Preparation for the Year end

Over the past weekend I was scouring the internet for some retailing information. I came across a number of sites with pictures of stores on Black Friday in theUSA. Black Friday is regarded as the first day of Christmas shopping and stores open much earlier than normal in anticipation of the crowds of shoppers wanting to find a bargain.

I was completely taken aback at some of the pictures! The crowds were unbelievable! It all looked like utter chaos in my view and if I lived in theUSI would avoid all the malls and stores over this weekend. I know there are real bargains to be had, but saving a few pennies would not entice me to even think of going anywhere near a shop.

So why am I writing about this today? I live inCape Town, which is a coastal city  – and our stores, restaurants and shopping malls look very similar over the Christmas period. You cannot move in the stores, finding parking is a major challenge and worst of all – Customer Service goes out the window! We dine out in a restaurant and when we sit down we know the service is just going to be shocking. The staff are tired and care little about giving good service – they just want the holiday season to pass as quickly as possible.  And management is only seen – when they are placating irate customers. (Which is often at this time of the year!)

And what happens to our suppliers in this period?

Many just seem to shut down and if they are open, our orders are never met in full. So we have products that we normally sell, not on our shelves, and customers get irate with us  – and our staff bear the brunt of this anger.

So here are a few suggestions from me that might perhaps help us all over the Christmas season.

For those that live along the coast (oh boy I am exhausted already just thinking about it):

1. Prepare your store ahead of time – make sure you have the right products ready for sale. Don’t just use last month’s orders – take some time out to properly consider your customer’s needs (remember to have jelly powder)
2. Prepare your staff for the onslaught – you know the onslaught is coming and so do they. We all dread it. So think about changing the way you manage your shifts. Give more frequent breaks but of shorter duration – especially to your cashiers. Just five minutes out of the front line gives us all a bit of sanity back into what we do 
3. Train additional staff to assist in those peak periods – now. Think about employing temporary staff to assist in keeping the store clean, or to take stock for you. Just because you are busy is no excuse for poor hygiene or allowing controls to be relaxed
4. Ensure you have your orders ready ahead of time. Increase your stock holding levels if need be – especially high volume items. Yes I know holding more stock is expensive but at this time of the year it is better to at least have them in stock all of the time, than not at all
5. Prepare your suppliers now – let them get the stock to your store and not the one across the road. Work with them – you want all the stock you can get. Let the guy next door have empty spaces on his shelves
6. Ensure all the hand held terminals are in good working order – and that you have enough of them. You know that in peak trading periods no matter how many terminals you have, they all work slower than normal – so make sure you have enough in good working order
7. Walk through the general customer experience with your staff – from the time they enter your site and into your store. See it through your customer’s eyes – and not your own. Plan for where the bottle necks are going to happen – and prepare your staff on how to deal with them
8. Work out how you are going to be able to keep the customer moving. It is one thing to have long queues, but if they are slow and not managed they can cause disaster for your business. Perhaps train your security staff to assist in getting people moving? Train them to show your customers where to find certain products in the store? If the customer keeps moving albeit slowly – it reduces the frustration for all concerned

Think about how you can still deliver quality customer service in a shopping season of madness. You know your business better than anybody else. I just urge you to consider what it is that you can do today to ensure a profitable and happy shopping experience.

 

Take care out there

Do your staff have the right Equipment to do their jobs?

I have a Total service station just around the corner from where I live. On three occasions I have driven off the driveway as there were no staff to be seen anywhere on the forecourt.

Anyway a week or two back – I had a bit of time on my hands – I decided to try and get attended once more.

The forecourt attendant filled my fuel tank – and then when I presented him with my debit card he said I had to go inside to pay. I asked him why – and he said that their handheld devices had stopped working ages ago but they were not fixed yet.

I asked for the pump number and started walking into the shop. The pump attendant followed me – so I said to him – not to worry he can go and serve another customer – and I will pay at the till. Guess what his response to me was – we have to stay with the customer to make sure that they do pay!

So here we were in a queue with about 5 customers in front of me – all of them also with a forecourt attendant in tow. No wonder there was never any staff on the forecourt – they were always standing in a line inside the shop to make sure the customers did not drive off without paying.     

Now how stupid is that? Just get the handheld devices fixed for goodness sake.

The customer in front of me said the owner of the service station lives far away – and hardly visits the site. The handheld devices he said had been broken for a good few months – and nothing gets done about it. Needless to say I have not been back there.

One more thing about hand held devices in general – especially those on most forecourts – they are absolutely filthy! Why can’t we use the same sort of clean wipes we find in our supermarkets for trolley handles?  The device can be wiped clean prior to each transaction. Really simple to get it right and it would leave a lasting impression for your customers.

 It clearly shows that you care about them.

Some of you will know from our facebook page that I have found inconsistencies in the coffee offering of the same franchise – in the same building. Both are housed at Lanseria airport – one is before you enter the security section and one is just before you board the plane.

The coffee dished up outside the security section is vile. I have tried it a few times now – and it remains awful. On the other hand the coffee served inside the boarding lounge is great – well it was until a few weeks back.

