The original article ran in the January 2006 edition of InStore Magazine. The article can be found at http://www.instoremagazine.com/instore/editorial_detail.asp?eid=1135&iid=90&cid=96&wid=0&text=%&from_page=1
“WHERE’S THE BEEF?” “Got Milk?” Famous catch phrases of the past 20 years. After this past selling season, a new phrase has taken the retail jewelry market by storm, “Do you stock balance?”
It sounds like a simple “Yes” or “No” question. But it’s not. And the reason is that a lot of retailers don’t understand what stock balancing means or how it works.
Stock-balancing is not a one-sided agreement designed to protect the retailer and leave the vendor with all the risk. Rather, it’s a dance between partners. The retail environment has changed. In the past, it was vendor-sells-retailer, retailer-sells-product, retailer-pays-vendor. Repeat until rich.
But today, many retailers expect the arrangement to play like this: vendor-sells-retailer, vendor-makes-sure-product-sells, vendor-takes-back-what-didn’t-sell, vendor-replaces-with-top-sellers, and finally, retailer-pays-vendor.
But a lot of suppliers aren’t willing to dance that dance. In fact, there are about as many different approaches to stock balancing as there are vendors. However, there is one thing that just about all of them will agree upon. If the retailer has reordered his hot-sellers during the year, there is less objection to stock balancing. Why? Let’s look at the numbers.
If a retailer has an inventory level from a vendor of $10,000 and maintains that level throughout the year, it would mean, on average, that $10,000 in inventory represents $20,000-$30,000 in business with that vendor during the year. With such sales levels, there should be no problem with the retailer asking for a 1:1 exchange on that inventory that didn’t sell during the year.
I had a retailer stop by my booth during a recent show. She was so excited to show me the sales reports produced by her new computer business system. I was impressed. But then, she turned to the page with her inventory and asked me to stock balance what she had left.
As I flipped through the pages, I came across what had sold during the year, which had been far more than what was left in inventory. So I asked her about her reorders. She answered that she wasn’t making any at this time — she only wanted new jewelry via stock balancing. So I told her that it would be a 3-1 exchange. She was not happy until I explained my reasons — the same ones I wrote above. She was only focusing on what jewelry of mine was left in her inventory and not what jewelry of mine was making her profit.
What I’m going to say is going to shock some of my friends in the retail side and upset my fellow manufacturing owners. Companies like Abbott Jewelry Systems and Focus Management have it right. Okay, I said it. Retailers should liquidate their slow-sellers, and vendors should be willing to help. However, retailers should also constantly be re-ordering what is selling for them. And that’s the part of the equation that some retailers forget to put into action.
If a retailer reorders inventory throughout the entire year, there’s no reason a vendor should refuse a request to stock balance against new styles. So, when a vendor is asked, “What’s your stock balancing policy?”, he should come right back and ask the retailer, “Well, what’s your restocking policy?
Unlike those other catch phrases from the beginning of the article, “Do you stock balance?” is here to stay. But, retailers and vendors have to learn how to do a slow dance without bruising each other’s toes.
Jeff Unger is president of B&N Jewelry/Britannia Bridal of Marietta, GA. Contact him at (800) 358-6223