CGTA RETAILERS’ SATISFACTION WITH NEW PRODUCTS PLUMMET…vendors offering new collections rewarded.

The recent CGTA annual report ominously warned, “Buyers who were very satisfied with new product introductions fell … to 26 per cent.”

Basically 75% of retailers are unhappy with the main reason you are a wholesaler..to bring them new products they can sell.   

And as we noted here, retailers rank wholesalers as a bigger problem than big-box retailers.    

The report sadly added,  “Research conducted with attendees… demonstrated that the number one reason retailers attend gift shows is to find new products.  However, this is the one area buyers continue to find disappointing.    Approximately 85 per cent of buyers that attend the gift shows agree they want to see more new product introductions.

In this post we’ll show you how one wholesaler,  after several years of flat sales, re-vitalized their business by focusing on new product development.  And as an added bonus they were also able to reduce their overall inventory levels as well.

More products and lower inventories…now that’s how you compete!

NEW PRODUCTS OUTSELL OLD BY A WIDE MARGIN and reduce inventory levels!

When you do what your customers ask, you are rewarded.   The problem is, many wholesalers don’t have the tools to analyze their data to hear what their customers are telling them.

If they did, they would know that new products outsell older products by a wide margin..roughly 3 to 1.  

Here is an example from a $3M wholesaler who experienced several years of flat sales and was struggling with slow turning inventory.

We took a look at the point in time just before they began to increase the rate of their new product introductions.  Here is what their sales looked like half-way through their year:

Obviously they were headed for another disappointing year.  When asked why sales were flat, the owner’s answer was, as usual, “the economy is tough and our retail customers are struggling.” (We know this couldn’t be true because retailers were doing well)

He also added, “I don’t think my sales reps are getting to their accounts as much as they should.”

Not satisfied with “the economy is bad” argument we delved a little deeper.  We segregated the sales between newly introduced and existing products.  Now we could clearly see the solution taking shape:

New products outsold older items by 3 to 1.  This vendor’s problem wasn’t that the economy was poor or that the sales reps didn’t work hard enough; there simply weren’t enough new products in the line.  In fact, just a few more new additions would have resulted in a sales gain.

We then added inventory to our little analysis and here is what we saw:

When you look at the results this way, it quite easy to see what’s happening to the business.  The entire inventory was tied up in the slower moving stock.  Not only do newer products have higher sales, they move faster.
 

This vendor, like many in our industry, simply never looked at their data this way.  Many vendors fail to realize that yesterday’s best-sellers are tomorrow’s dead stock. Customers always want new products in their stores and they will reward vendors who can provide them with fresh product every season.

Why was this vendor blaming the economy and pointing the finger at sales reps for his flat sales? Because it’s the easy answer.

However by doing a little bit of analytical work, by segregating the sales and inventory between new and existing product , we were able to show him what he needed to do.  Subsequently, this vendor increased the rate of new product introduction and was able to break through his sales plateau.

HOW TO INCREASE NEW PRODUCT INTRODUCTIONS WHEN YOUR CASH IS TIED UP IN OLDER INVENTORY?

That’s the big question isn’t it?  And it’s a serious issue facing many wholesalers. 

Introducing new products each season takes a lot of resources.  And because it’s difficult to know exactly what will sell, a few missteps can have a vendor choking on inventory.

There’s a fairly simple way around this and this is where having a good sales team is a real benefit to a wholesaler.  We’ll tackle that one in a future post.

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