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Discipline. Vigilance. Training. A new recruitment slogan for the United States Army? Not exactly, although the words do apply to hard-working leaders who issue orders and to troops who track the missing in action.
These are the watchwords for convenience store crews in charge of keeping stock — the right mix of products at the right time — on the shelves.
Retailers and suppliers agree that a critical component in winning the highly competitive convenience retailing game is top-notch category management, and some agree that individual c-store chains, if not the industry as a whole, have improved performance on staying in stock in recent years, with advances in scanning and automated inventory management playing a large role.
And most agree that nowhere in the store is training, discipline and execution put more keenly to the test than in the cooler, where a huge portion of in-store sales originates and where a flood of products vies for limited space.
"The cooler is a huge money maker," Travis Sheetz said, going on to describe changes the 275-store Sheetz Inc. has implemented in its cooler inventory strategy. "We've taken a more aggressive approach, beginning with planogramming. We're running very tight inventory." Sheetz, marketing director at the Altoona, Pa., chain, emphasized the aggressive approach because "70 percent to 80 percent of sales growth comes from new products."
Sheetz's words are backed by action. The chain eliminated a soda door from more than 100 stores, so that space allocated to non-carbonated beverages now exceeds carbonated. The average Sheetz store has nine cooler doors, he said, although a new 4,700-square-foot store in Medina, Ohio boasts 20 doors.
Pleased with sales performance in packaged beverages since the cooler realignment, Sheetz acknowledged the move created a susceptibility that requires increased watchfulness. "We have to stock the carbonated door more frequently now. We are more vulnerable to run out of things like 20-ounce Mountain Dew. We have to watch it much more closely," he said. "On the other hand, it opened up space on products where we were running short, such as water. We were over supplied on the carbonated side and under-supplied on the non-carb side."
The chain's tight rein on packaged beverages is backed by technology. Through the chain's Radiant POS system, scanning data is collected and the LVMI system (level vendor-managed inventory) calculates replenishment orders.
The LVMI calculates according to sales, serving as a virtual reminder for store personnel. "It keeps the store in stock in those items that may not be top of mind with managers," he said.
And if there's an out-of-stock in the virtual inventory, the LVMI automatically replaces the items, said Sheetz. "That's the best thing. Managers are very in tune with high-volume items. But you can run out of certain items and never notice until a customer asks for them."
Just as the cooler is possibly the most competitive spot inside any convenience store, certain markets in the United States seem to give the idea of retail competition new parameters. Take Las Vegas, for example. Green Valley Grocery's Rick Crawford explained. "This is a brutal marketplace. In this market in the last five years, we have gained a half-dozen hypermarkets, 30 to 50 brand new supermarkets, 200 convenience stores, and about 100 new drugstores. It's extremely important that you operate as efficiently as you can. If you are operating at 85-percent capacity, by being out-of-stock on 15 percent, you're not going to have a happy year." Crawford added, "We're still growing at the rate of 60,000 people per year."
Crawford battles out of stocks with the aid of his sons, Ed, who is general manager of Crawford Oil Co., the largest Shell wholesaler in Nevada, and David, marketing director of the 24-store Green Valley Grocery, along with the rest of the team. "I'm blessed with some really good people, who continually work on not just in-stocks but other things. We're trying to bring our managers along to operate our stores as close to 100 percent in-stock as possible."
Two key pieces in Green Valley Grocery's strategy are forecasting and training. Forecasting in Las Vegas means weather. "It's 105 degrees today," Crawford said on an early June day. "Thirty days ago, it was 75 degrees. But it'll be in the hundreds until late September."
The challenge in the Southwest is that the temperature spikes. And when the mercury soars, so do sales in cold beverages. Being prepared for jumps in demand, and at the same time planning to ease inventory levels toward the end of the year make up the challenge of convenience management for Vegas operators.
Crawford added, "Every day training is an ongoing issue. We're always training our managers to do good human resource scheduling" so that the store is covered during delivery times.
A recent trend in inventory management is SKU rationalization, or cutting down inventory levels. But according to consultant Rich Flask, there's a big difference between SKU rationalization and effective assortment. "You see a lot of rationalization, but not a lot of effective assortment," he said.
Flask, a partner in The Partnering Group, based in Laguna Niguel, Calif., said a few c-store chains have made impressive progress in effective assortment. He cited 7-Eleven, Circle K, Wawa and Nice N Easy.
"To develop efficient assortment is not an easy thing," he conceded. "You have to know your customers, your competition and the market."
His group proposes a six-step procedure, firmly grounded in quantification. First, operators must determine what the right market coverage is. "Market coverage means having the SKUs required to achieve a certain percentage of sales with a certain percentage of SKUs. It means having a real good handle on who your customers are and what they want." In addition, the category role and strategy have a big impact. For example, certain categories are destination categories.
The second step is to delete products that do not perform according to the retailer benchmark, and to validate this action. "You actually use a little chart," he said. "Suppliers give this kind of information. At some point down the page, you'll be able to draw a line, and delete products below a certain point." Naturally, there will be borderline items that may require some debate among managers. Next, add new items not in the current assortment. After finalizing the process, quantify the inventory strategy. What will the assortment mean in additional sales and profits?
The category's role in the store plays a big part in assortment strategies, and so does the way a retailer defines a category, according to Flask.
For instance, at Sheetz, single-serve milk falls in the beverage planogram, treated like any other single-serve beverage, including water and juices. Meanwhile, take-home milk stands as a grocery staple. As for managing the two faces of milk, Sheetz said, "We have one dairy door for take-home, and our dairy supplier manages it, but we planogram the single-serve side. We have to balance milk with waters and other single-serve products. It's based on the equation of total sales divided by total space. In the past, however, milk was given two doors and left alone."
The question of single-serve milk's place is not a small one. At Sheetz stores, approximately 20 percent of in-store sales come from single-serve beverages, including milk (but excluding beer).
In any combat mission, inevitably one or two soldiers rise above the rest in bravery and skill. No doubt most retailers would agree the good soldiers of recent years in the cooler are bottles of water, which seem to perform tirelessly. And then there are the mavericks, hot-doggers who seem invincible, despite the tough competition, such as Red Bull. At Sheetz, the stars of the moment are kids' products: Bug Juice, Kool-Aid Burst and In-Zone's BellyWashers. Re-engaging after an initial retreat, the carbonated category has launched several new products. "Vanilla Coke is doing very well," said Travis Sheetz, citing one example in what will be an enduring campaign.