Opinion: Retailers need to cut their SKUs

Although Bob Phibbs addresses his comments to large chain stores, I thought you might find the article below of interest. Click here to read his article.

I have added my comments to his article, they are in red.

Additionally I have hi-lighted in yellow comments that I strongly agree with.

Milton

Opinion: Retailers need to cut their SKUs by Bob Phibbs

A recent article in the Wall Street Journal talked about how all the largest chains are reducing choices for consumers. 

Pharmacy chain Walgreen Co. is cutting the types of superglues it carries to 11 from 25. Wal-Mart Stores Inc. has decided that 24 different tape measures is 20 too many. Kroger Co. has tested stripping out about 30 percent of its cereal varieties.

In the next year or so, these and a few of the other largest retailers are expected to slice the assortment of products in their stores by at least 15 percent, industry executives and analysts say. 

"All that go-go 1990s where we were adding items in and adding items in, and people wanted more, more, more, more choice… just didn’t pay off," said Catherine Lindner, Walgreen’s divisional vice president for marketing development, at a recent conference. Looking at store shelves, "people say, 'Whoa, you’re bombarding me. Help me figure out what I need.'"

 
Specialty stores key to success are ‘edited selections’, fresh new merchandise items customer are looking for now, attentive caring customer service, personal relationships, convenience and competitive prices.

If the big guys are doing it, you should be too. Here’s how: Not necessarily!

• Take a look at your inventory categories’ sales figures by month and year-to-date.   Know what ‘categories’ are selling and the percent of your monthly and annual business they produce profitably, plus how that compares to your monthly and annual inventories.                                                                    

·         Within each category, look at your bottom 20 percent 30 or 40 or ??% of your inventory — the ones ‘catagories’ not moving.

• Cancel all orders to replenish  This is big box computer lingo for automatically reordering!  In specialty store language, we’d refer to this as a mindless re-order.
• Come up with a sale to clear them out The sooner the better!
• Use money saved to add to your top two categories of merchandise Or perhaps simply reduce total inventory so as to improve turn, gross profit and reduce debt!

It’s never easy to let go of items we personally thought would be good movers but when you have 20,000 (too many) SKUs, how much duplication of selection do you need?

The big boys know: too much selection does not improve sales. Same with you.

It is very important to keep in mind that a store cannot be all things to all people! 

Remember - carve a niche, focus, fast markdowns, turn, newness and gross margin!

Keep your focus on turn, gross margin and newness … that means you are focused on the core items of your business and you are turning your inventory at least 5 to 8 times a year based on monthly sales to inventory by category, dept, class … at retail!

Never ever carry over anything from one season to another.  If your customers didn’t buy it this season, why will they all of sudden they want it next season?  It the item going to improve with age?  All of the sudden they are going to start liking corsets? 

Do not get emotionally attached to inventory!

Wanna understand this better … call me!