On my last visit through this airport I went straight to the boarding lounge expecting to have a great coffee after a long day at work. It was awful. So I asked to see the manager – I think her name was Tanya. When I told her about my experiences outside compared to hers she immediately said that this is what most customers tell her.

I then told her I was very disappointed with my coffee that day and she explained to me that their coffee grinder had broken and was in for repairs – so they had to get their coffee ground at the other coffee shop. Suddenly it all made sense – the difference was in the grind of the coffee! As simple as that.

And the worst thing about it all – was that management were fully aware of the discrepancy between the two offerings – and did nothing about it!

And so to my question this week – do your staff have the right equipment to do their jobs properly? When something breaks – have you got a back up plan? When last did you personally inspect your equipment? How do you know it is all working as it should be – if you don’t inspect it?

Don’t wait for a customer to complain before you check your equipment – inspect it personally and see it as part of your job on the site all of the time.

The devil is in the detail – make small changes to the way you do business today

Take care out there

Your store opening

A few weeks back I took new dealers in the industry to visit a few sites in the Sandton area inJohannesburg. For those that do not know this area – it is an extremely affluent residential and business area. So there is serious money around.

Many moons ago, I opened some of  these shops for the first time – so I knew the layout of some of the stores and of course what they looked like when we opened them. In hindsight that is probably the reason I was so disappointed in just about all of those we visited – regardless of the brand.

The only word I can find to describe them – is tired, looking lost and forlorn! So here is my question to you and your store?  Be honest now with yourself – does your store look as great as it did when you opened it to the public for the first time?

Here are some of the things that disturbed me on these visits:

1. The pay point/s looked particularly poor. They were dirty and untidy and the fixtures looked like they needed some serious attention. How much could a few new shelves cost?
2. Ticketing and labelling was non- existent for about 40% of the stores as a whole. The group had to physically count how many line items had no ticketing – so this is pretty accurate for all the stores we visited. This is an elementary retail norm – why can’t we get it right?
3. The shelves looked or were perceived to be empty. In reality they weren’t – but because the products were not being brought forward it left the impression that the store was empty.
4. And don’t let me talk about the condition of the toilets/rest rooms…

Ok so here are some suggestions for you and your store this week.

Firstly, take a good long hard look at your store. You need to be honest with yourself here. Because you work in the store all day, you no longer see it through the eyes of your customer. Why do you think it does not look like it did on your opening day? Why does it have the look and feeling of being tired and past its sell by date?

Secondly, take each area of your store one at a time. Start at the pay point – all your customers end up there – so that is your first priority. Is it neat and tidy? Is it clean? Look at the shelves – are they still looking the same as on the first day? Clean the shelves, the partitions, the merchandise, any stands, – in fact any surface that the customer comes into contact with.

Then move onto the sales floor. Try this for yourself to see just how easy this is to do. Walk up and down the aisles and just bring the products forward. Straighten up shelves that look untidy – make sure that there are no empty spaces on the shelf. Now look back and see the difference. Its as easy and as simple as that….you have already made the impression change from a store feeling empty to one that looks full.

Once you have done this get your merchandiser to fill in all the gaps. Get him /her to look at the price labels at the same time.

Now go into the store room –in retail terms we can always tell a profitable store based just on the condition of the store room. How does your one look today? It should be spotless, no papers or boxes lying around, no wrapping or packaging lying around. If you get your store room right the rest will follow.

Now take a walk into you cash office or back office. How does it look? Just because the customer does not see this office does not mean it does not have to be neat and tidy. Are there invoices lying around, till rolls and GRV’s lying waiting to be attended to? If so you know that they are behind in their work schedule – and this office is like the soul of your business. If that gets out of hand – you can bet your bottom dollar that you are losing money!

It should be neat and tidy with easy access to files – you should be able to find anything you might be looking for within a moment or two. Can you do this?

Many people in the retail industry talk about this as your store recovery. It is the simple act of getting your store ready to trade with your customers .It is the combination of several processes to make the store look and feel great. It is the continual process of preparing the store for its customers…

And it should be done on a daily basis!

 Take care out there

A second chance

Last week I was spending some time with a young lady in her first year at University. She was taking very similar subjects as I had done so many years ago. She asked me the question – how did you know what you were going to do after you completed your various degrees?

A really good question! How did I land up in retail of all industries in South Africa? Unlike other countries being in retail in South Africa is bottom of the rung – even the banking sector was deemed a better industry to work in. It still is regarded by most as a dirty industry to work in.

And this is how it happened. During my first year at University I was really struggling. My parents were unable to assist me financially in anyway to study. Early on in my first year I was introduced to a business owner who listened to me saying how hard it was just to stay at university – and how uncertain I was that I would be able to complete one degree – never mind three.

He owned a hotel in Cape St Francis – a good 9 hour drive from where I lived. He was having trouble managing the hotel and its bottle store that was attached to the hotel. Would I like to work each vacation for him – and all the long weekends and public holidays throughout the year? I jumped at it especially when he told me how much he would pay me! It was a huge salary.

