A new report states that retailers lose $1.75 trillion worldwide on overstocks, out-of-stocks and needless returns as reported by the IHL Group last week. That’s essentially money being left right there on the table when ordering too many items that are not selling, not ordering enough of items that are clearly popular or returns that could potentially have been prevented. Of the $14.2 trillion worldwide retail economy, the $1.75 trillion loss makes up just over 11% of that figure. So, when thinking of our retail businesses, we can effectively increase our revenue by at least 10% by mitigating these preventable losses.
What is causing the over-stocks and out-of-stocks?
The losses in retail can be due to any number of factors which may or may not be within the control of the business owner. There are some things a business owner simply can not control like government legislation, supplier issues or weather. However, there are some very important steps retailers can take to take back those losses and turn them into revenue.
How to turn your loss into revenue
This is an item that is the most valuable and requires the least amount of ‘effort’ on the business owner’s behalf to rectify. Within retail, you are essentially collecting data on your business, your staff, your customers and most importantly, your sales every day via your POS system. This data can be seen as a collection of meaningless numbers or used to your utmost advantage if organised properly by your retail management software. Surprisingly, there are very few POS systems out there that actually provide valuable reporting that not only shows you a report but actually guides you to making the best decision for your next order. When looking for the right POS system to intelligently help you reorder stock, you want to make sure it runs multiple reports using the following information as a very minimum:
- Sales by day (run rate)
- Lead time from the supplier
- How much stock you have in each store
- How much is already on order or in-transit to each store
- How long you want the new stock to last you for
Armed with this information, your POS system can essentially do the ordering for you or guide you to make the best decision based on the data in your unique store. You will then be more likely to purchase items that will sell placing you at a distinct advantage over other stores and preventing a large portion of the overstocks and under-stocks.
Powerful & On-time Marketing
Leading from the above clarity gained from reporting, naturally, when you’re clear on what your consumers want, then you’re going to promote it at the right time, to the right people. Take a look at this article on strategic partnerships for even more clarity around this. A lot of the losses due to improper marketing will be a result of either marketing a product that is not in stock or failing to market a product when you’ve ordered larger quantities. This comes down to the management systems you have in place and your retail management software should be able to alleviate reporting issues. When managed correctly, rather than getting stuck and relying on memory or staff reporting, these systems will give you more time to strategise and work on your business with live, accurate data to fuel your marketing decisions.
Train Your Staff So They Can Leave
Training and staff issues is an area of great importance and concern for many retailers as we’re all aware - people are our business. Retailers lose almost $2.6 billion on people issues alone so it deserves some of our attention. “A company is people. Train them well enough so they can leave, treat them well enough so they don’t want to” - Richard Branson
Every business is different and we all run our businesses differently so one size may not fit all. However, there are some great points to keep in mind when attempting to reduce staff inefficiencies (unknowledgeable, theft, laziness, inappropriate discounts) when related to overstocking or under-stocking items.
- Manage staff through training & coaching - reach their goals whilst achieving yours.
- Communicate daily with your staff via your online POS diary - appears the first time your staff login to your POS system.
- Ensure only specific individuals like trained managers have the ability to discount, and even then, ensure there is a maximum limit set on individual items or categories.
- Ensure specific individuals you choose have the ability to see the profit margins on each of the items so that they can see why limits are set on discounts.
With personnel, it’s important to give the right amount of responsibility with adequate training. Often, you will find when some individuals are given responsibility and asked to conduct themselves as if it were their own business, you might be pleasantly surprised with the results.
An obvious one that has clearly been drilled into us since before our days of working in our own business. However, now with all the information and clutter surrounding social media, showrooming and e-commerce, it is a pertinent reminder that customer service still goes a long way in securing a sale. Given that the losses mentioned are not due to a lack of customers, on the contrary, the customer is there, ready and waiting to make a purchase but the sale is lost as a result of poor internal management (over-stocks, under-stocks and unnecessary returns). There is still a lot to say about human nature and good old fashioned service. And remember, this can be achieved both in-store and online.
Retailers as with most business owners, often focus their whole attention on driving revenue and increasing sales. But with a heavier focus on these opportunities, there is a very good chance some of these potential losses can be turned into real revenue gains this year.