ETD: 902 Inventory Carrying Costs; 'Viral' Advertising Growing
as Marketing Tool; Gifts & Decorative Accessories for July
E-Tailer's Digest
etd_post at gapent.com
Wed Jul 6 18:19:11 GMT 2005
E-Tailer's Digest --- Everything for the Retailer
Issue #0902 July 7, 2005
George Matyjewicz, Moderator mailto:georgem at gapent.com
Published by: GAP Enterprises, Ltd. http://www.etailersdigest.com
----------------------------------------------------------------
CONTENTS
[1] Greetings
[2] Inventory Carrying Costs
[3] 'Viral' Advertising Growing as Marketing Tool
[4] Gifts & Decorative Accessories for July
----------------------------------------------------------------
[1] Greetings.
----------------------------------------------------------------
Hi All:
We're working with a client now helping them improve profitability. One
area we are investigating is the cost of carrying inventory. We want to
improve inventory turns and to do so, we need to analyze what it's costing
to carry the merchandise. I'm sharing with you what you need to do to
calculate carrying costs.
I have always been intrigued with viral marketing. A number of years ago
we had an incubator in Atlanta, and one of the companies we were incubating
was a viral marketing company (it was way before it's time). Viral
marketing seems to be taking off now, and is something to consider.
Our friends at Gifts & Dec magazine have some information for independent
retailers - the "mom & pop" stores that make up 70% of the retail market -
you and me. Gifts & Dec is an excellent source of information for retailers.
Now, let's get to everything for the retailer.
Sincerely
George Matyjewicz, PhD
Chief Global Strategist, GAP Enterprises, Ltd.
mailto:georgem at gapent.com
http://www.etailersdigest.com
----------------------------------------------------------------
[2] Inventory Carrying Costs
----------------------------------------------------------------
When calculating the savings you can obtain by increasing the number of
times you can turn inventory, you need to include the carrying cost of
inventory, i.e., the cost of maintaining your average inventory investment
in your warehouse, storeroom, stockroom, or other location where you stock
raw materials or finished goods. How do you calculate the cost of carrying
inventory?
For years many industry consultants have maintained that determining your
company's actual carrying cost is too difficult to calculate in a
reasonable amount of time, and that you should use a rule of thumb such as
"current prime rate plus 15%."
What's included in the costs of carrying inventory?
o Cost of putting away stock receipts and moving material within the
warehouse. How much of your employees' time is spent in these activities?
o Rent and utilities for the portion of your warehouse used to store stock
inventory.
o Insurance and taxes on inventory.
o Physical inventory and cycle counting.
o Inventory shrinkage and obsolescence. You can't sell something that
isn't there!
o Opportunity cost of the money invested in inventory. How much could you
make if you were to take the money you're investing in inventory and invest
it in a more traditional investment, such as treasury bills?
o Finance charges to the bank if you are financing your inventory.
The carrying cost percentage is calculated by dividing the sum of these
expenses (along with the opportunity cost) by the average inventory value.
It is the amount of money it takes to maintain one dollar's worth of
inventory for an entire year.
You should try to determine the costs by product line or department, which
will help you determine the profitability of merchandise, and whether it
makes sense to carry these goods.
Determining carrying cost does not help you identify areas for potential
improvement in your warehouse operations. Rather it helps you identify
your costs and the feasibility of carrying goods. The more you can turn
inventory the more profit you will make.
George
----------------------------------------------------------------
[3] 'Viral' Advertising Growing as Marketing Tool
----------------------------------------------------------------
"Interruption or disruption as the fundamental premise of marketing" no
longer works, Jeff Hicks, chief executive and partner at Crispin Porter +
Bogusky, says. "You have to create content that is interesting, useful or
entertaining enough to invite [the consumer]. Viral is the ultimate
invitation."
Viral advertising is spreading as a popular, efficient marketing tool, as
consumers increasingly pick and choose what ads they watch and when.
Viral is today's electronic equivalent of old-fashioned word of mouth. It's
a marketing strategy that involves creating an online message that's novel
or entertaining enough to prompt consumers to pass it on to others --
spreading the message across the Web like a virus at no cost to the advertiser.
Marketers have caught the bug and are increasingly weaving viral components
into their marketing plans. Not only is the approach relatively
inexpensive, but also it can sometimes be more believable than standard ads.
Consumer Interaction
"People have grown increasingly skeptical of packaged, canned, Madison
Avenue-speak," says Russ Klein, Burger King's chief marketing officer.
The company has reversed a long sales decline thanks in part to its
increased use of non-traditional marketing, especially viral. It has proved
particularly useful in reaching the fast-food chain's core market of young men.
The key to effective viral: Create and execute an idea that's intriguing
enough to get consumers to interact. Burger King has used wacky ideas by
agency Crispin Porter + Bogusky to promote its chicken sandwiches and
salads online.