And so that is where and when I started in retail – at 18 years of age. My first day on the job was horrific! We had two entrances to the bottle store – one for the “walk in” customers and one for the drive in customers. All returnable bottles were to be handed in on the “walk in” side – and the customer was duly paid for these bottles on that side too.

I could not believe just how many bottles were returned on one day! I spent the day running between the two tills. When I closed up for the night – and did my paper work for the end of day I was horrified at what I found. Guess what I had done? I was receiving and paying out for the same bottles over and over again! I had not secured the empties as they had come in!

And the cost – was almost equal to my month’s salary! I was devastated! My first real days work ever – and I had just cost my boss oodles of money in ONE day…

Anyway I decided to own up there and then. And resign with no pay for the day if need be – or work for the month for no salary. So those were the thoughts in my head when I went to see my boss.

He listened carefully to my story and asked a few clarifying questions. And then he sat very quietly. I was nearly in tears by then. The questions he was asking me sounded like he thought I had deliberately stolen the money – and now I was thinking he is going to call the police. I was a wreck.

He then asked me the following questions:

• “What will you do tomorrow to make sure it does not happen again?”
• “What have your learned today?”

On my way over to his office I had already thought about these very same things – so I was able to answer them quite easily and he was more than satisfied with my proposed solutions.

And so I got my second chance. I grabbed it with both hands. I spent time looking at the range of products, the pricing structures (I was determined to get those lost monies back for him) – I rearranged the layout of the store – not just once but over and over and until I thought I had got it right.

And I found that each change I made – even in the store room – made us more profitable. I LOVED it. He gave me complete carte blanche – I could add or delete products as I liked. I could price as I liked and even source suppliers that I preferred. I set up three pricing structures for each product we sold – one for the walk in entrance, one for the drive in customer – and a third one for the guests in the hotel and its restaurant.

I was hooked! And I never looked back – you either love the retail world or you hate it. It never felt like work to me – I was enjoying each day at work. Everything I learned in those days was by trial and error. It was only years later that I started to “study” retailing principles. But they were mostly old hat to me by then….

So the next time a staff member makes a genuine error which costs you money – think twice about how to deal with that person. As it turned out for me – I worked for Hilton for many years which allowed me the opportunity to complete three degrees. He had bought my loyalty for life! And when I was finished – he asked me to run of his other company’s which I turned down.

I was lucky to be able to do more or less as I liked in that bottle store. I was able to try out new things. It was an opportunity of a life time for me.

But how many of us even listen to suggestions our staff make or even allow them to try something new in our stores?   And after a while they stop making any….

Perhaps give them and yourself a second chance…

 

Take care out there

Planograms – Do these make good business cents?

The challenge for me in this discussion is that I do not have the answer!
And this is because I am not entirely convinced that planograms grow sales or even profitability for that matter, at store level.
What is a planogram?
Essentially it is a diagram that indicates which products go on which shelves – and how many facings of each product need to be on each shelf. The diagram will indicate which variant of a product to stock, and which supplier’s products should be on the shelves.  I see planograms as vastly different to say a store layout – which is also a diagram. To some extent I think these are being confused.
A store layout tells you where to position your pay point, where the fridges should go, where chips, sweets and snacks should be displayed in your store etc. As such I see store layouts as infinitely more helpful to me as a retailer when opening a new store or revamping a store.  And even as you trade – you can review your store layout to better meet the traffic flow in your store. So a store layout can be very useful to me as a retailer.
A store layout will not show which variant of toothpaste to stock. It will indicate however, where toiletries as a category or department should be in your store.  The planogram will indicate actual line item, the colour, size etc – and on which shelf it should be merchandised.
Planograms are the end product of some sophisticated software (that in many cases costs the earth to use or buy outright) – into which all sales of all products are pulled into the system. The software then uses these sales to generate a product layout based on these sales.
So why am I not entirely convinced that planograms can work and drive increased sales at store level?
Well firstly it all depends on where the information is being pulled from. If it is from my store only – then I would concede that there might be merit in using a planogram. However, mostly because the costs of these programs is prohibitively expensive – Franchisors tend to collect information from its entire network  – to drive consistent planograms throughout its network.
Some are fortunate to get down to regional level – but even at this level of information I am not convinced it helps me at store level.
For one thing the information is historical. So it is based on sales that have already taken place either a week ago, last month or even worse – the last six months. And those of us that work on the ground know intuitively that our customers’ tastes continuously change.
I remember a few years back when a large supermarket in our country introduced planograms into their store network. Based on historical sales – planograms were sent out and store staff ordered according to these plans. However, in that particular year down here in the Western Cape – we did not have a winter season. So soups and bread were not the priority purchases that had been incorporated into the planograms. Instead customers were looking for a continued supply of fruit and salads!
The one positive thing that worked in this company’s favour – was that they owned the supply chain – it was not a franchised network.   They supplied their stores out of their own distribution centres. But it did incur some revision of their strategy in this regard – as the whole supply chain was treated as one business entity – so their suppliers and orders had to be reviewed quite quickly.
Those of you that have worked with planograms will know that it is not that easy to comply with product layouts sent to you. And I am sure like me – there will be those of you that look at the product selection and then say to yourself – but these don’t sell in my store! And this is a common complaint from franchisees.
So why is it difficult to implement store planograms on the ground if there is no central distribution centre?
There are a number of reasons why this is so.

