Discounting programs are often overshadowed by primary sales, which is understandable given that primary deals usually yield higher profits. That being said, a tremendous amount of money is typically invested in primary sales across personnel, customer relationship management systems, communication tools, forecasting platforms and more.
Discounts, on the other hand, often lack the attention they deserve. They’re frequently run by individuals with very few tools at their disposal. In fact, in a survey of liquidation professionals, 63% of respondents said that their team only has one person or no one dedicated to discounts.
This can leave your discounting program open to significant disruptions if that person has to take a sick day, goes on vacation, or even retires.
The issue of leave
Everyone deserves a break from time to time. The key is to plan appropriately for that break so that business can continue as seamlessly as possible. In the case of a closeout specialist, this can be challenging without the right systems in place.
Imagine this scenario: Meet Jane, a dedicated team member who has been at the helm of your discounting process for years. She's well-versed in the intricacies of the system, has cultivated strong relationships with discount retailers, and can navigate the complexities of cost recovery with finesse. She has a mental rolodex of buyers, several verbal agreements in place, preferred retailers and a habitual listing process. But what occurs when Jane decides to take a well-deserved vacation, falls under the weather, or eventually enters retirement? Suddenly, the once-smooth discounting process grinds to a halt, and the potential for costly errors and missed opportunities soars.
This narrative isn't foreign in the modern business landscape. Placing substantial reliance on an individual for critical operations not only introduces operational risks but also limits adaptability and growth potential. In an age where technology is reshaping industries, banking solely on individual expertise is a vulnerability that businesses can ill afford.
When a closeout expert is absent, there’s often no backup plan at all. Because their work is so siloed, there’s often no one with the requisite institutional knowledge to step in and take over. The entirety of their role often resides solely with them, oftentimes in their head, leaving a giant gap.
As a result, the closeout cycle may be disregarded entirely when they’re out. This means products continue to age and may remain unsold, leading to a direct loss in revenue.
Vacation and sick days
This may seem like a very small problem on its surface. How much could time off really cost in liquidations? Well, let’s dig into the numbers a bit.
A year has 52 weeks. Once you factor in holidays, especially the winter holidays, that’s effectively 50 business weeks. Let’s say that an individual employee takes one week’s worth of sick days (the average full time worker takes 8, so we’re being conservative here) and three weeks of vacation. That means they’re missing four weeks out of the 50. If those closeout cycles get skipped, then right off the bat, that means an 8% reduction in closeout sales.
The thing is, that’s the best case scenario. Vacation, and especially sick leave, usually doesn’t work out so cleanly. Chances are you’ll have sick days scattered throughout the year, on unexpected days of the week, interrupting sales cycles.
The industry standard for most CPG companies is to run closeout cycles every two weeks, totaling about 25 cycles per year. A combination of one-week vacations and unexpected sick days could mean missing five of these cycles, now costing 20% of closeout revenue.
Let’s take a look at an example. Say a manufacturer has a total cost of goods (COGS) of $250 million. Even if 95% of that inventory is sold to primary customers, you’re left with 5% going to discounts, or $12.5M in COGS. Now, say your discounting program averages a 50% listed cost recovery. (Keep in mind that only 7% of companies recover more than 75% of COGS.) That means, in theory, that you’re getting about $6.25M in revenue from discounts. However, if you’re missing 20% of your cycles, that could be costing you $1.25 million. That’s a serious chunk of change to forgo.
Promotions and retirement
If an employee is retiring or leaving the role, you face even bigger challenges. Etiquette often dictates a longer notice period for retirements, sometimes several months. Still, that’s not a lot of time to potentially hire and train a replacement before the retirement date. On top of that, retirement can happen suddenly, due to health requirements, family issues, windfalls, or other unforeseen reasons.
If an employee chooses to move on to another opportunity, or gets promoted into a different role, you may only have two weeks’ notice. At a company that runs two week closeout cycles, that means you have one single cycle to try to train someone new, while also documenting all of the buyer relationships, financial history, formal and informal agreements, best practices and more. After that, you’re on your own.
Getting ahead of the problem
The key to managing a vacation or transition is to get ahead of it. Implementing standard processes, establishing a system of record, and creating a reliable knowledge base that will be there even when your team member isn’t can all go a long way in avoiding lost revenue.
It’s time for closeouts to move into the twenty-first century. (Seriously, 19% of survey respondents said they communicate with their buyers via fax, and another 13% said they only use phone calls.) With a fully digital, cloud-based platform, you can create a purpose-made system of record that houses all of your closeout sales history, buyer contact information, pricing guidelines, and more. Not only does this help with knowledge sharing, it also creates a standard process to make sure that you’re being consistent across all of your cycles and buyer partners.
Contrary to popular belief, digital tools can even decrease churn. According to Supply and Demand Chain Executive, “automation takes control of repetitive and mundane tasks that in many cases can make workers feel insignificant. The repetition of mindless work can lead to errors or delays, as well as employee burnout.” Eliminating repetitive work keeps employees more engaged and helps them feel more valuable. Plus, they can easily report all that revenue they’re generating to leadership, increasing employee recognition.
As a bonus, your buyers will have a consistent, reliable experience. That means that even if your usual closeout manager is out of the office, someone else can step in without causing any disruption to buyers. You never have to miss a discounting cycle just because someone has the flu.
By harnessing advanced analytics and embracing automation, you can bridge the gap created by vacations, sick days, retirements, or transitions. As organizations are realizing the benefits of digitizing their supply chains and operational processes, your discounting programs shouldn't lag behind. Through digitization, you can safeguard revenue, sustain buyer relationships, and empower your CPG teams to overcome challenges. When navigating the complexities of retirements, vacations, and sick days, remember that digitization is your steadfast ally on the journey to maintaining business continuity and revenue optimization.
For more on digitization, and where the rest of the closeout market stands, download our survey report, Technological maturity in the secondary CPG market.