Retailers need to get basics right: If it’s not in, it’s not on

I was reminded on a recent shopping trip as to why retailers need to pay particular attention to a critical “operational basic”. Whilst we all rightfully concern ourselves about omni-channel retailing, it is never a reason for us to not keep a radar eye on the “basics” of retailing.

Now, I would call myself a “stock standard size”, to sell me a shirt, you don’t have to cut one in half for me or sew two together. But to make a sale, you do have to give me the shirt I want, in my size.

Despite being a committed buyer, the standard size in the shirts I liked was not available for me to purchase, so there was no sale.

Candidly, no amount of omni-channel investment will ease the dilemma of missing sales when not being operationally “Fit for Business”.

If it’s not in, it’s not on; and with an average of 15% of customer sales being unfulfilled due to items being “out of stock”, the ability to link sales with your stock levels is absolutely necessary to unlock your store profits and get ‘fit’ for business.

I would like to say this was a one-off experience, but spurred on to understand the size of the issue (pardon the pun), I visited numerous fashion retailers and a minority had the ability to meet my standard size demands – the rest were out of stock. Particularly concerning was the fact that much of the product range were all new season lines. If you haven’t got it, you can’t sell it.

Note to budding retail consultants: simply testing the stock range in store will tell you immediately if the business is “healthy” in this area and, if not, will lead you to the infrastructure of supply channel, business information systems, inventory ordering, reconciliation and planning.

Let’s explode a typical myth that describes customer traffic flows as “unpredictable” and therefore hard to plan inventory levels for: It’s a myth that retail sales are unpredictable.

As experienced retailers, we understand there could be +/- 10% variations due to marketing activities, but these are events you can cater for by managing your inventory link to your sales forecasting tools.

It’s no coincidence that the “fittest” retailers are those who not only take command of a good stock management system, but also excel in buying. Forecasting and buying inventory requires a blend of analytics, strong boundaries and vision, and a truly “fit” retail marketing leader is disciplined in measuring sales, margin and stock position in both detail and composition.

On the opposite side, ‘unfit’ businesses often buy with their opinion, taste and relationship skills as their only buying tools.

Our latest Australian Retail Consumer Study proved that there are certain Limbic® personalities – making up almost a quarter of the Australian population combined – who will walk away in an “out of stock” situation. If these consumer types are identified as those who move towards your brand, you could be losing out.

Katharina Kuehn, director of RDG Insights, our consumer insights and strategic branding division, and a fellow SmartCompany blogger, explains why:

“We know there are three specific personality types who will not respond well at all to out-of-stock situations: The Hedonists (12% of the Australian population) and The Adventurers (5% of the Australian population) are both into instant gratification. If an item is not in stock, they won’t return and will seek to purchase it elsewhere. The Performers (5% of the population) are time poor and very time efficient shoppers who are also not prepared to wait.

“All three personality types will use their mobile phones or the internet to find the nearest and fastest replacement retailer. If you haven’t linked your sales to your inventory planning, you’re at a major disadvantage if your store caters to these personality types.”

To be a ‘fit’ retailer, always make sure your retail business understands the stock-to-sale ratio and that your inventory planning practices are matched to your order cycles. We insist on this operational procedure as, if it’s not in, it’s not on, and you’re not making sales – but your competitors are.

Happy ‘fit’ retailing.

Brian Walker is the managing director of Australasia’s leading retail consultancy, Retail Doctor Group.