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Buying Smart.

At a time when all convenience retailers are looking for ways to increase the profitability of their store, too many operators are still focusing their attention on buying at the lowest possible cost rather than making sure that they are “buying smart”.

In all my years in the retail business, I have come to believe there are two truisms that are important and that are at the core of the need to “buy smart”:

“Your job as a retailer is to buy and then sell what your customers want to buy, not what you want to sell”.

“You make money when you sell not when you buy”

What is “buying smart” and what are the key activities that you must undertake if you are going to buy smart?

  • You must have a good system in place to be able to accurately count what you have in stock, to know what you ordered last time and to know what you have sold since you last ordered. This means having an organized stock room, an organized procedure to count and to record what you bought, and knowing what you have in stock and what you sold.
  • Your buying must be an organized activity, carried out at the same time each week and in which you know exactly what you need to buy to satisfy your customer’s needs for the coming week. ( too many retailers don’t take the time to plan) Think about the job of shopping for your household grocery needs…do you make a list of what you need between now and the next time you shop and buy only those products, or do you shop on a whim and by impulse? (Supermarkets love impulse shoppers because they buy things they don’t need.)
  • Your signal that you need to buy a product should not come from discovering you are out of stock (having missed sales), but by knowing what you sell on a regular basis, what you have on hand, and what you need. In addition, although your expected need is based on history, (what happened last week), successful retailers also anticipate changes in need and plan ahead. (Holidays approaching, changes in weather, local activities, etc.) 
  • Where you have direct-to-store suppliers, are you relying on them to tell you what you need or are you taking an active role in the ordering process and asking questions to make sure you are receiving the stock you need. Remember, the direct to store sales rep may have other motivations for selling you products other than looking after the needs of your customers. As a retailer, you must never loose sight of the fact that it is your store, your customers and your inventory dollars, so you have a vested interest in making sure that you are getting the “right product”, in the “right quantity” and at the “right time”.

Buying smart in the convenience business also usually involves questions about where you buy; i.e. from a full service wholesaler, or from a cash & carry or warehouse club. Although you may occasionally need to use a cash & carry on an emergency basis, it has been my experience that virtually all successful retailers use a full service wholesaler to supply their cigarettes, confectionery, snacks, beverages, general merchandise etc on a regular basis. Why do these successful retailers use a full-service wholesaler for as much of their buying as they can?

  • They value their time and they realize that using a full-service wholesaler so they can spend more time servicing the needs of their customers, looking after their store, and supervising their staff is a more effective use of their time.
  • They realize that full service wholesalers are more consistently in stock of the best selling products that their customers need.
  • They like the idea that the more they buy from one source the better records they have of what they bought. (Too many independents who buy from multiple sources lose track of what they have bought.)
  • They realize that by organizing their buying, they can more consistently be in-stock of the best sellers and they will lose fewer sales by being out of stock. In addition, by organizing their buying they will more likely order what their customers want to buy and not buy something they don’t need on impulse.
  • They realize that by having an organized buying system they can operate on less inventory investment, turn their stock faster, have fresher stock, and have less need for backroom storage.

As convenience retailing becomes more competitive and complex, an increasing number of retailers recognize that “buying smart” will enable them to run a more effective and professional retail store and to be more successful.

Hugh Large & Associates Inc.
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