“If you grow faster than your market, you tie up capital.
If your market grows faster than you do, you lose market share.”
~Slim Fairview
The Quotations of Slim Fairview © 2018
Now, let’s move on to the death of the Supermarket as we know it.
Part of the problem is the Big-tailers. And part of the problem is your
supplier. And the rest of the problem is the supermarket industry
response to the problem
If your product sells out, shoppers will either
a. buy your product at another store
b. try your competitors product.
If we focus on you the retailer, you lose customers to a competitor.
If we focus on you the supplier, you lose customers to a competitor.
If you run out of product on the shelf, customers will try another product.
That, or try another store.
The problem for the supplier has been significantly blunted.
While the customer may shop at another store, they will still buy
the same product. However, there is a third option. Buy your
product online.
The challenge for the retailer--owner of the supermarket--is different.
If consumers don't like the bread in your bakery department or don't
like the quality of your produce, they will move to another supermarket.
This is an in-house problem.
But the suppliers who stock your shelves have two options and they
appear to be using both. I noticed this a while back. But it hit
home on a recent trip to the supermarket.
I bought the last three bottles of caffeine-free, diet Pepsi, hereafter
known as Cfd-Pepsi.
This happened while "the youngster" from Pepsi was stocking
the shelves.
"You always run out. Why don't you put more on the shelf?"
"I don't have enough space."
I pointed to the 10 rows of Pepsi.
"Take down some of them and put it there."
"I can't. Corporate determines what goes in the space."
True? Untrue? I don't know. However, I can tell you this about retail.
No matter who you are, no matter what you sell, I can identify two
products that are not selling.
The stuff on the shelf. I know this because your stuff is on the shelf.
The stuff that's not on the shelf. I know this because you can't sell
something that's not on the shelf.
In short, corporate does not determine how the space is allocated.
The consumers do.
"There are no unintended consequences.
Only unwanted consequences."
~ Slim Fairview.
The Incredible Shrinking Industry
Here is the new downside.
Consumers can continue moving to online supermarkets or buy from
club stores such as Sam's Club® or both.
Now, if you are a retailer, you have an incentive to keep product on
the shelf. If consumers buys Cfd-Pepsi online, consumers can also
buy other items:
Heavy Items:
Soft drinks
Bottled Water
Canned Goods
Bulky Items:
Paper products
Napkins
Bathroom Tissues
Potato Chips.
Fussy Items (many small items.):
Toothpaste
Vitamins
Deodorant
Paper Straws
Toothpicks
Shave Cream
Razor Blades
Q-Tips®
What does that leave you with?
Milk
Butter
Eggs
Cheese
Bacon
Perishables like Lettuce & Tomatoes
Frozen Items like:
Fish Sticks
Burger Patties
Shrimp
And your meat department.
If online savings are significant and, as incomes rise, your customers
will move to the butcher shop to buy meat.
And if keeping your shelves stocked in those areas is
a challenge, then the quality of management at your local
competitor will be a determining factor.
From my personal observation this is what you run out of:
unsalted butter
cream cheese (the real cream cheese)
Kraft, extra-sharp, Whole Milk, Cheddar Cheese--orange.
If a consumer does not find the aforementioned cheese on the shelf,
the consumer may buy another brand of cheddar
and not your healthier brand of cheddar.
If your customer tries a competitor then taste or price
may result in loss of sales.
The Kraft, ESWM Cheddar--orange routinely sells out. The Cheese
made with 2% Milk, does not.
When you don't have enough ESWM Cheddar--orange on the shelf,
we buy the other brand.
Now, shelf space is a premium. If you want to optimize your resources,
you ask yourself, "If I have 50 bottles of Pepsi across 10 facings
on the shelf, and three facings of the Cfd-Pepsi on the shelf
that are empty, I am losing sales. This may result in the loss
of customers and revenue.
While I am sympathetic to suppliers. You should not be.
Let's look at widgets.
It is easier for The Widget Company to ship 10,000 widgets
a month to an e-tailer than to ship 100 widgets a week
to 24 retailers every week for a year.
