Slow Moving Merchandise -- A Bane or An Opportunity?

Every shop, gallery or store selling decorative items runs into the problem of having slow moving merchandise. Unused, dated, end-of-line, discontinued and unsalable merchandise is the bane of all businesses no matter what the products are. Here are twelve ideas for you to consider. Rather than the problem being a negative, trying to solve it will open up many opportunities for having a more profitable business.

Method #1. Close-out sales -- usually done after Christmas or in January. Today, there is so much merchandise being sold at reduced prices (even when the reduced price is not really a reduced price) that few people look down on sale goods. Many customers look for sales in order to buy something they thought about but didn't buy at full price.

Some stores like to start the sale immediately after Christmas so the goods are gone before January 1. Some prefer to wait until the week after New Year's Day or later in January or early February. The sale does not have to be limited to Christmas goods. General merchandise can be put on sale during the same time. Some stores have found that with event goods (last year's Valentines, Mother's Day, Father's Day, etc.) it is best to put these goods on sale about 30 days after the event.

It does not say that by putting goods on sale means they were faulty when sold at full price. It may indicate that the buying was faulty. The thing to be wary of is re-buying what was sold on sale.

Method #2 Selective temporary retirement. This relates to #1. Where it differs is that these goods are perennials, ones that would be reordered the next year anyway. The justification for not putting them on sale is that the saving on freight offsets the interest on the money lost because the goods sit on the shelf. Keeping these goods from one year to the next may be advantageous if the prices increase the next year. This hold-over method calls for keeping a very tight inventory control with a very good “rate of sale” information (which differs from total sales). It is wise to re-ticket and price these items when they are reintroduced.

Method #3. Trade-back agreements. Some suppliers offer trade-back agreements. This gives the store the opportunity to exchange slow moving merchandise against an order of faster selling items. Usually it is on a 2 or 3 to 1 basis, i.e., for each dollar returned, the store buys $2 or $3 worth of new goods. If a supplier does not offer a trade-back program, a store might try to work one out with the supplier. Suppliers may subtract 10% or 15% from the trade-in amount to cover repackaging and handling costs. There are several “arguments” or reasons of justification for such a trade-back program. One, the store will, most likely, order more than the amount needed; two, the supplier will get more reorders later of the better selling goods; three, the store will be more loyal to the supplier because the store has a better selection of better-selling items.

Method #4. Buying less. Oh my, what an easy thing to say, what a difficult thing to do. Many buyers believe or are told by their management that the savings gained by ordering and shipping larger orders are a justification for the large order. Some suppliers, in order to encourage larger orders, will offer an extra discount for orders over X amount (determined by quantity, weight, or dollar amount) or pick up the part or all of the freight charges. Whatever saving may be realized is offset by having goods in stock longer than necessary and leads to leftovers...

Experienced buyers find it is best to buy small quantities of an item until such time as it is proven that it can sell. There is nothing wrong with giving a supplier a “Russian order” -- one-of-each. Vendors may not like it, but a buyer's job is not to please the vendor, it is to please their customers and their business. When the latter two things happen, suppliers will also be pleased. By ordering smaller quantities one can control some aspects of what has to be put on sale.

Method #5. Moving goods around. It is not unusual to find that some goods haven't sold because of where they are placed. Moving goods around has, on occasion, made a slow seller into a good, if not great, seller. In retail stores, different things sell better at different times in different places. Some spots are dead for some items at a particular time; the same spot may be a hot spot for others at another time. Because the layouts of stores differ, what is a hot spot for one store may not be a hot spot for others.

Hence, rearranging merchandise may lessen the number of things that need to be put on sale.

Still another plus factor for moving around is that handling items brings to mind goods that, because they have been in one place for such a long time, have become part of the fixtures.

Method #6. Grouping -- putting like things with like things. One aspect of having leftovers is that they are treated as left overs. It does not take more than a few minutes to find a store's leftover area. This melange of items is not a way of showing off the items to their best advantage -- something every store owes to the goods they buy. Grouping items from various suppliers or lines can be by design, color, use, shape, price, material or a combination of any two themes. Pulling things into groups separated by space makes each group important.

Grouping is best when there are 8 groups of 5 items rather than having 1 group of 40 items or 40 individual items. As items are sold out of a group, the group can be reorganized. When merchandise is in one big group nothing is important because customers' eyes get lost in the multitude or variety. Trying to give each item its individual space also means that because all are important, no one is more important than the others. Making groups with a common theme abates the leftover look.

