Under New Management
by Edward C. Taylor
February 1, 2014
Careful category management can help retailers get to the heart of what can make their businesses thrive or tank.

 

 

Category management concerns every aspect of how a retailer handles each major group of products in the aquatics category. There are many factors to consider when managing the segment—including everything from where the products are placed to how much space is given to a category to how often they are ordered. However, among the most important things to note about category management is that some products require more attention than others.


Livestock, in particular, demands a great deal more time and effort to stock properly than any other category of aquatic goods. The larger the aquatic-life inventory, the more challenging it will be to manage. It pays for any store to have more personnel working exclusively with livestock than any other product group. Retailers should not allow this segment of the store to suffer because they are unable or unwilling to dedicate the appropriate workforce to the maintenance of the livestock. This is the only category where retailers must track the sales of the items on a daily basis. While a weekly inventory will work for almost all other groups of items, sales associates should take note of all sales—as well as losses—daily in the livestock department.


Rather than asking employees to write down every purchase, there is a much simpler way to ensure accountability. Equip each person with a digital recorder that they can use to verbally list every livestock item sold. They should state their name, the item’s name, the number being sold, the price of each item and the number of the tank the item came from. For example, let’s say that Carol, the afternoon lead in the livestock section, is about to catch fish for a customer. She stands in front of the tank, turns on the digital recorder and says, “This is Carol, catching six black tetras from tank number 37. The price is $1.80 each.” Or, if someone is doing a “dead run,” they might say, “This is Nick, removing two dead tank-raised clownfish from tank number 14. The price is $19.99 each.”


This strategy is not too different from the inventory method used by many large stores, most notably in electronics departments, where every salesperson is equipped with a mike, a recorder and a headset connected to the warehouse or an inventory clerk. It works well in either venue, and for the pet shop, at the end of the day, you have a record of everything sold.


Of course, it’s going to be someone’s job to transcribe all this information. Who better than a register worker or, perhaps, the closing lead in the aquatics department? What a valuable reference tool information like this will become. No one will need to walk through the tanks, checking to see what fish are in short supply. The data will be right there. It will also be much more accurate than any other method of inventory evaluation.


As for dry, hard goods, many retailers may have a firm handle on the management of theses goods, but there are still a few tricks that most people don’t know. For example, which scenario is the most conducive to selling hard goods? Do you make customers walk through the products before they reach the livestock, or do you position the livestock so that customers must walk through aisles of fish before they reach the dry goods?


The answer is that most livestock, the bulk of your tanks, should always be at the rear of the store, for several reasons. First of all, tank maintenance is essential, and quick and easy access to water, utility sinks and back doors will make the job more efficient. Placing a few display tanks near the front entrance is a great way to draw in customers. However, when people are visiting you to look at the livestock, they don’t care how far away the fish are. If they happen to spot a product that catches their eye, so much the better for them and you. The best items to put on the aisle leading to the fish are the ones that people don’t think about very often. I suggest things like heaters—every day someone will need a heater—siphon and refill hoses/equipment in kit form and unusual things that are not necessary but that an aquarium can always benefit from, such as UV-sterilizers, air pumps and sponge filters. That’s right—these air-driven filters are perfect for small tanks used to raise juvenile fish and house specimens recuperating from disease or injury. People frequently don’t even know there is such a thing.

 

 

Controlling Inventory
Inventory control is another critical element of category management. Let’s say I walk into a store looking for protein skimmers, just to discover it only carries one brand of skimmer—the one the store gets a deal on. However, I’m looking for a different brand, and this retailer does not have a single example. He tries to talk me into the one he carries, but I know better. This is extremely short-sighted category management.


If you are going to have a decent marine department, you need to offer customers at least a few choices when it comes to something as critical as protein skimmers. The same applies to sumps or wet-dry filters. Yes, they are expensive, and it’s going to tie up some of your capital to stock a number of units, but it’s the only logical course of action. People looking for a sump are very likely to purchase one if they see an example that matches precisely what they are looking for.


When it comes to category management, retailers also need to examine their ordering practices. Retailers need to ask themselves: Are my ordering habits solid or haphazard? Do I order $2,000 one week and $500 the next week? Or is it consistent? Hopefully, your sales do not completely restrict your purchasing power. If that’s the case, you are playing the game too close to the vest. You need to find a way to standardize your purchases, always adding products that sell out quickly if you have extra money available.


Let’s say you go to a trade show. One vendor is offering a deal on canister filters, but you have to buy six months worth to get the deal. This is probably a large expenditure, and unless you are absolutely flush, it’s not the best idea. If your plan is to run a big sale on these canisters, you are giving away a good deal of your profit all at once. Maybe you make a tidy profit really fast. But two weeks later, when the inexpensive filters are gone, what do you tell your customers looking for the same deal? Not everyone has money available at a moment’s notice to take advantage of a good bargain. I believe it would be better product management to reduce your normal price by 10 percent—or whatever is appropriate—and sell filters for a longer period of time at a lower price. And don’t build a giant mound of canister boxes in the store. Keep the majority of your extra items in reserve—replacing one filter at a time as they are sold.


Obviously, the products you should manage most closely are the ones that need to be regularly replaced by customers. This would include marine salt, reef chemicals, test kits, charcoal, filter cartridges and especially fish food. Even missing one fish food SKU on the shelves means someone is not doing their job properly. If you have legitimately run out of an item, that means it is selling well and you should always have excess stock to bring forward when the time comes.


There are some items that defy logic when it comes to sales in the retail environment. Right now, the major category that comes to mind is reef lighting. It’s a quagmire of products ranging from the sacred to the profane. Sacred are the regular double-lamp (T-12) fixtures using both white and actinic bulbs. Profane are the fixtures that retail above $2,000 and can do everything but kiss you goodnight. In between, are all the others: halides, halide and T-5 combos, all T-5, LEDs and the high-par super cluster LEDs with programmable light shows. There are other types as well, but my point is that the odds that you are going to have the exact fixture a hardcore coral enthusiast is looking for, at the price he wants to pay, is like winning the lottery.


Stock your reef lights for the average customers or the novices just starting out in the hobby. They will soon enough move on to bigger and better lighting or their entire setup will be on sale in the local “trading” publications. Don’t try to cater to people outside your clientele base. A store’s got to know its limitations.



Edward C. Taylor has been in the pet industry for over 30 years as a retailer, live fish importer and wholesaler, and fish-hatchery manager.

 

 

 

Asking the Right Questions


Planning on doing some category management? Here is a list of questions retailers should ask themselves while examining any given category:


(1)  Where are the products physically located in the
    store, and why?


(2)  How much space is allotted to each category, and why?


(3)  How often do you order items in the category, and why?


(4)  What is the inventory of the category, and why?


(5)  What is the turnover rate, and why?


(6)  Where do your products come from—local, national or
    international—and why?


(7)  When is it a good time to stock up on products?


(8)  Do some categories of products require more
    management than others?