It's common for retailers to forget space is a cost to the business if the product filling the space is a waste of space. How much shelf space are you tying up with something that you don't sell often
Three common reasons why garden centres over stock (especially small stores).
1. They feel they must have everything in order to satisfy any customer request
2. They have lots of space to fill
3. They focus on margin, believing that by buying in bulk they are doing the right thing. They see dropping the price for a special as losing margin rather than increasing sales and stockturn.
Typical stock levels for garden centres is around 12 – 16% of turnover. If your stock level is a lot higher at around 20-30%; alarm bells should be ringing. It’s something that needs focus and change if the garden centre is to be profitable at any point.
Consider the following factors:
There are many brands on the market that do a similar job, or in the case of chemicals, have the same active ingredient. What is the point of replicating that same product seven-fold for less than 8% of your customers?
Better to have a strong presence - say 3-6 facings - of a product you know is effective; performs well; is your best seller; that you recommend; where you have a competitive advantage
Customers love recommendations – even if they have been using the same product for years and years.
If they are convincingly told the product you recommend is your best seller / it is more effective / is a better alternative / offers the same solution / has a better growing habit / is disease resistant etc. etc. they are likely to be very appreciative. They will soon come to believe you are the experts because you KNOW and RECOMMEND.
You will move up a few notches in the ‘best customer service’ competition too!
Reduced stock level or increased sales with the same stock will increase profitability. So the speed at which product sells has a bearing. Increasing the stock turn means money invested in stock can be re-invested sooner to make more profit sooner.
This is harder to achieve in a smaller store with a turnover under 800,000 – 1mill so it’s better to focus on increasing sales to grow the business than saving margin.
Steps you can take to reduce and maintain stock at a sensible level
- Remove everything off the shelf that has only sold three units or less in the last 12 months
- If there are large numbers of particular items that represent more than 6 months’ supply, remove the surplus quantity.
- Put all this slow selling or surplus stock into a clearance area at half price or less and turn it into cash.
Note: Dropping the purchase budget alone without following these steps will not improve the situation because you won’t have funds to buy fast turning products.
- Set maximum stock levels by value i.e. set a budget for each category. Monitor stock levels monthly.
- When placing an order, only buy a product or quantity that you can sell in 3 months. (there will be products that are only available once a year but they will be a small number of exceptions
- Multiface biggest sellers, best products, and focus advice to customers on these rather than giving the customer a choice of 5 brands / types – using signage, shelf talkers, brochures, emails and special offers.
- Train staff. Their knowledge should be focussed on your best sellers and products where you have a competitive advantage. They must be able to recommend alternatives to the slow sellers that have been removed from shelves and benches.
The bottom line is the Garden Centre must aim to make a return on the money invested in stock to stay in business
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