Tip of the Week

Business SMART:	Did You Forget to Advertise?
	By: Dennis A. Conforto A-Z Media Group

One of the discussions I have most often with retailers deals with carrying too much inventory and how to get rid of it. In many ways the discussion is always very interesting as I listen to retailers who are at war with retailing. I know it sounds strange but really it’s true. Let me share with you some of the dialog that I often have. Retailer: Dennis, I have listened to your talks and have read your articles. I finally believe you, but the question I have now is how do I get rid of my excess inventory? Dennis: How much excess inventory do you have? Retailer: I don’t know! Dennis: Why not? Retailer: Well, I don’t know how much inventory I should have. Dennis: Why not? Retailer: I guess I just never learned how much I should carry; I just filled the store with product until I felt my store looked right. Dennis: How do you know your store is the right size for your market? Retailer: Gosh, I guess I really don’t know. Dennis: Why not? Retailer: I just never learned how big or small my store should be for the marketplace I am in. Dennis: Ok, who is your biggest competitor? Retailer: Michaels, Wal-Mart, Hobby Lobby, Jo-Anne’s or Target. Dennis: What makes them big competitors? Retailer: Those awful 40%-off coupons. Dennis: Where do you shop most often? Retailer: Wal-Mart or Target! Dennis: Why do you shop at those stores? Retailer: Because I want to save money for my family. Dennis: Why? Retailer: Because it’s my job to save my family money and to get more for less. Dennis: What do you think Michaels does if they are over inventoried? Retailer: They have a sales event. Dennis: What do you think you should do when you are over inventoried? Retailer: Hmmm, have a sales event? Dennis: What does a sales event look like to you, a shopper that wants to save money? Retailer: Price points that I know are real savings or percentage off sales. Dennis: What percentage off will drive you to a store? Retailer: It depends but anywhere from 15% to 50% off. Dennis: Why don’t you have an inventory clearance sale with 15% to 50% off? Retailer: Because I can’t make money doing that? Dennis: Can you make more money by holding on to dead inventory? Retailer: No! Dennis: Do you think Michael’s losses money when they have 40% off sales? Retailer: No. Dennis: Why do you lose money at 40% off and they make money at 40% off? Retailer: Because they can buy it for less than me? Dennis: Do you think that is unfair? Retailer: Yes. Dennis: Why? Retailer: Because manufacturers should sell the product at the same price to everyone. Dennis: If I was a consumer and came to your store and purchased $5,000 worth of products from your store would you give me a discount greater than someone who spends say $100 with you? Retailer: Yes, I would! Dennis: Why? Retailer: Because the more you spend the more you should save. Dennis: Why shouldn’t that be true for a larger company? Retailer: Because… because… I don’t know, but I don’t like it! Dennis: Have you heard me talk about doing more business with fewer manufacturers? Retailer: Yes, I have! Dennis: Do you know why I have suggested that? Retailer: I guess to be more important to the manufacturers I do business with. Dennis: Do you think you will ever buy enough of any product to compete on the buying price of any product? Retailer: No! Dennis: I would agree with you, so how can you compete on price at retail if you can’t compete with price at cost? Retailer: I can’t! But I can educate the consumer, service them and give them more selection than the chains can. Dennis: With more education, service, and selection are you winning? Retailer: No. Dennis: Why not? Retailer: Two reasons. They advertise more and price is a huge factor for the everyday consumer. Dennis: Do you have the feeling that you have to have education, service, and selection and now price to win? Retailer: Yes, I do… But I don’t know how to buy more and sell for less. Dennis: Have you heard me talk about turning your inventory faster? Retailer: Yes, I have but I don’t know how to do it. Dennis: How long do you think is too long to hang on dead inventory? Retailer: One year. Dennis: What if I told you it was three months? Retailer: Then I would say I was in big trouble! Dennis: Who sells for less, Costco or Wal-Mart? Retailer: I don’t know. Dennis: What if I told you pricing was a perception? Retailer: I would think it was not perception but reality. Dennis: Costco and Wal-Mart are both lower on any given day so are Target or Sears or the rest of them. Nobody is the low price leader all of the time, but a retailer can have the appearance of being the lowest price all the time. Retailer: Then how do I do that? Dennis: By out-promoting and out-retailing those who you think are the industry giants. Retailer: I don’t have the money to out-promote and out-retail Wal-Mart or others like them. Dennis: It is not a question of who has the most money but rather who is the best promoter, the best thinker and the best manager of moving their inventory! Retailer: How do I out promote an industry giant? Dennis: Did you run an inventory clearance sale the day after Thanksgiving? Retailer: No. Dennis: Why not? Retailer: Because everyone has a sale that day! Dennis: And the problem with that is? Retailer: Well, I don’t want my sales to be lost in everyone else sale! Dennis: Don’t you think the average consumer is looking for deals on that day? Retailer: Yes. Dennis: Then why wouldn’t you match up your need to clear inventory with their need to have a deal on that day? Why wouldn’t you take advantage of the fact they were out and about shopping? Retailer: I blew it, huh? Dennis: It’s not that you blew it, but you are fighting the very two things that make a retailer a retailer - strongly timed promotions and great pricing that is equal to the sales event! This kind of dialog is one that I have every single week with retailers. They have too much inventory and are deathly afraid to run a powerful sales event to move the inventory that keeps them alive but kills them if they hang on to it. They hate the 40%-off coupon as a retailer but as a shopper they love it. They would love to have someone buy enough quantity from them to give them a huge discount but can’t understand why manufacturers would do the same. They believe they need to move their inventory but are unwilling to promote discounts they expect to get as a shopper. In many ways, independent retailers are not at war with industry giants, they are at war with their own habits and own feelings as an everyday shopper. The next great time to move lots of dead inventory is the week between Christmas and New Years. Maybe you too missed the day after Thanksgiving sales event for your store or maybe you just forgot to advertise. But, don’t miss the next great time to offer a sale. You have a few short weeks left to finally clear out your dead inventory and start the new year off right. That is what being business SMART is all about.