Don't let FOMO affect your buying
Are your retail staff trained how to buy? It is likely that there is a significant difference in skills between the sales reps who are selling, and your retail staff who are buying for your store.
How do your retail staff decide whether to take the “good deal” that is being offered to them by the reps? Unless your staff have had significant experience buying for multiple businesses, they won’t have enough information to be able to assess the offer and make an objective decision.
The company sales reps are highly trained in the art of persuasion, and they receive extensive training and lots of practice. They use their instore relationship to influence your pharmacy’s stock levels of their products - otherwise they would be out of a job!
Most retail buyers rely on the supplier reps to advise them what to buy, and the reps are very good at using the FOMO (Fear Of Missing Out) to pressure staff into taking more stock than they would normally want.
How to decide
One of the best tools your buyers can employ to ensure they are making good decisions is a formula to calculate your optimum stock level. This requires an understanding of your retail stockturn.
In simplest terms – small retailers should aim for more than 4 stockturns per year. This means that they hold no more than 3 months stock at any time. However there are plenty of variations either side of this average stockturn depending on the type of product, which category it belongs to and how much profit margin it generates.
For instance – fashion products like Cosmetics and Fragrances only achieve 2 stockturns per year in pharmacies because of the wide range of slow-moving products required to present a full range. Whereas Pain Relief products typically achieve 6 to 8 stockturns per year.
Taking a stand
It is common for companies to offer stock with an instore display stand that must be purchased in full to get the best deal. These manufacturer’s stands certainly work for the supplier because they get you to take some products and quantities that you wouldn’t normally buy. Plus they ensure that these products are displayed in an off-shelf location in a high foot-traffic area.
Manufacturer’s stands can be a fantastic instore promotional tool to lift sales of best-selling brands, particularly when they coincide with a nationwide advertising campaign which creates consumer awareness and demand.
However there is a real danger that the stand will contain some products that don’t sell – and that these poor-performing products will become slow-moving or dead stock long after the rest of the stand has sold through.
I remember monitoring stands full of named novelties – such as combs, coffee mugs or toothbrushes - now sold by the 2-dollar shops. The most popular names always sold out immediately – leaving a stand full of names that would never sell. Even if the popular items were replaced and sold out again, all of the profit generated, and more, remained tied up in the stock that didn’t sell.
It is easy to see the positive sales of a few best-sellers off a stand and claim that the whole stand has been successful, but by analysing the return-on-investment of the whole range it is often clear that the only one who has made money out of the stand is the supplier.
For a complete set rules for buying best-practice – talk to our consulting team.