An empty shelf space generates no revenue

Posted by Tom LarsenJan 22, 2014 Operations, Organization, Planning 0 Comment

The greatest risk a retailer faces is an empty shelf space on their sales floor. Paying rent for empty shelf space is not a growth strategy for retailers. Even slow selling product on a shelf is earning some revenue, but, no stock on the shelf earns a big goose egg every time.

So, the greatest risk to a retailer is to be aligned with a vendor that does not deliver on time, delivers late, ships short or does anything else that is not going to keep the shelves full with product. Fail to execute and the retailer is left with all the risk.

What if there was punishment for vendors that do not meet their delivery obligations (who do not execute on time and to the letter)? In the consumer product landscape there are punishments, and they can be very, very painful (read expensive).

Yet, these oversights are so common for vendors that the retail industry has setup chargeback systems to penalize vendors for not meeting the delivery expectation established by the retailer. One of the many ways a new vendor can fail. Fail to execute and you may fail entirely.

One department store retailer deducts 5% per week of the Purchase Order value from its eventual payment to the vendor for late delivery. Another electronics retailer submits all orders with a “Cancel if not delivered by” on all Purchase Orders. When a shipment arrives late, it is sent back. The entire consumer product industry won’t take new product into stores in December. And, this one is easy, there is no way a college book store can have product arrive after the back to school rush is over.

The lesson….read the Vendor Guide to be absolutely certain you can deliver to the letter, unless you are willing to suffer the consequences of elimination as a vendor. Harsh – you bet. There is a long line of other vendors with other fascinating items that can go in that empty space on the shelf. Remember, it’s all about filling the shelf space in the store.

Flawless execution receives the reward of getting paid.

Perform or perish.

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