Single Store Owner

APR 2016

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APRIL 2016 / singlestoreowner.com / 45 includes a "current asset section" called merchandise inventory. This asset consists of goods that you own on your balance sheet date and hold for the purpose of selling to your customers. The in-store merchan- dise inventory includes the costs incurred to buy the goods, ship them to the store, and otherwise make them ready for sale. In simple terms, it's the value of all the product sitting on your shelves and in your back room that you've paid for and haven't sold yet. If your assets are tied up in high amounts of inventory, it restricts other more productive invest- ments for your store. Moving to a category management approach will help you make more strategic choices for your categories as they relate to assortment, shelving, pricing and promotion — which will ultimately im- prove the results on your income statement through increased sales, reduced cost of goods sold and/or reduced inventory. Thinking about your business this way will help you to make better choices that will improve your net profit. And again, who doesn't want that? Once you've created these category management foundations, you can start to analyze your categories and get insights to help you make better decisions for your categories and your store. SSO Sue Nicholls is founder and president of Category Management Knowledge Group (CMKG), based in Calgary, Canada. She is a speaker and consultant, working with business partners to bring category management training solutions to different areas of retailing like the convenience channel. Editor's note: The opinions expressed in this column are the author's and do not necessarily refect the views of Convenience Store News for the Single Store Owner. NACS has defined five distinct category roles in the convenience channel: destination driver, staple, niche, occasional/seasonal and fill-in. Category roles provide guidance for how you treat different catego- ries in your store. Once you understand the roles in detail, you should do the actual work of assigning roles to your categories. For example, categories that are assigned the "destination driver" role are your most important categories in terms of sales and they drive shop- pers to your store. Examples of c-store destination categories include tobacco, beer, cold beverages, foodservice and fuel. In your destination categories, you may want to offer a broader assortment of items; allocate ample shelf space (ensuring no out-of-stocks on your fastest-moving items); price competitively; and promote most frequently. You should allocate a high percentage of time and resources against destination categories. 3. READ & INFLUENCE YOUR INCOME STATEMENT As a c-store owner/operator, you need to under- stand how to read and make decisions that affect your income statement. By increasing sales or reducing cost of goods sold, you will net a larger gross margin — or money you take to the bank. Every choice you make in your store — how much product to buy, to keep as inven- tory in the back room, to price, promote and shelve your products, and what products to carry — has a direct influence on your income statement. You can influence margin in your store by: • Increasing sales through changes in your key drivers of volume and profit; • Decreasing cost of goods sold through pric- ing and promotional strategies and inventory management; and/or • Decreasing operating expenses. As a c-store owner/operator, the opportunity is to understand how the day-to-day decisions you make, and how the measures you track and/or are respon- sible for, drive the overall results in your financial statement. Because that's what you take to the bank. Something else that is not included on your income statement is your balance sheet, which A simple example of a retailer income statement. Large categories that define the image of the retailer and draw target shoppers to the store Allocate a high percentage of resources against destination categories Examples: Tobacco, beer, cold beverages, foodservice and fuel Offer competitive pricing vs. market and promotions on price-sensitive items/categories Ensure a strong assortment of items that are in-stock given the speed at which products sell DESCRIPTION STRATEGIC CONSIDERATIONS DESTINATION DRIVER Destination driver categories are your most important in terms of sales. RETAILER INCOME STATEMENT $ MARGIN Sales 5,107,410 100.0% Cost of goods sold -4,375,243 -85.7% Gross profit 732,167 14.3% Operating expenses 508,800 -10.0% Net income 223,366 4.3% Source: NACS 2014 State of the Industry

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