The e-tailer can satisfy my customers' needs. I am optimizing
on the profit motive. However, there is the flip-side. The
retail store. To understand their predicament, let's look
at the PLCB. The Pennsylvania Liquor Control Board.
In Pennsylvania, liquor is sold in State owned stores.
The PLCB is a profitable agency. One of the few government
agencies that brings money in to the State. The PLCB works
on the profit model. The State liquor stores do not.
They operate on the revenue model.
Across the river, in New Jersey, liquor store owners operate
on the profit model. It a customer wants Bolla® Soave,
and the store doesn't carry it, the owners will order a case.
If it sells, they keep it in stock. If sales are low, they still keep
it in stock. Why? Because if they do not have it in stock,
the customer who wants it, will buy it at a competitor. And
in so doing, will buy other products at the other store.
There are no competitors in Pennsylvania.
Great Product! Bad Management?
In the late eighties, we found what I believe was the best frozen pizza
on the market. Red Baron® . They had four facings.
Plain, Pepperoni, Deluxe, Supreme Deluxe.
Four facings.
My wife and I bought a plain pizza to try it. It was great. I went
back the next day on my way home from work. There were
three left. I bought one.
When I went back for more, there were none. I asked the
youngster in frozen foods, if there was more in the back.
"No." But that they were getting more in.
When the next shipment arrived, the facing was full. I bought two.
Two days later the facing was empty. And it remained so until
the next shipment.
Eventually, it seems, they eliminated the Cheese Pizza.
Now they have 4-cheese Pizza.
Nothing says "Italian" like cheddar cheese on a pizza.
The failure?
"The retailer repeatedly ordered more."
"The supplier repeatedly shipped more."
Both sides failed to grasp the concept:
"more high big numbers". [sic]
If your product is selling out, ship more high big numbers.
If your shelf is empty, order more high big numbers.
Today, there is unbridled competition in the frozen pizza business.
We no longer buy Red Baron. I realize that consumer-taste
is constantly changing. However, there is little evidence in
the supermarket industry to suggest that getting rid of a line
of product optimizes space, attracts customers, increases
sales, or increases profits.
Failure to monitor the situation.
Now, as my my biggest complaint about online articles is,
they are descriptive,not prescriptive, I will offer up initial action.
Hand the manager of your store a clipboard, a pad of legal paper,
and a pen.
Send interns or management trainees down the aisles to "unface"
the shelves.
Walk through the store, aisle by aisle, and have your manager
write down what has sold out.
Split your trainees into two small groups.
Group One walks ahead of your manager unfacing the shelves.
Pushing products into their spots revealing gaping spaces that
are draining your revenue and jeopardizing your bottom line.
Group Two will follow to face the shelves.
The manger will do this twice a day for four weeks.
Look at the invoices:
What did we run out of?
How much did we order?
Order more, high, big numbers.
Don't tell me about computers and truck to shelf stocking.
If computers worked you would not be running out of product.
But this addresses only part of the problem.
The Industry is not adjusting to the shift.
The industry is adapting to the shift.
The industry is not adjusting to the shift.
In a word: Change!
It is no secret that the variety on the shelf is dwindling.
Twenty-five feet of shelf space, 5 feet by 5 shelves, that
displayed a variety of rice--by brand, type, price--has dwindled
to a few feet of space with some bagged rice & pasta meals,
and a few boxes of instant rice.
Suppliers and Retailers are complicit in the devolution of
the industry.
Some options:
Have customers call in or go online to shop their list then
come in later to pick it up.
Have phone shopping or online shopping coupled with a
delivery service.
Have customers buy butter, eggs, milk, bread, cheese, bread,
and orange juice, but have bulky items, heavy items, and
fussy items delivered or shipped to their homes.
Start a joint venture with other local markets to buy a
"local warehouse" to make it possible to deliver food
regardless of which store made the sale.
The last may seem counter-intuitive, however, you are
talking about survival.
Best of luck.
Sincerest regards,
Slim Fairview
If you find anything here to be helpful, please don't hesitate
to send me a really tricked out Mac and to tuck a few dollars
into the envelope along with the thank you note. Slim.
Bob Asken
Box 33
Pen Argyl, PA 18072
Copyright (c) 2018 Bob Asken
All rights reserved.
