CPG Sales Strategy and Large Count Size
IN CONSUMER PACKAGE GOODS RETAIL SALES THE ANSWER IS ABSOLUTELY YES!
Despite a declining economy, those retailers who years ago adopted the original Price Club business model learned that large count product cash register sales and high transaction velocity meant outstanding cash flow and profits! Imagine having thousands of ATM machines loaded with cash. However, if no one accepts the fee for a withdrawal or takes money out, all you have is dead cash in the ATM machine and you LOSE money on the lease fees. The same business model applies to today’s Channel supply chain retail environment. Your inventory is the cash and the size and speed of the retail transaction ultimately determines what is called “PENNY PROFIT” and cash flow. If you’re not a believer yet, just research the price of stocks like Costco and Wal-Mart/Sams.
Busy consumers who are working parents have increasingly disliked the “shopping experience”. Why do busy working mothers stop at their local Walgreens or CVS to buy diapers or milk at a higher price, rather than stop in the local Mass or Grocery Store with better prices? CONVENIENCE. Sam Walton had one of his early consumer mission principles ingrained in every (I mean every) one of his employees from CEO to associate “the way to succeed at retail long term is to eliminate the aggravation of consumers doing business with Wal-Mart”. This principle is still true today for any leading retailer. Promoting and selling large count packs means higher cash register revenue sales, fewer out of stocks in home (more consumption) and fewer retail store trips which will ultimately enhance the overall shopper experience when they do shop, provided the right mix of product is available.
Club stores like Costco and Sam’s use to be called “CATEGORY KILLERS” by most of the grocery industry due to their limited offerings (usually only a large size of the #1 selling brand in each category) and incredibly low prices per unit. They didn’t charge slotting, ad fees, plan-o-gram and so on. They wanted the absolute best cost from the manufacturer and they passed the saving directly to the consumer. Those leading grocery retailers who caught on early are thriving versus their competition. To get into Costco a single item has to exceed $2,000,000 in retail sales per year. For that large count packing the manufacturer will have its product sold at 14% above cost. The consumer wins and the manufacture does too by selling two times the product per transaction and cash flow for the manufacturer and retailer is optimized.
The average grocery store cash register market basket per consumer shopping trip use to be in the area of $28 to $38 while club stores were averaging $178 and up per shopping trip. Consumers see shopping club stores as a “shopping experience” and often take the whole family. Just for young or large families? No. Demographics are increasingly favoring older people who also enjoy the shopping experience. The fact club stores only carry large count sizes reinforces what most consumer’s prefer, and more importantly, EXPECT.
Yes, size does matter. What’s in your wallet and stock portfolio?
To Your Success!
Gary Pawlovich, Executive VP of Business Development
The Geisheker Group marketing firm
(920) 265-9500
"We don't help you compete, we help you dominate!"
Labels: consumer packaged goods, CPG, retail marketing, retail sales
posted by Peter Geisheker @ 9:35 AM
0 Comments
Links to this post