"Interruption or disruption as the fundamental premise of marketing" no
longer works, says Jeff Hicks, chief executive and partner at Crispin
Porter + Bogusky. "You have to create content that is interesting, useful
or entertaining enough to invite [the consumer]. Viral is the ultimate
invitation."
Hicks' agency on June 22 won the Grand Prix (best overall), as well as four
Cannes Lions, in the online ad category at the International Advertising
Festival in Cannes, France. The annual competition honors the world's best
advertising in eight categories.
Sharing the Message
Brewer Anheuser-Busch has hired Gregg and Evan Spiridellis to create Web
entertainment this summer for Budweiser. They are the brothers who created
This Land, an animated spoof of the presidential election that spread
across the Web last fall eventually to be seen by an estimated 80 million
viewers.
"All viral means ... is that you've created a message that people want to
share. It's proof that your message is resonating," says Gregg Spiridellis,
who co-founded animation and design studio JibJab with his brother. "If
people want to pass it along, that's what brand marketing is all about."
Though specific viral spending is difficult to measure, overall spending on
Web advertising continues to rise. Last year, marketers spent US$7.4
billion, a 21 percent increase over 2003, on Internet ads, according to TNS
Media Intelligence.
Part of the Mix
Viral also takes off best with a boost, cautions Hicks: "Where you really
get the 'one plus one equals three' is to include viral into the mix
Included was a "documentary" about the event, supposedly by faux film
director Carlos Soto (who even had his own faux Web site).
Long John Silver's. Not since the movie "Forrest Gump" has shrimp had the
potential to create such a buzz. The fast-seafood chain has launched
shrimpbuddy.com, a Web site that features a two-minute, feel-good film
about a road trip by a guy and his buddy, who is a shrimp.
The guy narrates a series of flashback images showing the two pals enjoying
laughs, meals and traveling together. In the end, the guy eats his shrimp
buddy at a Long John Silver's restaurant -- to promote the chain's Popcorn
Shrimp.
"Our new Popcorn Shrimp is a product that is going to appeal to a younger,
hipper, on-the-go consumer," says Don Gates, director of marketing for Long
John Silver's.
"They're young; they're Web savvy; they have a great sense of humor.
"They're the kind of customers who will enjoy Road Trip with ShrimpBuddy.
Heck, they're the kind of customers who'd enjoy going on a road trip with a
shrimp buddy."
http://www.ecommercetimes.com/story/44121.html
----------------------------------------------------------------
[4] Gifts & Decorative Accessories for July
----------------------------------------------------------------
One solution for specialty retailers seeking to differentiate themselves
from the big boxes is to offer products covering a wide range of price
points, with one thing in common: good design. In “20/20,” the cover story
of the July issue of Gifts & Decorative Accessories, our editors offer a
few suggestions on how to get started by presenting 20 products under $10
and 20 products over $50. Actual retail prices range from $1 to nearly
$500.
Color-driven fashion jewelry is the forecast for fall, reports
editor Caroline Kennedy in “Baubles, Bangles, and Beads.”
We also present
two 2005 REA finalists in Store Design, and the second part of our annual
Retailer Comparison Survey.
Sales rep agency principal Randy Newcomb
talks to G&DA about the state of the independent retailer, and columnist
Carol Schroeder offers tips on how to select product that will sell
through.
All this, plus The Top 5 lists, the news, and much more in the
July issue of Gifts & Decorative Accessories magazine.
In a Word or Two
o A corporate downsizing move at Enesco Group (Precious Moments®), Itasca,
IL, eliminated the position of chief operating officer, currently held by
Jeffrey Smith. The company is seeking to reduce its salary expenses by 12
percent.
o Spider Man 2 was named the 2004 Overall Best License of the Year at the
annual International Licensing Industry Merchandisers Association (LIMA)
awards ceremony in New York, June 27. Best Retailer of the Year went to
Target for SpongeBob SquarePants.
Quote of the Week
“The industry is made up of manufacturers, reps, and retailers. None can
live without the other. If one dies, we all die.” — Randy Newcomb,
principal, The Newcombs, in the July issue of Gifts & Decorative Accessories.
Quinn Halford, Editor In Chief
Matthew Kalash, Managing Editor
www.giftanddec.com
----------------------------------------------------------------
Links to follow
----------------------------------------------------------------
GAP Enterprises, Ltd. http://www.gapent.com/
E-Tailer's Digest http://www.etailersdigest.com
Interim Help http://interimhelp.com
Sophisticated Me http://sophisticatedme.com/
Marketing Your Web http://www.gapent.com/myweb/
Automated Press Releases http://www.automatedpr.com
More information about the ETD
mailing list