1. You don’t stock an item because it does not sell in your store or region
2. You do not have the required fixtures and fittings in your store to display the products as depicted in the diagram. This is particularly true when you use pegs and hanging displays
3.  You don’t sell that variant – your customers for example prefer strawberry yoghurt to vanilla yoghurt
4.  You don’t like where that product has been positioned on your shelves as your margin on that product is very low
5.  Your supplier is out of stock – very common in some regions in our country

And by far the biggest challenge for me is that we are basing our future product layouts based on information that may or may not be correct in the first place. They may not be a true reflection of what our customers are looking for.
In this regard a while ago I wrote about a product such as Jelly powder. It really only sells in one month of the year – and if you did not have it last year – it won’t be on the planogram for the next year’s sales.
Don’t get me wrong about those networks that have central distribution points. They too have difficulty in implementing planograms in their networks too – but it is much easier for them than say a franchised network that does not have a DC.
My feeling is that to some extent implementing planograms across a network run by franchisees is hard work for all concerned – and in the end, very few stores are able to comply fully to these at store level.
So my question is why bother in the first place?
I just don’t see the return on the bottom line – except of course perhaps for our suppliers?
Take care out there

Jocelyn Daly 

The devil is in the detail – believe you me!

Any of you with children will relate to this first story of mine.
When my kids were younger we used to ask them where they would like to go for a treat. They had a choice between MacDonald’s, KFC, or a Spur meal? The answer they gave us was always dependent on the gift that was on offer from that particular franchise – it had nothing to do with the meal itself! That R10 toy got a family of 4 for dinner that day. Only R10! (probably less if bought in bulk via China!)
The same is true of any convenience outlet – “give” a toy away supposedly for free – and the kids will get you to stop there! Engen are currently running a promotion with the concept of a “free” soft dog toy. A different version of the same sort of thing. Luckily for me they are now old enough to do some math’s of their own – as they worked out they would each need to spend in excess of R1000 to qualify for the supposedly free toy! Not so free after all!
But the point is that this type of marketing is very powerful and works! Time and again! It is the small additional “extra” as a reward for using your services that counts. This was brought home to me again recently by my children who are now in their teens.
Very seldom do I frequent the movie houses whereas my kids seem to live there and recently I took them to watch a movie at a Nu Metro movie house. They were really galled that I would even go there. Want to know why?
They charge an extra R2 for salt on your popcorn! Ster Kinekor do not charge extra for salt – it is inclusive of the price for popcorn and so it should be in my view! I had not noticed that my children only frequent Ster Kinekor movie houses.
I wonder how many kids out there feel the same as mine if it comes out of their allotted pocket monies? R2 for salt? How many “bums in seats” have they lost for just R2? Who thought this one through? Is that R2 really worth it in the long run?
After we had watched the movie, my children then also explained that if we had gone to the competitor’s movie house – our 3D glasses were also for free! We had to pay R5 a pair.
Another thing happened to me on a Bp site recently in Cape Town. I am in the habit of checking with the forecourt attendant that they do in fact take my debit card before I fill up my tank as I hate having to go into the shop to pay for my fuel.
On this occasion I did check and the answer was “we take all debit cards”. Great on that basis I asked him to fill up my tank.
I handed him my debit card to pay for the transaction and was told that type of debit card needed to be swiped at the shop terminal. So I was annoyed to say the least. Anyway once I got to the shop terminal the manager was called who explained to me that yes they take debit cards – but not one like mine!
Mine was a cheque debit card and that was not acceptable as a form of payment for fuel! Now I was really getting fed up! Look I am just a mere customer here – what the heck is the difference? I refused to back down as I had asked if they took debit cards and the answer was yes.
Guess what the manager did – he added 5% to the overall cost of the fuel transaction to cover the costs of swiping my debit card! Really customer friendly indeed!
I wonder how many clients are lost due to these stupid decisions.
I ask you; R2 for salt, advertise that you take debit cards – only to be told that your one is not acceptable – and make the customer pay an additional 5% on the transaction! Is this good customer relationship building?
No these are not endearing to the most resolute of customers, even for me who was an avid Wild Bean coffee purchaser! Will I go there again? Absolutely not!
Ok so here is the message for this week – look at the little things – the details that the customer sees in each transaction. Is it encouraging – does it entice me to come back time and time again?
Are we building customer relationships or protecting our potential losses and costs? Our business is service, who keeps our door open?

Take care out there

Jocelyn Daly

Do you have the controls to reduce shrinkage in your store?

The amount of shrinkage in your store will be in direct proportion to the controls you have in place. The more controls, checks and balances you have over your stock – the lower your shrinkage will be.

Sounds simple I know! And it is – if you put the effort into ensuring that strict procedures are in place. And that they are maintained at all times!

There are many areas of our business in which we can “lose” stock. These include :

1. Ordering

2. Receiving

3. Return of goods

4. Pricing

5. Price changes

6. Displays

7. Food preparation

8. In-store use

9. Point of sale

In this article we deal with points 1-5. In the next issue of Wholesale Business we cover the others

For each point we explain the area of major concern – and then give one or two suggestions to help you manage them.

