Focus on Winners

At Channelier, our distribution automation platform, we work with a lot of medium size firms. Most of them have singular belief. They believe that the best way to achieve more sales is

1. get more channel partners
2. get more customers and
3. get more products in  portfolio

More the merrier is the mantra. But is it correct?

When I was running my supermarkets, I was given the same gyan by vendors as well as customers alike - you should keep more variety, more is better. I had over 4000 SKU’s. My vendors had a portfolio of over 10,000 SKUs, and expectedly, they wanted me to keep them all. A senior RSM from a multinational FMCG firm visited my outlet and prophesied,”I guarantee that if you keep our entire range, your sales(from our brand) will go up 20% without doing anything. Even if you keep it in single quantity, keep every variant, otherwise how will you know what sells.”

I on the other hand, was not enjoying managing such large number of SKUs. The pareto principle was at play in its full glory - 86% of my sales came from 20% of variants. I decided that I can always grow Sales later, but in order to get my processes in order, I need to reduce the number of variants. I decided to keep only 800 top-selling SKUs, even if it meant that I’ll lose 20% of my sales. A little micro-analytics later, we printed a list of 750 SKUs by vendor.

My vendors were appalled. One salesman commented, “ Why do you need a 4000sft store to keep 20 products(his shortlisted SKU’s)?”. One month later, I relooked at numbers. On expected lines, admin and product management costs were down by 60%. Since we had limited range, the stocking in each variant increased. As a result, in an unplanned benefit, stock-outs were down by 80%. There is more, billing times were down by 10% and  average product age reduced by a month. The overall customer satisfaction was up which resulted in a crazy outcome, overall sales instead of going down, went up by 15% within a month, and 25% in 3 months.

Focus on Winners

Make your best Channel partners happier. Make your best employees more satisfied. Make your best customers delighted. Life is short, you cannot make everyone happy, so don’t even try.