8/22/2023 0 Comments Walmart instock itemsTo achieve maximum GMROII, the goal is to maximize inventory turns by keeping stock at the lowest levels possible. The new retail balancing act – Low inventory with no out of stocks They can empower vendors to make these decisions because they also can hold them accountable for KPIs like GMROII! This makes Walmart profitable, because they can leverage data to literally hold every one of their "partner's" feet to the fire to maximize margin, with the lowest inventory possible, to produce the greatest GMROII. They also give vendors on-hand inventory by SKU, as well as gross margin achieved, inventory turns, in-stock %, and yes, the metric of GMROII! Essentially, Walmart has created a vendor managed inventory system where they let you the supplier decide where to put SKUs and how to ship through to stores. Through Retail Link, Walmart essentially gives suppliers all of their sell through data by SKU, by hour, by store. In short, Walmart essentially gives you all of your data for your SKUs and then holds you accountable for managing them! In fact, it is almost impossible to do business at scale without being on Walmart Retail Link. If you are a supplier who has done business with Walmart, you have certainly heard of Walmart's Retail Link. Walmart leverages data to get vendors to manage it all for them! With all this size and complexity, how does Walmart achieve this return? Their GMROII is typically at the best class level of 2.0+ ($2+ returned for each $ invested inventory). Walmart typically achieves 8 or more inventory turns a year on hundreds of thousands of SKUs, spread across over 4,000 US stores. To maximize GMROII also requires aggressively managing inventory to reduce operating costs. This requires a lot of category management to ensure the right mix of SKUs with the right margin, as well as other items that consumers will purchase to increase the gross margin of the overall market basket. To optimize gross margin dollars requires having the right SKUs on the shelf that the consumer wants to purchase. Retailer profitability is highly dependent upon one key metric: GMROII - Gross Margin Return on Inventory Investment. ![]() But, retailers have to make a profit turning their inventory. ![]() And, in the case of Walmart, their large stores stock as many as 200,000 items! It is this breadth of in-stock selection that serves as a key Walmart differentiator, particularly in grocery and consumable items. Indeed, inventory is often the 2nd most expensive thing for retailers to operate. What we as consumers don't realize or appreciate is that keeping large numbers of items in stock can be very expensive. Come meet Chris and our other great retail educators at this year's Retail Customer Experience Executive Summit! Registration is now open, and early bird pricing is in effect!īreadth of a massive assortment requires mastery of GMROII The result is that while Walmart might not "always" have the absolute lowest prices, consumers trust that they will have one stop shopping with everything they need at very good prices. Walmart's low prices come through mastery of supply chain and being able to drive out costs, while maintaining shelf stock on a massive assortment in store. In the case of Walmart, they have made their brand and fortune synonymous with breadth of assortment and low price. To thrive with consumers, a retailer must standout on at least two of these dimensions. In terms of a retailer's brand and value proposition, there are 8 key dimensions where retailers can differentiate their value to consumers: In this highly competitive omni-channel world, retailers truly must differentiate or die. Yet, if there is a secret sauce that makes Walmart successful, it is mastery of using data to hold suppliers accountable in managing its inventory and in-stock rates for them. And, Walmart is never one to rest on its laurels! We've posted previously about Walmart's Lab, ventures in social media, and its own initiatives in "long tail" e-commerce. To continue to grow and remain profitable is a remarkable feat given the size of their worldwide operation. But at the end of the day, Walmart is the largest retailer on the planet, and the second largest company in terms of revenue. Amazon and omni-channel are sexy topics that grab a lot of retail press.
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