Forbes.com reported last week (Feb. 16) that a key factor that allowed Wal-Mart to increase its gross profit margin from U.S. operations – up from 26 percent in 2006 to 27.5 percent in 2009 – was reducing its inventory shrinkage.
“In early 2009, Wal-Mart introduced Project Impact, an initiative to remodel its stores and increase efficiency,” wrote the Trefis Team at Forbes.com. “The goal was to reduce clutter in its stores, making them cleaner and friendlier for customers. Wal-Mart has been successful in reducing its inventory size, leading to fewer markdowns and expects year-over-year inventory improvement to continue.”
The take-home message from Wal-Mart’s experience is: Systematically improving inventory efficiencies can fatten the bottom line. But the question remains: How can wireless retailers achieve this?
VMI: A Three-Pronged Approach
After 15 years of experience distributing wireless accessories, Omaha-based OFFWIRE has finely tuned its Vendor Managed Inventory Program.
Training: “We help your sales staff become more successful,” explains OFFWIRE’s Director of Sales, Kelly Grace. “We have a comprehensive training program, called Jump Start, which focuses on educating salespeople in the dealer channel on product as well as best practices.”
Promotion: “We have a strong Promotion Program, built into our VMI model,” he adds. “We work with our clients to identify areas of opportunity and provide ‘product seeding,’ which involves educating staff by introducing new items into new markets, or helping with obsolescence. The aim is to maximize client profitability.”
Risk-Free Inventory: “Fully integrated with RQ4, we have a comprehensive, 100% risk-free inventory program. We provide weekly inventory replenishment; we also request product back that hasn’t sold within 90 days; and we ensure prompt credit on the account. This eliminates our clients’ dead stock headaches and empowers them to broaden their inventory mix and selection.”
While some distributors offer a standard min/max auto-replenishment model, Grace says, OFFWIRE takes a more comprehensive approach. “We have a dedicated team for every VMI client. We have analysts that review client data by location and take into account each store’s needs, based on historical sell-through data.”
OFFWIRE communicates frequently with each client, providing a quarterly progress report that measures OFFWIRE’s VMI Program’s impact on client profitability, as indicated by their AAPPA (Average Accessory Profit Per Activation) as well as their attachment rate.
“At the end of the day, we focus on providing meaningful training, powerful promotions and risk-free inventory factor to maximize our clients’ profitability,” says Grace.
Monster Cable: Training Salespeople to Get in the Habit of Selling Accessories
On Feb. 10, Nancy Klosek of Dealerscope.com spoke with headphone vendors about their marketing, merchandising and online strategy for dealers this year.
Noel Lee of Monster Cable said his company has created programs to position headphones as high-profile products, presenting them not as accessories but rather as “the new loudspeakers,” taking them off wall hangers and displaying them in glass cases, more central within the store.
Like OFFWIRE, Monster considers the importance of training salespeople to push these high-margin items. “In training, we feel people aren’t taught how to properly present headphones,” says Lee. “We believe in doing training on headphones, just as we do training with cables and power management products. We’re taking our M5 approach to headphones to train on how to properly present headphones. We’re going to pump headphones up just like with did cable and power.”