Low Inventory Levels Hurting Retailer Sales But Aids Amazon
Just-in-Time inventory is hurting sales, hurting profits and enriching Amazon. Everywhere I go, companies think they are managing their inventory well, but items are out of stock and the shelves are far from full. Retailers from my little neighborhood GNC vitamin store, to big old Walmart – are driving customers away …. and right into the arms of Amazon.
A few examples:
a) I am trying to buy products at my local Publix supermarket (a huge national chain) and they are cutting the number of SKUs that they carry. I can’t get the Texas Willie’s chili mix I like – that they used to carry, or the Progresso red clam sauce that they used to carry. (No, Publix, I don’t want Bumblebee clam sauce.) I can, and do, get the chili mix on Amazon – or occasionally a trek to Walmart. And asking the store manager to get these products does not work. (Is it all about slotting fees?)
b) I recently bought a nice aluminum road bike for my son and the local bike shop didn’t have any stock and I had to wait three weeks. (Literally, the dealer had a total of 12 bikes on the shelf in a store that is at least 2,000 sq feet.) The bike shop owner said the American division of the international bike manufacturer underestimated sales for the year and didn’t order enough bikes for their dealers. He also told me that the inventory shortage was so bad that the American division was using up their profits flying bikes over from China instead of getting them through normal shipment methods, just so they could keep their dealers going.
c) My local vitamin store – a franchisee of the big national GNC chain – has not had the type of Vitamin C that I like in several weeks – and I made TWO failed trips to the store, despite claims of weekly deliveries from their warehouse. I had to drive 15 minutes out of my way to one of their other locations. I would have bought the GNC product on Amazon, I have done it before, but the vitamin C tablets arrived broken and damaged after all that shipment. They also only stock the Jay Robb Whey product I like in the small, very expensive size. I normally buy the bigger bags of whey which will last me two months. For that product I went right to Amazon, and click-click-click, I knew it was on it’s way and would arrive in 2 days. It did.
d) Walmart – regularly runs out of key items like toothpaste and dental floss. Just completely off the shelf. Since I will only drive to Walmart once every month or two, to restock in bulk on those staples, I really need for Walmart to have them in stock. I could easily find these national brands on Amazon and I may start doing that. Since these products have been around for decades, and have a long shelf life, there is no reason not to have plenty of inventory. I sometimes wonder if part of the problem is that the toothpaste manufacturer offers too many flavors and those flavor options are cannabalizing shelf space for their core product.
Never, in my 50+ years as a consumer have I seen such a failure of retailers on every scale to have the right product. Never before has it been as critical to have the right product when the customer wants it. It is almost as if retailers don’t care about customer needs – preferring to run an overly tight level of inventory and consider themselves well-managed. Managing like that will put a retailer right out of business and/or keep him in the poor house. Once you try to purchase a product at the local store, and can’t, why shouldn’t you just go to Amazon since you have to wait anyway? At least with Amazon you won’t get disappointed twice or three times.
Even more annoying, none of these companies are contacting me as a consumer for a survey even though they all have my email address. Management isn’t listening at the local level or corporate level. I am the kind of customer that will go to a store manager and ask for certain brands or more merchandise. It hasn’t seemed to help. Despite what top management may claim, store managers don’t seem to have any actual control over inventory anywhere.
Why might retailers be reluctant to carry more inventory? Conversations with retailers, wholesalers and manufacturers has led me to these reasons:
— follow up with this in part two of the article.
I also discuss exactly why it is so costly not to have the right inventory, and explain why it is cheaper to carry inventory now
than any time in the last 6,000 years of recorded history.
Written by Craig Aberle
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