WHY YOUR BESTSELLERS AREN’T REALLY THAT POPULAR

In this post we’ll see why focusing on best sellers is a poor sales strategy.  In fact it’s no strategy at all because bestsellers are unpredictable.  The majority of sales come from those products we barely notice.

In our last blog we identified that the 80-20 rule simply doesn’t exist for CGTA wholesalers.  It’s an important factor to understand so we’ll elaborate more deeply here.  

WHAT IS A BESTSELLER?

Well it’s quite easy to define.  It’s those products that are purchased by the greatest number of customers.   If 100 customers purchased an item it’s more popular than a product purchased by 50 customers.

Few vendors we have encountered actually count the number of customers who actually buy an item; they simply look at the total sales.   This is unfortunate because it’s a simple, effective method to forecast demand.  Because vendors neglect this step  they often have large mismatches between supply and demand.  Another way to put it is they back-order many more popular items while they have a warehouse full of products that don’t move very quickly.

RESULTS FROM CGTA VENDORS

The following chart is a composite of data from giftware wholesalers and we’ll call it EXAMPLE CORP.  EXAMPLE CORP has:

• ·         1500 customers
• ·         Carries 2500 products
• ·         Annual sales are $5M

We’ll take all of EXAMPLE CORP’s products and identify how many customers bought each item.  Here is the chart.

(click chart to enlarge)

We can see that the bestselling product was sold to a little over 15% of the customer base and the worst selling product to about 2.5% of the customer base.  That means 225 customers (1500 customers x 15%) bought the item.  Now let’s assume the item was a $10 candleholder and each customer bought 2 units.  The total sales for a best seller can be calculated to be $4500 (225 customers x 2 each x $10).  It’s not a particularly impressive sales total for a bestseller!

In fact to generate $1M sales you would need 222 products like this. So to generate $5M you would need 1100 products and each of those would need to be a bestseller.

Few if any CGTA vendors would be able to do this. (Note: this example excludes sales to major accounts because the sale of a single item to these accounts skew the data)

Now when we add a little more information we see the surprisingly small impact bestsellers have on EXAMPLE CORP’s overall sales…and how important the "non-bestsellers sellers" really are!

THE 80-20 RULE IN PERSPECTIVE

Now in the chart below, the top 20% of products would be the 450 best selling products out of a total of 2500 products.  

(click chart to enlarge)

We can see they accounted for 40% of total sales and not 80% as the rule implies.  And by looking at the second chart we can also see:

 the “non-bestsellers” account for a whopping 60% of total sales($3m out of $5m).  And it took over 2000 products to accomplish this.

Now imagine if the vendor decides these “weaker” selling products should be eliminated from the product line.  The result would be a 60% drop in sales! 

PRODUCT BREADTH IS KEY

The obvious conclusion from the data is that product breadth is a key sales success factor.  Obviously the more items you can sell the higher your revenues will be.  But having more products creates two problems for many wholesalers:

• ·         more products means more inventory to control and manage
• ·         how do you focus sales reps on items that aren’t bestsellers?

Several wholesalers have successfully navigated through these problems.  In fact they have managed to increase their product offerings while at the same time reducing their inventory investment and improving their order fill rates!

We'll take a look at how these wholesalers accomplished this in future posts, but with trade shows upon us we'll turn our attention to the trade show season.

CGTA: CONSISTENTLY STABLE!

With the semi-annual renewal of trade show season upon us we’ll take a look at the incredible stability of the giftware industry.

Having worked with over 100 sales agents in this industry we've consistently noted a sense of "times are tough" among many of these sales professionals.  But the industry statistics tell a much more positive story.

We'll tell this remarkable story in the next post!