Managing stock is a huge subject. Many books have been written on it. Most are very technical and serve to confuse rather than assist in resolving the question – “How do I improve stock control in my store?”

So our aim here is to keep it simple and practical and to demystify something which is often made overly complicated.

Ordering

Orders go wrong when we do not count stock on hand before placing the order. In particular – not checking for “hidden” stock in the store room.

Over-stock on a line item results in shrinkage when we have to write it off because it has passed its Sell By date or it has become damaged from being on the shelves too long.

Make sure that your ordering procedure ensures that stock on hand – both on the sales floor and in the store room is counted before the order is placed

Orders also go wrong – when the person placing the order does not have access to the previous sales figures. Without them they cannot order accurately. It is important that they have the sales figures of each line item variant or sku (stock keeping unit) they order.

In this scenario – we often end up with variants on our shelves that are not the variant of choice of our customers. (Variants include for example the different flavours and the pack sizes that a product comes in).

When you have a new person doing the orders work with them to help them place an informed order that reflects your customer base’s choices.

It’s especially important in our retail environment when buying stock from van sales operators to make sure that you get the top selling sku’s – and not just what’s left on the truck.

Where possible move to a pre-order situation where you place your order with the supplier ahead of the delivery. This should ensure that the stock you order is at least put on the truck. It does not, however, mean that you will get what you order. Too often, part of the stock you’ve ordered goes ‘missing’ – to some other store – earlier in the delivery route.

There’s a way of dealing with this problem as we will see under receiving

Receiving

Receiving is where most shrinkage takes place in stores. And, it does not require dishonesty on the part of our staff for that to happen – although to often that’s a major cause.

For starters we often receipt goods that are just not there. Counting boxes delivered is not enough. In a previous article I discussed how I had personally receipted a delivery from Simba – the well known supplier of chips only to find out afterward that not one – and I repeat – not one box had the correct number of packets in them! One box of supposedly 48 packets had less than 30 in it!

So make sure your staff check each and every box they receive – that means opening all of them – for the correct pack quantity. Now I know the reps delivering stock hate this and complain that they have to get to the next store. All this puts pressure on receiving staff to take short cuts.

There’s one way to enforce this. Personally re-check a delivery from different suppliers each and every day . Once your staff know you are going to check their work – they will make sure that they do it right the next time around.

The next challenge in receiving – is checking the quality of goods. The first quality check is for expiry dates. Too often expired or close to expired stock is receipted. Quality control also includes checking that the packs are properly filled – you’ll be surprised at how often this happens – and that they are not damaged in any way. Again, our staff will be pressured by delivery people to take short cuts.

If you check expiry dates as you do the quantity of packs in each carton – your staff and the supplier reps will soon learn not to take a chance when delivering to your store. Let them short deliver and deliver poor quality to your opposition down the road instead! At the same time these random spot checks will discourage dishonesty and collusion on the part of your receiving staff with delivery people.

A major cause of having the wrong stock, especially the wrong product variants, in stores is the habit of checking stock against the delivery note rather than against the order. It enables van sales people to load a store with all the unwanted stock in their vehicle. So the first thing that receiving staff should do is to strike off items on the delivery note that were not ordered and refuse to receive them.

Case quantity also needs to be checked . Suppliers often change the number of packs in the box – so we may count a case in as a six pack – but the quantity has been changed to four packs to the case. I have yet to come across a supplier van sales person that points out this fact when counting in stock at receiving. They are always just in a hurry and often fluster your staff into just signing the delivery note.

Price checks are part of one of the headings – but the lack of any price checks at receiving – accounts for stock “loss” on the system. ???

Return of goods to suppliers/credit notes

Many suppliers will take back stock not sold due to damage or because it has passed its expiry or Sell By date.

However our controls on return of stock are generally very poor. Who controls the return of goods? Where are they kept while waiting for the rep to come and uplift them? Who produces the credit note and counts that all the stock being returned is on that credit note? Any stock item not reflected on the credit note is another loss.

Newspapers and magazines are major culprits in this for most stores. Who counts the returns – your staff or the rep that uplifts them? How do you record that credit note? How do you check that the supplier has passed that credit note in your favour?

Do you have a system in place that “ties up” stock returns – the stock itself, the credit note – and the recording thereof on the system?

Are you aware of each suppliers policy on returns? I have been in countless stores over the years where the owners were unaware that they could have returned the stock instead of writing it off. Again its money lost.

Do you and your staff know about supplier policies about the packaging of the returns? Some suppliers will only take it back if it is in its original packaging? Do your staff know that? They should of course know about it – you don’t want them opening packages that they can see have a week to go before they expire.

The best way of handling returns is first to have a specific place for returns in the deep freeze room, the chiller and dry stockroom. The products should be stored by supplier name. The credit note needs to be written up before the supplier representative, delivery truck driver or van sales person arrives. Usually the receiving manager is the best person for the job and needs access to the cost prices paid. The signed credit notes then need to be passed to the creditor accounts person and entered into the accounts system.