Method # 7. Signage -- something that allows customers to know what the price is without having to turn it over to see the price. Tickets should be placed in a logical placement such as aligned with an edge or rim or to the left of a handle, and always right side up. Many items remain unsold because the price was not where it could be seen . Customers hesitate to ask because they don't want to be embarrassed if the price is too high for the situation they are looking to fill or, they don't want to waste their time if it is not up to their standards (often determined by the price). And, looking for someone to ask is seen as a waste of time.

Stores are now beginning to use point-of-sale or bar coding price stickers (tickets). Although they help with sales figures, they are large and unsightly. They can take away from the perceived value of an item especially if it is of high quality and/or price. Because the price stickers are large, people think that removing them will be difficult (which is true), or doing so will damage the goods. How many sales are lost because of this? I'd say, “Way too many!” Small, “come-clean” price stickers are readily available.

The other format is to type a price list (no more than 5 or 6 items) on a tent card or card in a card holder. With good signage, customers can ask about goods without the previously mentioned fears of being embarrassed or for wasting their time.

Article By:

Alan J. Zell, Ambassador Of Selling
P.O. Box 69 Portland, Oregon, USA 97207-0069

Email: azell@aol.com
Telephone: (503) 241-1988

Dispose of Slow Moving and Obsolete Inventory

In every business there are hits and misses--hot selling goods or services and real dogs that nobody seems to want. Often, the difference between a businesses' success or failure is the ability to distinguish between the two, and the courage to cut losses quickly by disposing of the doggies.

Because time is money, the key word is "quickly." As a rule of thumb, we figure that the expense of maintaining goods in inventory averages about 2 percent of the cost of those goods each month. If you carry an item in stock on the shelves or in a warehouse for a year, you're down 24 percent. There aren't many businesses that can overcome this kind of a cost handicap even in the best of times. When business is bad, a slow moving inventory can be a killer.

For many business people, however, disposing of obsolete inventory is difficult because it means they have to admit making a mistake. Some have gone to the grave without making that admission.

One businesswoman who inherited a small gift shop in a resort area was surprised when she paid a visit to the store. The shelves were crammed with a lot of dingy looking merchandise that seemed to be priced far too low.

Upon closer inspection she discovered why. Based on the price tags, some of the goods had to have been sitting on those shelves for at least 15 years! But even at prices from the 1970s, this shopworn merchandise was no bargain. Indeed, much of the inventory was virtually unsalable.

She junked most of merchandise, sold what she could at a distress sale, and restocked the store with fresh inventory. Today the shop is a viable business again, and the owner has an iron-clad policy of getting rid of dogs. If an item doesn't sell in six months, she cuts the price 40 percent and moves it out.

n some industries, it's possible to work out arrangements with suppliers to limit your vulnerability to slow-selling inventories. An auto parts retailer established a relationship with a wholesaler that allowed the store to return any unsold merchandise for full credit within a year.

Unfortunately, however, the company's warehouse manager failed to keep records necessary to establish the purchase date of merchandise in stock. In reviewing the businesses' inventory the owner discovered thousands of dollars of old, obsolete parts sitting alongside new merchandise.

Had these old goods been identified in time, they could have been returned to the supplier in exchange for fresh merchandise. Instead, the retailer wound up disposing of them for a few cents on the dollar.

India's retail market to grow by 40%

India's retail market, currently valued at $511 billion, is poised to grow to $833 billion in the next five years, according to commercial real estate servics company CB Richard Ellis.
With the retail sector witnessing a boom, organised retail that currently accounts for less than 5 percent of the total retail market is expected to register a compounded annual growth rate of 40 percent and swell to $107 billion by 2013, a report by the company states.

To underscore the potential growth, CB Ellis quotes from a report by global consultancy AT Kearney, which says: "The consumer spending in India has increased by an impressive 75 percent in the last four years and will quadruple in the next 20 years."

Due to this increased consumer spending, the retail sector has received a thrust due to which it is experiencing an unprecedented growth.

According to CB Ellis, a pre-requisite of modern retailing is the availability of quality space in key locations to support the rollout plans of retailers.

However, due to subdued global economic scenario, retail rentals have been impacted significantly.

The report said while mall rentals in some of the micro-markets have remained stable, these have declined in pockets of Delhi and Gurgaon in the National Capital Region (NCR) and Bangalore between the first and the second quarter of this calendar year.

Declining mall rentals, combined with falling consumer spending due to inflation and close to 100 million square feet of mall space coming up, have led to a surplus of retail space in the country.

The report also dwells on the Indian retail scenario that is likely to emerge.

"Domestic retailers and mall developers will be moving into the smaller towns and cities with alacrity in order to respond to the growing consumers markets there and to capture the rising demand for branded products," it said.

As the existing formats make way for modern ones and the national footprint of retailers expands, efficient supply chains will be set up and logistics will be consolidated, CB Ellis said.

