The CPG Guys’ Post

Transcript

Welcome to another edition of the Gilmore Gonna Comment part of the CGI podcasting platform. I'm your host, Bryan Gildenberg. Apparently the Red Sox don't need me to play 500 baseball, so they can do it all by themselves. It today's topic comments can be a relatively quick one and it's a little bit late, as seems to be the case for me at the moment. But I do want to talk to you a little bit about the idea of hitting the gym. And by hitting the gym, of course, I don't mean physical exercise, though by all means do that. But I want to talk about hitting the gym in terms of a relatively. Poorly understood metric called Jim Roy and this is a little bit of a shameless plug this week. But also I want to talk a little bit about the concept of Jim Roy at Retail Cities and my my day job. We're going to be running a webinar on Thursday at 11:00. It's about a two to three hour workshop right now. So it's booked from 11:00 to 2:00 Eastern Time, but probably won't go that long. But we're going to be running a workshop called hitting the gym or Hitting the gym, right and about understanding this metric gross margin return on inventory. And why it's so important to understanding the future of omnichannel retail? And there's three primary things we're going to talk about in that session, none of which are accounting, by the way, apart from just helping you understand mechanically how that measure gets put together, the first of which is to look at Jim Wright performance. Across a wide range of publicly traded retailers in the United States because one of the things that we've discovered is, is that Jim Roy looked at the right way, can be relatively predictive of retailers who are both improving their business and whose business is under pressure. That can be extraordinarily helpful as a watch out if you're a retail investor and that's kind of cool. But it's also it's also pretty helpful as a as a brand or an agency working with the retailer to know when their business might be because Jim Roy tends to deteriorate a little bit more quickly. And the public seems to notice. So just an observation there. Second, I wanna look at the component parts of Jim Wright to explore which ones are the most predictive in terms of performance. Because what you usually find there is that Jim Murray, which is a measure of gross margin and basically inventory position put together. So it measures sales, overall sales margin rate and inventory in one integrated measure, which you often find is that one of the biggest problems from a gym work performance point of view isn't in sales or margin, but it's actually an inventory. And the importance of inventory, particularly to those of you in the ecommerce or retail media world is clearly around the relationship between in stocks and media performance. And whether that's within the Amazon ecosystem that the minute you go out of stock your media investment sub optimizes quite quickly or just simply the as a retailer trying to understand that. The minute I go out of stock today, platforms like like Crisp and Hyphen allow you to see that the retailer is out of stock in particular areas and allows media agencies to suppress media spend based on in stock conditions, which you quickly realize is that the ability to stay in stock is an integral part of an integrated retail. Commerce conversation. So we spend a little bit of time talking about that and how to think about that. When you think about the when you think about that and then you try to translate that into a commercial plan and some of the some of the strategies that are required in order to be able to do that. I've had the pleasure of being part of the Iep's working group on the future of Instore media and one of the things that that that report will highlight when it comes out is the importance of understanding the mechanics of how in store merchandising. Conditions were arrived at and how in store merchandising decisions are made because there's the trade-offs involved in that in terms of what needs to be on the shelf, how much it needs to be on the shelf and where it needs to be. All of which are foundational to the retailer's efforts to support basically their their Jim Roy returns. And in the end, every merchandising function in the world is compensated to maximize Jimboy, whether they realize it or not. And that's sort of the third reason I want to talk about this. Whether it's the Walmart buyer scorecard, which is basically Jim Roy decomposed into independent variables or another retailer where you're working with one team that's responsible for sales and margin another that's responsible for inventory. In the end, to try to understand the commercial objectives of a retailer and a brand, it can be the best simple heuristic to understand how that overall business is performing and what are the variables and levers that we pull in order to maximize it. And then finally, most specifically, what's the theme? We do. What's the trade off it causes in another one of the variables. There are inevitable tradeoffs in these things between, you know, the classic merchandise and heuristic of the fast nickel versus the slowdown is basically an articulation of Jim Roy. Do I want to maximize sales at a lower margin rate or have a higher margin rate but lower sales? You know, when I put together a category, what's the importance of giving holding power to major national brands versus putting items on the shelf that may not sell as well, that may constrain some of my selling ability, but that that have higher margin rates. All of these conversations get encapsulated within a single measure. So that's the kind of thing we're going to talk about this. We're going to the operational implications of Jim Morris, well, it's predictive power for understanding the future retail. So I hope that this hitting the gym session has been useful. Spring Gilbert for the Gildenberg Omni comment, the CPG guys, thanks and have a great weekend.