Trim inventory, but not at point of sale - The Packer

Trim inventory, but not at point of sale

11/04/2009 02:37:28 PM
Armand Lobato

My broker is E.F. Hutton, and E.F. Hutton says…

Armand Lobato
The Produce Aisle

Remember that commercial? That line was the cue when everyone within earshot froze in their tracks, waiting to hear what investment guru Edward Francis Hutton had to say. It was an effective ad that will live on as part of our pop culture. As soon as everyone gets unfrozen, that is.

As the economy and the current recession wear on, I’m constantly reminded of certain marketing principles. Specifically, I tune in to inventory levels when I walk through stores or warehouses. I notice if the place is packed. More so, if it is lean.

This makes sense, from a pure business point of view. Inventory, whether you’re retailing apples or automobiles, requires money. An organization needs enough merchandise to keep the supply pipeline flowing, but too much can cause
problems. Too much money tied up in inventory means that much less money is available to operate the business.

This especially true with car dealerships. Even the big, highly visible dealers no longer have acres of ‘new iron’ waiting in the wings. It’s lean, man. Today they might have one-quarter of the backup inventory.

I see this inventory-reduction philosophy in produce departments too. One local chain I frequent now maintains just a single layer or two on display — the barest of inventory. All the time. Which I have to say is probably a mistake.

Textbook opinion holds that retailers can always reduce the inventory in many areas — from the warehouse to the back room of a store. The old adage of ordering just what you need until the next delivery (or truck-to-shelf) guide is solid. These ensure fast inventory turns and fresh product.

But this is where the E.F. Hutton of Produce steps in and says, “If you display a lean inventory, your dividends (sales) can suffer.”

First, sales will limp along simply because of less selection. Those lean displays will get shopped through quickly. What’s left over will be considered “picked over” — not an ideal display method.

Second, as an industry we still depend heavily on impulse sales, recession or not. People are drawn to and will shop heaviest from displays that shout freshness, value and (not the least) abundance. Produce inventory is our stock, and the best sales result when preparation (building ample displays) meets opportunity (having the ideal inventory displayed) for your heaviest traffic.

One-layer displays are not abundant. They are so lean that even if neatly stacked, they look like the store is going out of business. Then again, maybe that’s exactly what these stores are doing.

Quote: “If you resign yourself to fate, fate accepts your resignation.”

Armand Lobato works for the Idaho Potato Commission. His 30 years of experience in the produce business span a range of foodservice and retail positions. E-mail armandlobato@comcast.net.

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Cervando Torres    
Corona, CA  |  November, 16, 2012 at 10:18 PM

Armand, I loved this article because it's happening to me at work, my competitor is running so low their inventory that many customers are shopping in our store. Last Monday I stop to see it for myself, customers were right and so are you! Thank You for all your knowledge, but Where were you when I got my first department in 1990? You could had saved me so many headaches...

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