The report says the luxury retail market will gain critical mass and witness substantial growth in the next few years.

However, to enable this sector to realize its full potential, restrictions on foreign investments in retail will have to be relaxed further and retail rentals will need to undergo some degree of rationalization.

‘We can lower prices but we can’t be the cheapest’

UK-based retailer Marks and Spencer Group Plc. (M&S), which has a venture in India with Reliance Retail Ltd, plans to roll out larger company-run stores by the end of the year. Currently, M&S operates more than a dozen apparel stores through a franchisee. Last month, Marks and Spencer Reliance India Pvt. Ltd received approval from the Foreign Investment Promotion Board, or FIPB, to invest about £30 million (Rs250 crore) that the joint venture intends to spend in opening 50 stores in the next five years. Mark Ashman, chief executive-designate of the India venture, spoke with Mint. Edited excerpts:

Space matters: Mark Ashman says M&S is opening bigger stores to rival competitors’ and to demonstrate the full range of the M&S brand

Why have a joint venture in India instead of operating through a franchisee?

We identified that franchising in India, given the scale of opportunity, was not the right route to really become a significant retail player, and therefore, we would need a partner. We had (a) couple of options. One was we could have found a partner who took a financial interest so that we could trade here. Or, we could find a partner who could bring something to the party. We spoke to a number of people and came with a shortlist.

What made you pick Reliance as a partner?

We were looking for three core competencies. One was capability in property; the other was capability in logistics and supply chain. And the third was, in my description, capable of getting things done in India.

It would be fair to say that out of the three serious potential partners we sat down with, two clearly demonstrated these. The third one did have the capabilities but we got the impression that they were not totally convinced about partnering with us. And, at that point it was also clear that Reliance had an ambition and track record in retail. Delivering 500 stores in such a short time is impressive.

What are your plans for store sizes in India?

Customers tell us that they like the M&S brand but we are too expensive. They say they like the M&S brand but the stores are too small. And, except for (Ambience Mall), we can’t even fit in children’s wear. We are also very constrained in terms of the ranges in adult clothing.

So, we have to open larger stores now. Initially, our revenues are going to be probably low for our larger stores and real estate rentals, as you know, are not the cheapest in the world.

I think what we need to find a maximum footage that says that you can’t go smaller than this if you want to show people our range and demonstrate the M&S brand in a similar way as in the UK. You can’t do it on 5,000 sq. ft or 10,000 sq. ft.

So how big will be your stores?

I think we will start with 15,000-20,000 (sq. ft) and it will depend on the location. The stores that we are planning to open in three years might be bigger because the market would have grown. If Shoppers Stop are going to be on 80,000 sq. ft plus, and Pantaloon are going to be on a similar or larger (format), and Debenhams is going to be on 30,000 (sq. ft), I certainly can’t afford to be on 5,000 (sq. ft). 15,000 sq. ft is certainly big enough to get adult clothing, home ware and children’s wear and maybe a cafe.

Are you bringing in food as well?

We would like to bring imported food at a later stage, but we would need to make an application for food to FIPB. We only asked for permission for apparel and home ware.

There is no technical reason why we could not import long-life ambient food. I think that ultimately we could develop a food business but I think initially the bigger win for us is apparel, clothing and home ware. So, if we can open larger stores that can offer a broader range of adult clothing, children’s wear and introduce home ware that would be a big three things for us.

M&S is perceived as a high-end brand in India. How would you change that perception?

I think we have to lower prices. If I look at what the franchisee has done, I don’t think they have ever done a strategic marketing approach to position the brand in India. They would have done tactical marketing to support sales with specific promotions. We obviously would do tactical promotional activities, but we will need to develop a marketing campaign to start to position our brand.

We need to get to a position where a consumer comes in and we get a reputation for good value, quality times price, as we have in the UK. We have never been the cheapest and we can never be the cheapest because of our quality standards. But we can be good value.

So, my opening price point on chinos is always going to be governed by the quality of the fabric that we use. We can lower prices but we cannot be the cheapest. For us in the UK, it’s always been about value and I believe the Indian consumer understands that. I would like to get the entry pricing right and then start looking at the ranges above that.

Do you think you have been late in forming a joint venture?

I don’t think we are too late. I think we lost some time with the franchisee. Do I think we would have come with a joint venture in 2001? Probably not, as India wasn’t ready for us. Though I think potentially it could have started where we are now two years ago. Time will tell us whether we are about right. If the real estate market starts to fall, then now is a good time to come.

But you have a brand equity that gives you a head-start?

