I continue to observe, and to be impressed by, the diversity and educational pedigree of today’s produce buyers and sellers.
There are several sources who give visibility to today’s “up and coming” produce talent and I marvel at the backgrounds these individuals bring to their positions. I see speakers at various events whose credentials bring a great deal of numerical acumen to their respective companies.
And when you examine the financial performance of most food retailers, they’re definitely delivering financial performance.
But as a merchant, I continue to be puzzled by many things I see at retail, and wonder how these young, talented individuals are being mentored in the nuances of retailing fresh fruits and vegetables.
There seems to be a homogenization of merchandizing schemes with all products in the store, and this is particularly evident in the large, national or multinational retailers.
Back in the day, we used to say, “a can of beans is a can of beans,” meaning that merchandising fresh fruits and vegetables was not the same as merchandising dry grocery. It takes a different skill set, which historically was mentored to young buyers and sellers by more seasoned professionals.
Most often, these mentors had operational as well as procurement experience, and could pass along various perspectives that could temper buying decisions.
Produce merchandising is as much an art as a science and this “art” can only be gained by experience. So, with that said, I offer a perspective on a particular element of produce merchandising.
Enhancing gross margin is a key driver (probably the key driver) in today’s buying and merchandising decisions. This is clearly important, but the real driver in merchandizing fresh fruits and vegetables is the concept of turns.
Produce is a perishable commodity and not a can of beans. To maximize customer experience and enhance reputation in “fresh,” grocers must compress the amount of time an item spends in the supply chain.
Ideally, an item would be plucked from a tree and handed directly to a consumer. But this is not the case with grocery stores. All time spent in the supply chain denigrates an item’s quality, and the best way to enhance turns is a concept called “retail costing.”
Essentially, the first consideration is display size and what environment the item will be sold in (refrigerated? ambient?). Next, what retail price is needed to turn the display in optimum time, given its respiration (i.e., sweet corn needs to move faster than apples). Then, apply margin needs, and this is cost to make it all happen.
Yet this is basically the opposite thought process of today’s buying offices: they get a cost, apply the margin, then set the retail.
So when I go into stores and see a large display, I see the retail is such that the rate of sale is not compatible with the size of the display—and the item starts looking “tired.” Worse, the eating experience declines substantially.
This does nothing for repeat sales, not to mention the store’s image for fresh. When I see this happening, I’m sure the buyer has a good margin on the item, which is why the store wants to push it. But without the right retail, they sacrifice turns.
One last thing regarding turns: so often people think the biggest expense in a retail operation is labor.
The truth: the biggest expense is the cost of inventory. This is what makes produce such an important part of the financial makeup of a retail company. In the produce division, inventory generally sells long before it’s paid for (which is loved by CFOs).
So, whether you’re a buyer or a seller, don’t let the importance of “turns” get lost in the drive for maximizing margin.
