Over a quarter-century ago, a small estuary appeared off the river of information technology. Because it was evolutionary in nature, rather than revolutionary, it silently carved its way, remaining virtually undetected by the general business community. Insidiously, it expanded both laterally and bilaterally, gobbling up small businesses as it grew in both depth and width. Sam Moore Walton, a man of great vision and steadfast determination, single-handedly skippered the makeshift vessel ‘Walmart’ through the dark and treacherous waters, leaving great wakes in its path for other boats… ‘Kmart’, ‘Montgomery Ward’, and ‘Spiegel’, to be decimated by its waves and washed ashore to die a slow and uncertain death; as others with names like ‘Target’, ‘7-Eleven’ and ‘Costco’ meandered cautiously behind.
The phrase, Retail Is Detail, has been attributed to so many different individuals, I’m sure its true origin will forever remain a mystery; however, to retailers, there is no phrase more important nor more diametrically opposed to Category Management than this one.
For more than three decades now, we have worked with retailers, primarily those involved in the grocery, beer, cigarette and soft drink categories, who cling to the century-old belief that paying attention to the items in stores equates to ‘too much work, too much technology and too much expense;’ when in reality, the technology to do just that continues to become more automated, simpler and cheaper as the years go by.
One of our favorite TV shows is “Pawn Stars.” Every item that makes its way into Rick’s store is carefully evaluated. If he can’t determine the value of the item himself, he calls in experts. Not only is the purchase price of the item a consideration, but the handling costs, the risk, the stocking fees and the time it will take to sell, is carefully scrutinized before a purchase is made. Items that do not pass the tests are summarily rejected.
That box of candy bars you just put on your shelf, or that dress, or diamond ring, are no less important than each and every other item in your store. Every piece of merchandise you invest your hard-earned working-capital in, regardless of the price, should be there for a reason. It’s should be considered a ‘tiny little machine that generates cash,’ and if it doesn’t generate enough cash to pay its own way, it has no business being there; else, it’s cluttering up space and costing you money.
On March 3, 2000, we created the first Cloud Computing environment for the independent retail industry. Back then the term ‘Cloud Computing’ didn’t exist. What we were called then was an ‘Application Service Provider’ or simply an ‘ASP’.
Larry Ellison of Oracle© described Cloud Computing as, just putting everything on the Internet. That description couldn’t be any farther from the truth. The true definition of Cloud Computing supports the philosophy of non-competitive cooperation between everyone involved in the process of business and using current technologies, including the Internet, to share the costs and make it profitable and more efficient. As this new technology evolves, the term Cloud Computing will vanish in the same way we expect automobiles to have wheels and planes to have wings. Soon, all computer technology will depend on The Cloud.
We have come to the conclusion the only explanation for the popularity of Category Management is because the suppliers and trade associations like it this way. What these misguided trading partners don’t understand is Category Management is not only destroying the retailers they serve, it could end up destroying them as well.
One of the many subjects described in this book includes how big-box retailers like Walmart© have made vast improvements in managing their inventory, literally forcing their suppliers to conform to item-level inventory methodologies, which is a main contributor to their overwhelming success. While at the same time, small to medium-size retailers continue to suffer the consequences. Does this mean Big-Box ignores Category Management entirely? No, not at all, but they certainly don’t use it for inventory control.
Any retailer who reads this book should come away with an understanding of the importance of item-level inventory control, and how to implement a plan to migrate to it as quickly as possible; because in times like these, where tremendous economic changes threaten all of us, if a change in methods is not made quickly, we will see more and more retailers closing up shop and heading to the bankruptcy courts.
After eight-years of research, we have determined 35 percent of your inventory is costing you money, 40 percent is marginal at best, and the remaining 25 percent is so profitable, it is cross-subsidizing the losses and creating the appearance you’re making a modest profit; and worst of all, somewhere in the mix, 10 to 15 percent of your inventory is just plain dead and enjoying free rent, hijacking precious income-producing territory.
In good economic times it mattered, but it never mattered so much as it does today. Costs are rising faster than retailers can load their label guns. We have to do something about this before it’s too late, because the profit you’re seeing from the tiny percent of stock that’s holding your company together may soon evaporate right before your very eyes.
One large retailer who is in trouble now, recently confessed, he pays little or no attention to what goes into his stores and he counts his inventory only once per year. When we heard that, we had the same reaction as if he had taken his fingernails and ran them across a blackboard. What level of insanity does one have to reach to operate in this fashion and what opportunities does that create for the rest of us? “Retail Is Detail” is a one-of-a-kind book that should be read by everyone involved in the retail and wholesale industries. It’s not a matter of ‘if’, but ‘when’ you decide to get involved.
Throughout this book we will discuss real-time experiences encountered and lessons learned during our twelve-year venture into an environment that’s just now being talked about.
While Cloud Computing is not new, it is a new concept to most of you, and as your competitors are carefully plotting your demise, you may wake up someday and discover it’s too late for you to catch up.
Blockbuster Video ignored Net Flix and look what happened. Major book stores are leaving empty buildings behind due to the rise of Amazon, and print-on-demand outfits are destroying the once profitable publishing business.
This is a real problem for retailers and you will not be able to pretend it’s not there.
This book is not about the intricacies of data processing, albeit we do briefly mention a few of the elements that are necessary to explain how and why this technology affects you; it is about the actions your competitors may be taking this very instant to adjust to a totally new way of managing their inventories and marketing their products. Love it or hate it, the one thing you will not be able to do is ignore it.
We have played with our computers for three decades, using them to cut cost and improve efficiency. Now it’s time to put the toys away and prepare for the onslaught of serious strategic threats that are just now beginning to appear on the horizon. But, with these threats, comes a small window of opportunity to show them what you’re really made of.