Pricing

In most stores the person doing the pricing – is not the same person that does the receiving. This should be a huge area of concern. Not only does this increase the potential for incorrect pricing – but as they are mostly administrators and do not think like retailers, it increases the potential for wrong pricing.

For example; you manage to source cigarette lighters cheaply at the local cash and carry. The receipt gets to the administrator – and they just add the normal mark up or gross margin that you have set for that product category. Now, your mark-up on lighters is 100%. This normally gives you a R7.50 selling price, but as you only paid R1.50 per unit – what price will they now be sold at per the system? Not the normal R7.50 I can assure you! This is loss of profits – not necessarily loss of stock I know – but it highlights the disconnect between the different functions in our stores.

The person on the system will also not be able to pick up any changes to pack sizes or bar codes – unless they are brought to their attention and they physically see the goods. Roughly 20 – 15% of all suppliers make changes to their products each month that range from pack size to flavour variant or even pack design. Each of these changes occasions a new barcode number.

So, you need to introduce an easy to use system in which a sample of every product in every delivery is brought to the back office administrator and scanned. This will check if the barcodes are on the system. There’s a danger that if a product does not scan the cashier will guess at the price and those guesses are almost invariably in favour of the customer. The administrator also needs to compare the cost prices on the system with the cost price on the delivery note to ensure they have not gone up. And if they have, to change the selling price if required.

In an ideal world no products should be put on the sales floor – until you are certain that they have been captured and costed correctly. The world is not ideal, so put a system in place that ensures that deliveries are processed quickly but are held off the sales floor till this has been done.

Price changes

Checking price changes on most of computer software today has been made easier…but this functionality is often not used in our day to day operations. We just want to ensure that all our delivery notes have been captured on a daily basis – what we don’t check is the quality of that data capture.

The person putting or capturing the stock onto the system is the best person to identify price changes in those lines. Those of us that make use of cash and carry’s to supplement our stock on a weekly basis have an enormous challenge in managing pricing of these products. They often change on a weekly basis – up and down. How do you decide on when to implement a new price change?

And then our range of products also creates a problem on the shop floor. For example, we want to keep a tooth paste on shelf. Last week we bought brand A at price X. This week we buy Brand B at price Y. Now we have two competing brands on shelf taking up more space than we budgeted. – and they are priced differently. So we land up with an overstock of one brand because the other brand is cheaper…..

Golden rule: No stock should be on the sales floor unless it has been captured correctly on the system. You need to have a procedure in place to ensure that this is adhered to – and one that checks the quality of the information captured.

Stock is money! We often forget that our money is tied up on those shelves and it might very well have yielded a better return if you had just put the money in a market link account! Each lost item – is a loss to you personally.

Guard it well!

Measuring profitability in our stores

One of the most common questions I have been asked over the past 15 years or so – is; “What should my GP%* be for my store?” It is a question that I get asked at least ten times a week and is the number one Q&A item on my Facebook page.

Measuring GP% is of course very important. It is the indicator of profitability that most of us in the forecourt business look at on our POS system at day end, everyday. It will vary day to day depending on the mix of line items sold. And, it remains at best a theoretical figure as it does not take into account stock loss and admin errors.

GP%, however, is hardly a complete measure of a store’s profitability. What concerns me is that I can count on one hand the number of times I have been asked a more important question; “What should my stock turn be each month?”

Good retailers know that this is as important as GP%! Just look at the growth of all the Chinese shops springing up all over our towns and suburbs. What do you think they look to for their success: GP% or, stock turn?

I’ll explain why stock turn keeps them going and makes them successful, later.

At the most basic level we buy in stock – add on a margin – and sell it on to our customers. If we can sell that stock before we have to pay for it – we’re in the pound seats and very profitable indeed! The sooner we can sell our stock the better off we are.

Real profitability is the combination of Gross Profit % and stock turn. And stock turn for most retailers is the stronger partner in the profit equation.

There’s a complete lack of understanding among of this among so many retailers. This is reflected in the complaint I get so often from them about selling airtime, magazines and milk. “The margins are so low it is not worthwhile!” they complain. Is this indeed the case?

Let’s take a more detailed look at stock turn. Essentially it is the number of times stock can be turned into cash over a year. We calculate stock turn by dividing the year’s sales by the value of the average stockholding – usually determined at stocktake.

Here is a very simple theoretical example that highlights the relationship between GP% and stock turn

	Product A	Product B
Two products selling for R10 carry the following GP%	30%	15%
And earn the following Rand Gross Profit;	R 3.00	R1.50c
Number of units sold in a year;	20	400
Contributes the following Rand Gross Profit per annum;	R 60	R 600

The % return on total stock purchases (GP% X units sold) 600%     &sbsp; 6,000%

If the cost of stocking the product was the same and the shelf space they took was the same it shows that items that sell faster will often earn you much more money despite having a much lower GP%.

Obviously we would not stock either product in this example as they do not sell enough for our stores to stock with limited space on our floors. But it makes the point.

Here is another theoretical example using Cigarettes and Magazines that brings stock holding and stock turn into the equation. Cigarettes are often considered the lifeblood of the convenience store business and they do make a huge contribution – which is so easily lost through shrinkage. We’ve given cigarettes an unlikely high GP% just to strengthen the comparison.

