Red Zebra Business Centre -Management Memos
January, 2010. Making Measurably More For Your Business Since 1985!

MaxProfile
Our 25th Anniversary comes this year!

Max Williams, Principal Consultant

Now that the GFC is firmly behind us, we are engulfed in a great flood of activity!

Recent ABS data shows that retail spending has increased remarkably in the last quarter of 2009 - showing that the Australian economy is once again powering ahead. Sadly, that is not true for all sectors.
For instance, the automotive sector is seeing record low production - and component manufacturers  are gritting their teeth - waiting for the silver lining to appear. The latest auto sales figures old give some cause for optimism, but the good times are not back yet!

Then again, some industries (like for example, printing,) have chronic over capacity. Some niche operators are OK, but everywhere there is strident competition. Despite happier economic tidings, some printers are still looking at a very bleak future.

Our work in the current market arises from two sources. While some clients are needing help because their sector is not yet seeing sunshine, others are needing more support - and that means a heavier workload for us - so they can be sure to make the most of the rebound.

By taking the very best advantage of the current market flow, some of the losses (or profit reductions) of the last twelve months can be recouped. The great news is that some of our clients are seeing one record after another smashed in growing sales and growing gross margins.

Since there had been a really forceful tightening of the company belt during the GFC, the expense structures of these businesses is quite lean. The result here is that increasing sales and gross margins are leading to record operating profits.

With clients who have avoided bankruptcy in 2009 because of the early warnings that come in our Red Zebra program, and with clients who are now seeing record results because of the Red Zebra inputs to their operations, it is a fantastic time to be looking forward to our 25th anniversary this year!

It was in July 1985 that the first tentative steps were taken in the creation of McNicol Williams Management & Marketing Services, leading in 1996 to the introduction of the ?My Red Zebra' program for Small and Medium Businesses.

Not surprisingly, it has been a bumpy road. It has for everyone in those twenty five years. The reward is to see loyal clients who appreciate the work we do - clients who have made some really significant strides in building their businesses over that time, and who graciously share their success with us. We certainly appreciate their support as we work together.

Regrettably, not everyone had that experience.  Perhaps we did not make the messages clear. In some cases we know the business operators lost interest in growing their business. In other cases, we all had to stop work because of client illness, or, sometimes, a marriage breakdown in a business operated by a couple.

Yes. There have been some downs along with the ups. With all of that, the ride has been exhilarating - and it's not over yet.

So the dawn of 2010 - our 25th Anniversary Year - is a big event in our corporate life. We hope you will be able to celebrate 2010 with us in the most effective way possible - with superb growth and record profits too!


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to stock or not


N

o retailer can carry every line, and every variation of a brand, or every pack size.  But every retailer has to make an offer that meets the reasonable needs of people who walk in as a prospective customer. So what comes in, what stays, and what goes? Here's the rub! "To be a good retailer you must be a good buyer".





What ranges will we stock? How many variants should we carry? What quantities in each line?

Retailers have confronted these questions for decades but the range of new lines, the release of new variants and the choice of suppliers has never been so great as it is today.

In any product range whether that be soft drink, confectionery and snack foods, or fashion goods, homewares, hardware or automotive parts and accessories, or, indeed, any other category - there will be products that sell particularly well and others which are duds.  The secret to good retailing is to be able to pick the 'movers and the shakers' - the lines that move so well they really shake up your staff.

Here are some suggestions to help the retailers in our reader list maximise their stock efficiency - that is, the return they'll make from their stock investment:

Since you are the expert as to what sells in your store, it's your call on whether to stock a new line. Make that call based on that expertise.  If you preview a new line and your instinct tells you that some of it won't sell - then don't buy that stock.

  • Beware the launch deal. It's usually based on a 'penetration pricing' model, and the deal won't last. Will the inevitable price hike tee-off customers? Will it disadvantage you with other, more reliable suppliers?
  • In most new product releases there is an advertising program to help that new line sell well in the first few weeks.  Remember the "slip stream effect"! High impact advertising by one supplier  drives sales increases across the whole sector. What affect will this advertising have on your other similar stocked lines? Are your staff properly trained to take full advantage of interest in the whole segment and increase sales across all brands, as we ll as shift the new stock
  • Ask your sales rep or customer account manager how long the advertising will run. Be ready for sales to slow when the ads stop, and plan some point-of-sale presentation to keep stock moving.  Above all, don't be caught with too much stock on hand.
  • Be very wary of buying a package deal which requires you to take all of a particular range or brand.  That's the supplier's way of ensuring that even the dud lines are sold to you in the initial sell-in.

  • Be even more wary of the "bulk deal" It includes the supplier's slow moving lines.  It is often not economical to take that deal despite the favourable pricing - particularly if you are going to be left with unsaleable stock which may have to be heavily discounted (or thrown out!!) because it passes its 'best before' or 'use by' date, or gets shopsoiled before you can sell it.
  • Be wary of stocking too much in any one range.  This point will strike a chord with anyone who has tried to stock all the new products released in a confectionery launch.
  • Don't overlook the space demands of new products.  You are probably well stocked already, and any display (and storage) space has to be found for any additional products. At the expense of something you already sell! For example, the  classic dilemma that arises because of limited space in drink fridges.  The immediate success of sports drinks meant that space had to be found, usually replacing the slowest seller produced by the some company.
  • Inevitably, success is in picking winners, minimising the risks of a wrong decision, and clearing stock of slow movers.  Most retailers will recall new products stocked with enthusiasm, but which turned out to be very slow movers.

There is no denying that there are two proven golden rules for retailers. They will help and guide you while you are using your own expertise and knowledge of your local market. When you come to the point of asking yourself "Which lines will we stock", build your answer on these two guiding stars:
   
  1. Always stock the leading products in the market.
  2. Always allocate display space according to the dollar gross profit performance of the product - not sales!

So, make an assessment of any new range or new offer based on your own experience. Stock leading products fit well with your experience of what sells. Stock products which are being advertised or otherwise promoted.  Be wary of buying too much stock, or taking bonus stock which you are not able to choose, and might not move.

Here's that key point one more time:

"To be a good retailer you must be a good buyer".




If you'd like to find out more about how to make measurably more in your business right now, talk to us, or ask us a question here! Remember, there's no charge or obligation.



This same offer applies in New Zealand. Click Here!

McNicol Williams Management & Marketing Services is a Small Business Advisor listed with the Small Business Victoria, and has presented The Red Zebra program under its auspices. This listing requires that the first hour's consultation is always free. So when we say "No charge or obligation", we mean it!