Retailers if you want to reduce shrink and improve liquidity try a Forward Auction

April 11th, 2017

There are so many reasons why stock is being left in the backrooms of stores across the country.

 

Todays post is by Ronald D. Southard, CEO at SafeSourcing Inc.

For major chains the liquidation of this stock in a timely manner can significantly reduce reported shrink numbers and improve financial results and liquidity.

A Forward Auction is part of most e-negotiation tool belts. Probably the most well known type of forward auctions are those run by eBay. These tools are often overlooked as a way for companies to sell items that represent overstock, out of cycle, buffer stock, new old stock and other types of inventory that has been paid for and not sold through.

Placing these items for sale on your e-procurement provider’s website so that buyers from a variety of formats such as dollar stores, liquidation companies and other overstock resellers can bid for the items can positively impact shrink.

The simple philosophy here is that getting something for inventory that has already been paid for is better than getting nothing. The biggest dilemma to this solution is that most retailers do not know what is in the back rooms of their stores or how long it has been there.

An issue the above can create is the misinterpretation that shrinkage caused by employee theft, error or other mistakes is actually higher than it is.

There are any numbers of sources that report on annual retail shrinkage numbers. It is safe to say that average shrink numbers across the retail industry has hovered around 3% for years, although you will find significantly higher numbers by specific retail industry vertical.

The fact is that for a one billion dollar supermarket company, this represents $30,000,000.00 annually. With net earnings in this vertical averaging 1%, a reduction in shrink of 33% can improve earnings by as much as 100%.

A quick hit to these numbers can be accomplished by a forward auction. What do you have to lose? Better yet, what do you have to gain?

If  you are profitable enough or don’t care about your shareholders, then  don’t bother to contact a SafeSourcing customer services project  manager. After all, shrink has not gone down as a percentage in 30 years, so most don’t seem to care anyway. Maybe we could help make you a hero. It’s just a click away.

We look forward to and appreciate your comments.

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