Monday, May 28, 2012

Automated Store Replenishment – Volume VII

The line between ‘choice’ and ‘confusion’ is a thin one. So how much choice is enough? Psychologists have conducted studies that have proven, at some point when confronted with more than six choices of similar items, shoppers’ minds tend to enter a state of confusion and doubt; even guilt that they might make the wrong decision. Did you know that you are doing your customers a service by holding their choices down to a mentally, manageable number? 

Have you ever installed a new version of Windows only to be confronted with a large list of choices during the process? “Do you want the typical install, the compact install, or the customized install?” Some developer at Microsoft foresaw the confusion factor when he displayed a dialogue box that said, “Windows will now format your hard disk. OK?” No confusion there. Why do they bother to ask? I don’t care how long you wait, you will never find the ‘Hell No’ button on that screen, because it doesn’t exists.

The idea that people want choices in EVERYTHING they do is ridiculous. Customers might hate to be sold, but they LOVE to buy. If you make it too difficult, they’ll just go elsewhere. My wife will spend three hours trying on shoes in a department store, but in a convenience store, she could run down Usain Bolt heading for the exit.

The smaller the store, the less confusion there should be. There are no shopping carts in convenience stores, and you know why? Because nobody SHOPS there. They don’t need salespeople, information booths, lounge chairs or rewards cards. If you want to compete with grocery stores, go and find a larger building. The whole point of ‘convenience’ is to get in and get out as fast as you can. If your customer has a full bladder, getting in may take precedence, but getting out is always the same. It is a culture you will not be able to change no matter how hard you try. So, if you want to adapt, keep it simple. Any item that moves less than one-turn-per-month isn’t worth the investment, or the carrying cost. From the get-go, you will free up a minimum of 70% of NON-PRODUCTIVE sales space.

So what do you do with all that empty real estate? Widen your aisles, get the inventory off the bottom shelf where all the dirt lives and then, explore adding small amounts of other kinds of items you think will sell and make you a profit. Open a post office. With local post offices soon cutting their hours down to four-hours-per-day, the USPS will be happy to talk to you about becoming a ‘Contract Postal Unit’, or an ‘Approved Shipper.’ Put in a coffee bar, a roller grill—use your imagination. Experiment with different things. The extra space provides a great opportunity to display seasonal items, because you can keep them all in a group and replace them quickly.

Set up a small cosmetics display and see what happens. If your store is in an affluent neighborhood, create a small cheese and wine display. The idea here is to always keep a little corner of your store available for experimenting.

Perry Marshall, author of the “Ultimate Guide To Google AdWords” describes a technique called ‘Split-Testing’. That is where you run two Internet ads for the same product and see which one is getting the most hits. It is the real secret to mastering Internet advertising. You can do the same thing with products. If you are monitoring turns, you can swap products of a similar kind and monitor which ones sell the best AND produce the greater profit.

In short, 70% of your inventory needs to be fired, because it is not making you any money, and when your advisors try to convince you, you need too much inventory to show full shelves, it is the wrong solution to the correct problem.

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