	Cigarettes	Magazines
Average sale per week	R12 250	R1 750
Annual sales (x 52 weeks)	R637 000	R91 000
Weekly stock holdings	R24 500	R1 162
Stock turn	(R637 000 / R24 500) = 26	(R91 000 / R1 162) = 78
Average Gross Profit	27 %	15 %
Return on stock investment	(26 x 27) = 702 %	(78 x 15) = 1170 %

Bread also has a low margin but we know it turns over fast and stocks are kept low as most of us get three deliveries per week – so contrary to the complaints it is profitable to sell bread. Pies do even better – they have a higher margin – AND probably turn over even faster than bread!

An important portion of stock turn is our stock holding figure for that particular line item. In an ideal world the more deliveries, the lower the stockholding. But, this does clog up resources too. We have to receive stock more often – and then enter it onto the back office system.

You need to weigh up the balance that works for you in your trading environment. Decrease your stockholding numbers but increase staff costs versus holding stock for longer with fewer staff. Somewhere in the middle is where you will want to be.

There is another leg to this and that is the amount of dead stock we carry from month to month. So to go back to the question posed to me – just what is the correct GP% for you? You might be showing a GP% of 30% on the system! That looks great…..but if you are only turning over stock once a month – that is not a great return on your money invested in stock.

If on the other hand you were showing a GP% of 25% but turning your stock twice a month – would you be more profitable? You know the answer!

In practice a stock turn of twice a month or 24 times a year is the minimum that a forecourt convenience store should aim for. The top forecourt stores, by the way, are achieving 2.2 stock turns a month.

Do you take stock regularly and measure your stock turn? If you want to increase your overall profitability start doing this regularly. It will probably require a shift for you in the way you manage your retail outlet. But it is worth doing. It will give you an objective view on which lines are earning you a real return and which are truly costing you.

With this knowledge you can start making rational decisions about what GP% you should make. It may well be that on some lines you aught to cut the price and the GP% you earn if it will increase the product’s sales. On others, you may well be better off in dropping the line altogether and looking for new ones that will give you a real Rand profit contribution.

Let’s take a look at the Chinese shops again. Why do they do so well? Yes, they have the products and brand names that people want and at price they can afford.

But there is something more about the way they operate that contributes mightily to their success. They’re often members of buying syndicates that aim to bring in a container a week of stock from China. Because of this they have to turn their stock into money within a week to make their contribution to pay for the next container.

Within a week of receiving new stock they know what is selling and what is not. So what do they do with the dead stock? They get rid of it at ridiculous prices – namely; cost to them.

Why? To make room for more of what their customers are looking for.

There are two things they are doing well.
They know what sells well – and what does not sell fast enough. (Fast enough is a week!)
They are also very good at understanding the simple retail rules – turn it over as fast as possible and get rid of what does not sell at cost to make room for the next product that does make money. They measure return on the money invested in buying stock as opposed to looking purely at gross profit % attained.

We also need to be ruthless at applying this very basic retail principle to our stores. If it does not sell – get rid of it at cost if need be. We have limited shelf space and it needs to work for us. We have money tied up in those slow sellers on our shelves that reduces our overall profitability. See getting rid of dead stock as freeing up space for more of what your customers want!

To get back to my first question – what should my GP% be for my store? It all depends on what return you want from the money invested in stock! GP%s is only one measurement tool of making your money work for you! Now focus on stock holding! And you will be reeling in the cash. Enjoy!
Good luck and take care out there

Jocelyn Daly
http://www.cstores.co.za

GP% or, Gross Margin% is the difference between cost and selling price expressed as a percentage of the selling price

Where are our suppliers in our growing market?

As I said I am really enjoying the changing landscape of our stores and the legal contractual obligations between the different parties currently on the market. But what I am not seeing is our suppliers to this industry upping their game in anyway….and that is a concern and constraint for us moving forward.

Newspapers/ magazines as a category remain behind their potential. Ice creams and coffee offerings remain pitiful. And as for Frozen foods – they are a disgrace even in those stores with major retailer store backing. And fresh foods….we have a long way to go even in those Fresh Stops.

And right now I blame the suppliers in this lack of creativity and growing this segment of the market. Where is the innovation? Our customer base is increasing by the day – and exceeding inflation in sales in our stores – but it is no thanks to our suppliers. It is the convenience of the location of our stores and the reduced time our customers have, that are growing this market, despite the lack of input and support of our suppliers.

As long as our suppliers see this industry as a grudge drop off – there will be no real growth for either party – the supplier or the retailer. And the customer will always be the loser.

