage of actual contact.
Another frequent benefit quoted by internet shoppers is the range of stock available, and the information to hand.
"But they're cheating", I hear you cry. "They don't carry that range of stock - it just looks as if they do."
There is truth in this, but surely what matters is the result for the customer: if they order it, it will indeed come - Virtual Stock in fact. This is tough for ‘real stock' retailers because the shops' availability must be now (or never?) while the web trader has a few days to fill the order.
So this leads us to two aspects:
- How to hold more available stock
- How to have your own virtual stock
Suppliers have improved fill rates, and retailers become more canny in their buying. The old days of ‘I get Garmins from xyz' have gone. Now you'll know a handful of places to source items and this expertise adds value for the customer.
But do you see this as a necessary evil, or a positive benefit in your shop?
How can you make your customer know you provide this service, and how can you get him to commit to you... now?
Do you promote the fact that if we haven't got it we can have it tomorrow? If they order it with you how do they know what it'll be like: are your suppliers' catalogues well organised and available at the counter? Do you have a web terminal on the counter delivering access to suppliers' websites to see the product or download spec sheets - maybe even to order online with the customer there?
As a customer myself I would rather buy from someone who will bring expertise to bear to help me choose, and who will take care of any problems if, when the bit arrives, it's wrong.
Can some suppliers deliver direct? Which ones?
Do you do deliver locally? Perhaps to local centres?
Can your customer see you place the order with the supplier and so feel he owes you the commitment to buy that you've made for him? Will he be embarrassed now to buy on the web: have you done enough?
Margin, Service and Stock Profile
Margin is key - and it's tempting to source the cheapest - yet it may be more profitable to buy on delivery service level. It depends on how you measure your success.
Margin Achieved tends to push you into buying a smaller range with larger order quantities to achieve lower prices. The snag is that this decreases the range of your offering and so ties up capital while saying ‘yes I've got one' to fewer customers.
ROCI - Return on Capital Invested - measures the return from your stock investment. It leads to seeing stock as a flow not an asset (after all, no-one buying a shop ever pays supplier price for the stock: the more you have the more you lose).
Your range is greater, your comfort less: hence the need for good suppliers - and if you don't believe that better service is worth a bob or two, I suggest you sell your lease and open a webshop. How often we apply the same ‘price of everything value of nothing' habits spending our own money that we complain about from our customers!
Against common sense, the maths says you should focus on fast moving items: buy little and often of what you sell most, focussing efforts where turnover will deliver the results.
Wider, flatter
The Retailer's dream is to run out as the replacement arrives. Yet a wise old shopkeeper once said to me that his shop was judged by what he didn't have, not by what he did. So it's down to achieving a wider flatter stock range.
I've tried hard in this series not to beat the Retail IT systems drum in focussing on systems. But the plain fact is that a good retail stock control system revolutionises this area.
It delivers smaller, more regular orders giving a shallower stocking plan - more choice from the same investment making more profit (unless you're stocking saddles in a grocers shop - there is still room for talent!)
Your special order administration is tighter and more responsive - for example e-mailing customers automatically when items arrive - and records of customer purchases allow targeted pro-active marketing.
And, as we recently discovered in (rather nervously) installing Retail Systems in a charity shop chain, a well designed retail system provides a till that is much easier to use. And more than 40 part time volunteers of a certain age and their managers at each shop just love it!
