Ditch Money Losers and Free Shelf Space for Profitable Lines

Sep 10, 2019

About

Store: Northampton IGA Plus Liquor
Location: Northampton, Australia
Owners: John, Maree, Richard and Kerry Hasleby

Manager: Graham Stonehouse
Annual Sales:
$6 million
Size of store:
11,000 square feet

Strategy

About six years ago, I noticed a growing number of deleted lines taking up valuable shelf space we needed for the never-ending new lines that continue to come onto the market. I thought, "Why are we waiting for these old items to hopefully sell through? Why not reduce them and try to get them out the door quicker?"

How it Works

We were already getting an electronic report from our distributor with their list of price changes, cost changes, new lines, deleted lines, and upcoming promotions. The problem was we weren't using it to take action, so our dollar investment was trapped in low performing SKUs when it needed to be redeployed for better performing SKUs.

That's when we started to pay special attention to the deleted lines report. If we see that a line that has been deleted from the wholesaler’s distribution is moving slowly in our store, we go ahead and mark it down to just above cost so we can clear through stock quickly and free up valuable space for items that will move more quickly and at a higher profit margin.

For example, we used to stock 500ml olive oil, which came in cases of 12. Looking at the last six months, we saw we had only sold two units at our normal selling price of $9.14 (a 30 percent gross profit). That equals $18.28 in the register or $3 a month. By reducing this item to $6.50 at 12 percent gross profit, we were able to sell the remaining 10 units in eight weeks. That equals $65 in the register in a two month period, or $32.50 a month.

Why it Works

For Our Shoppers

Gives customers continually new offerings. By freeing up shelf space so that we can try new lines as soon as they become available, it allows shoppers to try these new items as quickly as possible.

Provides a fresh look. It also keeps the shelves looking fresh, with new items hopefully standing out.

For Our Store

Frees up valuable shelf space. With so many deleted lines taking up valuable shelf space and numerous new lines coming onto the market, we need to sell those deleted lines quickly to make room for the new, more profitable products. 

Minimal time expenditure. Depending on store size, it shouldn't take more than one hour a week to maintain the process. Initially it could take some time to go through the store and mark down any existing deleted lines.

Tactics

Go through your deleted lines report. You’ll need a distributor with the means to provide a deleted lines report. Weekly would be best, but even monthly would suffice.

Print off new shelf labels with the updated prices. These shelf labels also display the order code from our distributor or "DELETED" if we can no longer order them.

Run an internal report to flag slow sellers. Even if you don’t have a distributor who can provide a list of deleted lines, run an internal report from your back-office system to flag slow-moving items. We use a system that allows me to print off a report for any department in our store showing sales for any time frame and then will rank them from least sales to most sales. Very quick and easy to see what is selling and what isn’t.

Pro Tips

Watch for reinstated items. The only glitches I have encountered are if Metcash sends down an item on the HOST file as a deleted line one week and then reinstates it the next week. It doesn’t happen very often, thankfully. However, if this does happen, it is easy to remove the markdown promotion from the item and go back to selling the item at full margin.

Don’t confuse sales results of new inventory with slow movers on your internal report. You have to be wary of new items that have just come in as these items will show up on the report.

You May Also Like

These Stories on Best Practice

Subscribe by Email

Have a best practice of your own? We want to hear it!

Submit Best Practice