Holiday sales projections are just starting to appear for 2020 and those appearing so far seem more varied than in past, more stable, years. Some projections appear to be influenced by the interruption to business that we experienced in mid-2020, others seem to lean toward the thought that shoppers will spend heavily in an attempt to have an exciting holiday period with lots of gifts that may, hopefully, help us to forget the rough year we had. In either case, the Christmas Holiday this year will be particularly important to retailers who have weathered a choppy sales year. This may well be make-or-break for some.
Stores are stocking up for Christmas already and I have noticed numerous retailers who are in the process of clearing seasonal stock on the sales floor and making room for new merchandise. Christmas lights have appeared on store shelves and there will most certainly be more decorations appearing in the coming days. In watching this process unfold I am drawn to the current level of integration between a retailer’s on-line presence and their stores.
In the past, pre Omni-Channel days, the stores and their associated budding on-line business were barely integrated. Do you recall the good old days when you bought an item on-line and were informed that it could not be returned at one of the retailer’s stores? Great service. Now, having learned the lesson of servicing the on-line customer, most multi-channel retailers have adopted a level of integration that makes shopping more pleasant and efficient. Prices are more consistent across channels, returns are less complicated and inventory levels are often indicated. Hooray!
As of late I have also been noticing the number of retailers who have begun displaying item location by store on their websites. I find that information to be quite helpful and I utilize it when available. Thank you, Home Depot
What few shoppers probably realize is that there are a myriad of operational steps necessary to permit accurate merchandise location tracking to occur. Before a store aisle is stocked all of the shelf display capacities and store configuration quirks need to be considered for each aisle for each store. Software makes tracking item location more efficient now and as long as the re-stocking process is completed accurately, items will be found in the slots they were intended for.
Item location data also permits merchants to manage item margin by location. Years ago, early versions of store stocking software, sometimes performing what was loosely referred to as space management, attempted to bring item location tracking to the forefront, but it never fully took off. Repeatedly over the years I was told by senior retail management that they wanted the ability to track item location by store, but store configurations were so varied across a chain and shelf restocking was so inaccurate that tracking item location just was not worth the trouble. Current, more robust, software capability to process inventory location data has prompted retailers to find new ways to organize their store stocking process and make item tracking possible….and accurate.
To the retailers who are employing item location tracking, and those that eventually will, I also suggest that you incorporate “margin tracking” into your shelf management capabilities. Ask any old school grocery guy about shelf placement and they will tell you that you should always put the chocolate cocoa puffs down low so that little Johnny will see it and items that Grandma will typically buy should never be too high for her to reach. While those types of placement guidance are sound, they tend to be sales focused, not margin focused.
Location tracking capability promotes the tracking of margin. That edge could be the difference between a good profit year and a loser. Item placement should employ a strong emphasis on how much gross profit can be made, permitting a retailer the ability to try various placements to optimize GM. A previous national office products client was adamant about the optimal placement of printer ink cartridges in the stores due to their high margin percentage. There was even a “never out-of-stock” edict from the CEO to accompany the placement significance.
When I discuss merchandising strategy with the average small retailer, they often signal that they never thought to consider merchandise margin in their item placement strategy. They should. One component I found to be useful in planning placement strategy is to observe in detail where in the store most customers tend to shop. The senior management team of one previous client was surprised by the fact that most browsing customers only shopped the first third of their store, yet numerous high margin items were located toward the back. They changed that.
So, as we prepare for what I hope will be a redeeming holiday season, consider item placement with an eye toward margin optimization. Likely, this will be another record busting on-line Christmas season, so your stores will need all the refinement they can handle to optimize their profit. Margin optimization could be the additional magic that you need to allow your stores to prosper.