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23.11.2016 | Елена Смирнова

Working with commodity balances

part 1        part 2          part 3

 

Natalia Chinenova, chief expert of Fashion Consulting Group on business technologies in retail, tells about the European experience of working with leftovers

 

To what extent does the management of commodity balances in other countries differ in principle from the corresponding experience in Russia?


The management of commodity balances in Europe differs significantly from the Russian practice in several parameters. Most foreign retail operators plan sales "from the store shelf", so the balances are minimized in advance. European brands do not have the habit of lowering prices in the middle of the season, respectively, the marginality of sales is much higher than that of Russian players, so it is not a pity to sell the leftovers for pennies at the end of the season to discounters, and not to save up for years in stock.


At the same time, in France, for example, the movement of goods between stores is developed at the height of the season, to where sales of specific articles are going better. In Spain (and not only), the leftovers are used to open stores in other countries, that is, to develop new markets. In Sweden, the remnants of goods decorate the streets.
The actual management of inventory balances is the planning of the assortment of goods, the location of each unit of goods in each particular store, the timing of the submission of collections to the sales halls and the turnaround time of each specific article. And Russian operators, for the most part, save on software products, plan purchases or production and sales from the payback of the business, and they just act barbarically with the leftovers. They are trying to sell them for a song in the same stores where they sell regular collections. The consequence is the distortion of sales and the growth of unrealized goods.


How has the foreign experience changed over the past five years? What are the key changes?


– No revolutionary changes have taken place. The experience of some market players is interesting, who set fixed terms for the turnover of goods in the amount of no more than 30 days and, based on analytics and sales forecast, plan production and deliveries to stores EXCLUSIVELY for 30 days. It is important to note that such brands have a wide network of stores or franchising. If the goods sell better, they are produced additionally, if worse, they are moved to those regions where the article has not yet been sold. Such revolver deliveries and production.


To what extent is the management of balances abroad automated compared to Russia?


Even small companies automate production, purchases and sales. No one is engaged in "self-records" or modifications of software products, as it is customary to do in Russia from 1 C. After all, buying a software product, the company also receives reports from the best practices of players who have already installed this software.


– What interesting software and other solutions are used there? Which of these can be implemented in Russia?


– There are a lot of them. There are both foreign and Russian programs on the Russian market, the main thing is to use them competently. Automation of processes is not a panacea, but a help to a category manager.


– Highlight the main problems of managing commodity balances in Russia. How to deal with them?


The main reason for overstocking of Russian retail chains or stores is incorrect purchase and inability to sell. Most small stores do not have loyalty programs, merchandising is lame, pricing and customer service problems. The main motto of trade today is "it's better to buy fewer goods, but sell to everyone who entered the store."

 

 

 


– How will this topic change in the next two to three years – will something be invented that makes life easier for market participants?


– I think that «the rescue of drowning people – is the work of the drowning people themselves ». It is necessary to deal with the remnants, starting from the moment of purchase of goods. And you need to sell each product one by one. Just take and sell. I recently participated in a strategic session with the owners of retail enterprises, and at my request, "Praise your products," they told me about the price, about the quality, about the season. Only after all, those who knowingly sell low-quality goods are expensive and out of season does not happen. I asked you to praise the goods. Tell them that they are warm, soft, comfortable, cozy, protect from cold or rain, will be worn for a hundred years and will remain for children, that there are both my sizes, and my colors, etc. That's the answer to the question of where the leftovers come from. It's just that today we need to learn how to sell.

 

The risk of large balances at the end of the season can be minimized with proper weekly monitoring of sales and timely movement of goods between sales units. In case of identifying positions with an unsatisfactory sales rate, there is no need to wait for a seasonal sale, it is better to start lowering the price during the season; this will allow you to avoid large balances at the end of the season as much as possible.

 

Excess inventory balances should be avoided. The average size of the inventory can be determined based on the frequency of deliveries and the volume of sales of goods for a period (day, month). The frequency of deliveries and the average volume of inventory depend, among other things, on transport and logistics costs. It is necessary to answer the question: which is more profitable to buy more and less often or a little and often? The answer will depend on what the volume of purchases is and on whom the transport costs are borne by the retailer or supplier, as well as on what the warehouse's capacity is in terms of area and what the cost of storing goods in the warehouse is. For example, if the delivery is carried out by the supplier at his own expense, of course, it is more profitable to increase the frequency of deliveries so as not to store the goods at home.

 

Author: Svetlana Michan

Photo: Shutterstock.com

 

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