I firmly believe that there should be penalties in place against suppliers for each time they either short deliver (very frequent) or deliver incorrect product against an order! (virtually 100% for most suppliers)

There are a number of elements to this stalemate position.
1. The franchisor head offices are far too concerned with rebates based on “fictitious” volumes – with little or no innovation or performance criteria being in place. Imagine how much more they could earn for each short delivery or incorrect delivery….I rest my case! And imagine the true growth if they both got this part right?
2. The retailer has a major problem enforcing correct deliveries – they sit with empty shelves and need them filled regardless of whether they receive their correct order or the right quantities.
3. And the supplier wins regardless. Drop off all excess stock at these small drops – just get them out of the warehouse, even when they know in some cases that they will have to pick up excess stock in a few weeks time. Our customers lose out each and every time.
4. And the customer – there is no guarantee of always finding the right stock at the right time in any of our stores! We are so lucky that they are in a catch twenty two situation! We have them trapped regardless of what we do or how poorly we perform.
So to you our suppliers why are you lagging so far behind the market requirements in this industry? Imagine getting this industry right and how well you could perform and grow! Where are the performance guarantees? The training of staff at store level – just ten years ago it was the competitive edge – now it is virtually non- existent!

And yes I am tired of the standard complaints I receive about the lack of supplier support in this market from retailers in particular. You just have to read the constant complaints we receive through our website in this regard to understand the extent of the problem! Hell it is hard enough to even find you or to place an order!

So to the suppliers to this industry and to the franchisors – work on putting performance criteria in place – just to keep your customers coming back time and again because they can then rest assured it will always be there!

Take care out there

Jocelyn Daly

A few examples of correspondence we have received recently:

To: cstores@iafrica.com
Subject: Re: Information
Importance: High

Good afternoon

I am a staff member at XXXXXX and bought a Bacon & Mozzarella “Fold over” Code 6001001614726 (R23.99) to have it during my lunch. It is the first time a bought it and will definitely never buy it again. I am still looking for the bacon and Mozzarella after I finished it. I had to carry on eating it because it was all I had to eat before I went into a meeting.

I am filing this complaint for the reason not expecting something back but only for you to proceed not selling this to clients.

Thank you

Kind regards
XXXXXX
Sent: Tuesday, August 17, 2010 7:52 AM
To: cstores@iafrica.com
Subject: I share your vision

Hi Jocelyn

I share your vision on changing the landscape of our convenience stores

I’m always looking for ways to differentiate my site from the rest
It’s a pity I didn’t come across you earlier

My site opened in December 2009 , with the oil company not happy with me for not towing the line with an express site .
I feel I’ve opened myself up to more opportunities by going it alone

In the words of Frank “ I DID IT MY WAY”

Looking forward to implementing any new ideas you might have

Sent: Wednesday, August 18, 2010 5:32 AM
To: cstores@iafrica.com
Subject: C Stores: whats lacking

This is an enquiry e-mail via http://www.cstores.co.za/ from:
XXXXXX>

Hi Jocelyn

whats lacking in the non branded c-stores are promos and more importantly point of sale to go with it.

reasons
1.the printing of posters and or POS for a single site is too costly 2.trying to set up a deal with a know-it-all rep is next to impossible

to put it lighty we are hungry for promo that will benifit the supplier , the consumer and not forgetting us the dealers

thanking you
XXXXX

And now for a good cup!

Consumers see coffee as an integral part of their everyday lives, it is not an impulse purchase. Nearly 96 percent of customers intend to buy a cup of coffee prior to walking in, according to Willard Bishop, an industry consultancy. If a customer comes in for coffee, the average visit is about two minutes, which makes the location of other merchandise located near the coffee bar a good way to increase the customer’s purchase amount. Some retailers are finding that customers will typically purchase bottled water or a grab-and-go breakfast item with a cup coffee, or a packaged snack item such as an energy, protein or granola bar.

Here are some promised suggestions on how to serve a good cup of coffee.

1. Ensure that your staff are properly trained on all aspects of making a good coffee. This includes understanding the machines your have bought and how the different components impact on the end result. You cannot send them on a course and then expect them to be able to deliver a good product. It needs practice and reinforcement at store level – all of the time.
2. Have one coffee expert on each of your shifts. Rather train fewer staff members correctly – than try to have them all being half good at it.
3. You should not have any beans in your store older than two weeks. Fresh is best. Keep your orders down and rather receive stock more often.
4. Check your own products regularly. Test cups of coffees being made on your site. Many of the staff I spoke to on this journey do not themselves drink coffee. So how can they tell a good one from a bad one? Quality is in your hands.
5. Alternatively find a customer that enjoys a good coffee – that can come in once a week to do taste tests for you.
6. Beans should only be ground as and when required. The longer they stand unused – the less chance of getting a good cup of coffee.
7. Check how long the loaded coffee head sits – before they start to pour. Once again flavor and taste will be compromised.
8. Check that the machines are well maintained and kept clean at all times.
9. Bring in expert coffee makers regularly onto your site! They will be able to tell you what is not being done properly and help you address the problem.

Here is a nice saying that I came across in researching this subject:

“A finely prepared cup of coffee should be enjoyed as thoughtfully as it was prepared”. (National Coffee Association of USA, Inc)

The quality of the coffee being served in your store is up to you! Your attitude determines the difference between a good cup of coffee – and one that leaves a bitter taste in your customer’s mouth!

Take care out there!

Jocelyn Daly
If you are looking for assistance in this regard you can contact us directly via our website at http://www.cstores.co.za or email us at cstores@iafrica.com