The good thing is many Indians have experienced the M&S brand—some good, some maybe not so good. But it definitely has brand recognition, and I think it’s a great place to start with. We are excited about the opportunity of expanding the M&S brand across India in partnership with Reliance.

‘Brand Factory’ opens 7th outlet; undertakes two-fold expansion within a year

Brand Factory, the value fashion chain of Pantaloon Retail– the country’s largest listed retailer owned by Kishore Biyani-led Future Group– opened its seventh store on Thursday, the 24th July, in Bangalore.

Spread over a retail space of around 55,000 sq ft, the new store is also the second outlet of retail chain in the IT capital of India. Bangalore is an important market for the chain as in FY 2008 it accounted for 30% of total sales revenue for the chain. The first store of the chain in the city attracts a footfall of 5,000 persons every day.

Brand Factory outlets offer products of well known global and local fashion brands numbering around 200. These products are sold at discounts ranging between 20 to 50%, all round the year.

Brand Factory, according to a Business Line report, has also roped in the products of Planet M, Globus, Staples and Dollar stores. Apart from selling apparel and accessories, which contribute 80% of business, Brand Factory stores are also offering products across categories that among others include footwear, eyewear, watches, home and kitchen accessories, travel goods, and cell phones.

The value retail chain has planned to nearly double the number of its outlets from seven at present to 13 by June, 2009. This, according to , will entail an investment of Rs 6 to 10 crore per store. This expansion is expected to increase the sales revenue from Rs 200 crore in FY 2008 to Rs 500 crore in FY 2009 (ending June 30, 2009).

Value retailing is estimated to be a Rs 45,000 crore business in India, which is believed to be growing at a healthy rate of 20% per annum.

Kishore Biyani offers lessons to Microfinance Sector

In an exclusive interview featured in the latest issue of the quarterly journal MICROFINANCE INSIGHTS, Nachiket Mor, President of the ICICI Foundation for Inclusive Growth, interviews Kishore Biyani, Group CEO, Future Group, to draw from his experience expanding his fast-growing retail conglomerate. Speaking about the sector, Biyani says that microfinance has the potential to be a significant distribution and marketing channel and could enable businesses and services to expand into the lowest levels of the economy. In the interview Biyani also spoke about the need to create effective second-rung leaders, partnerships within the industry, and perhaps controversially, increase the sector’s marketability in terms of the marriage opportunities it affords its staff.

Other voices in the sixth volume of the journal, focusing on human resource challenges and solutions for the sector, include a commentary on the recently released and controversial Forbes list of Top 50 MFIs, and insights on the sector’s staffing gender gap. Ian Callahan of Morgan Stanley talks about how the Forbes list may serve a larger purpose for the sector. Mary Ellen Iskenderian, President of Women’s World Banking in New York, says that Muhammad Yunus isn’t the only one who should receive credit for microfinance’s progress.

With an industry facing stiff competition, regulation, and rapid growth, issues such as recruiting, training, and retaining staff, are being acknowledged as the most challenging yet. This issue looks at what some microfinance institutions (MFIs) have done to tackle those challenges.

As the first issue under the leadership of new Managing Editor, Lindsay Clinton, several new features have been added to the journal including a global survey of more than 90 MFIs, a Commentary section, and Global Viewpoints, where MFIs from around the world, from Tunisia to Bolivia, share their perspectives.

Interactive And Entertaining Stores - new trends in retail marketing

Consumers are getting more of what they increasingly demand from retailers these days. They want--and get--more entertainment, high-tech, and interaction from retail stores than ever before.

According to Karen Schaffner, publisher of Display & Design Ideas magazine, entertainment is a significant factor in drawing customers and then encouraging them to stay. Whether it is creating a lounge area where teenage girls can hang out or a souped-up demo area that appeals to men, stores are being built to create customer participation.

"The future of retailing includes such technologies as touchscreens, body scanning, biometric identification, real-time Web broadcasts, and faster, more-accessible multimedia content? she notes. "The result will be a shopping experience that is greatly enhanced--but not frivolous. Experts agree that these technologies must make sense in order to justify the investment of money and floor space."

In San Francisco, for instance, home base for Levi Strauss & Co., a four-level store serves as a backdrop for new fashion and music experimentation, "sponsored" by the giant jeans retailer, while also selling jeans. New technology and interactive stations--including body scanners, periscope directories, and shrink-to-fit tubs--make it a multisensory experience. Each floor is carefully "curated" to give the customers a sense of discovery, with areas devoted to multimedia presentations, lounges for teens to congregate, artist presentations, Internet stations, a DJ booth and listening stations, and an entire floor devoted to the customization of individual jeans through stamps, embroidery, and personalized fitting, all done in a matter of minutes.