Thanks to me following professional experts in the retail industry I’m learning a lot from, I found the missing link I was looking for in terms of inventory management for the hood. We already identified one the biggest barrier to a retailing entrepreneur based in the hood is acquiring inventory and this is where most startups spend their SBA loan money on. This article will look at Scan Based Trading or SBT as a possible solution.
What is Scan Based Training?
This morning, I stopped by Kroger to get one banana and a yogurt which added up to $0.89 cents for a healthily breakfast option. My physician recommended I eat more active culture yogurt as part of my daily diet to help digestion while hustling hard. So as I was in the Kroger early in the morning, I saw this Mexican dude with his little son and they had a dolly with some food packages they started to pack on the shelves at Kroger. When I saw him do this, that’s when I realize what was going on which was direct store delivery or DSD. The Mexican distributor was probably a one-man or family owned setup was teaching his son entrepreneurship bringing him in to unpack. My son was also with me selling from the beverage stand last summer as I was showing him how to run a business.
Have you ever walked in Wal-Mart and saw some cats putting soda bottles on the racks and asked him or her if they knew what aisle the hot sauce was at and they tell you they don’t work there? Those cats work for the manufacturer and distributor and their job is to place the items on the shelves at the store instead of the Wal-Mart stock cats putting the items on the shelves. Direct store delivery is when these suppliers go store to store and stock the shelves of Wal-Mart, Target and Kroger and Publix and so on with the bags of chips or whatever food they were supplying.
I mentioned last year that this is what we need in the hood because I found it difficult to manage inventory as an entrepreneur and it appears that the big stores already doing this on a bigger scale. They sign deals with food and product distributors where they put their own products on the shelves to be sold. This is actually not a bad arrangement because all Target and Wal-Mart has to do is just sign contracts and the supplier bring the stuff to the store to be sold.
Scan based trading or SBT takes DSD to another level and that is where the supplier owns the products even while it is on the store shelves until it is scanned over the register. This means that you as a retailer do not buy anything and just offer shelves to manufacturers and distributors to stock their products and you just split the cost of the good sold. This is similar to just-in-time inventory but better because you have items on hand to be bought.
The Missing Link?
Scan based trading was the missing inventory link I wrote about last year but did not know the name or that this practice actually exist. Believe it or not, scan based trading is not widespread but this is the perfect solution for starting up business in the hood because the benefits are too great to not consider. The start retail entrepreneur in the hood will have products to showcase and sell and do not have to spend startup money on inventory, all they have to do is sign deals with DSD cats who own the products on the entrepreneur shelves.
But there are issues with scan based trading that has to be addressed first. The first issue is a trust issue where we have to believe the DSD cats are bringing in the right number of products and giving up good quality products to put on our shelves. The second issue is fear of data manipulation were cats can modify the count and products just “disappear” off the computer books and recorded as sold by the retailer when they never got it. Third is ownership because if the DSD cats are putting their products in a hood entrepreneur store, of course they want the products displayed prominently and want to dictate where to locate the product or not do business.
We can mitigate these issues involved with scan based trading in the hood because this practice is just too important. If you haven’t realize, scan based trading is a similar model to consignment sales and is the same setup for the micro-mall business model. The trust issue is important and I think we need to setup a web site like alibaba.com that connect distributors with retailers and allow retailers to post reviews and recommendations on good distributors and bad distributors. Now for the placement of products in your store, retail entrepreneurs should sell placement on their shelves and sell space for product advertising in their store.
So let’s look at the benefits to fully understand why scan based trading should be taken more seriously. The first thing scan based trading do is create some real jobs for brothas and sistas in the hood. Cats can ride around and stock shelves of a product. The second thing it does is make it easier for brothas and sistas to become retail entrepreneurs because now they don’t have to spend thousands on upfront inventory to start a business. And by not focusing on inventory, the entrepreneur can focus instead of selling the right product instead of holding the bag.
Now, you are probably thinking the supplier or distributor or manufacturer will be holding the bag if the product doesn’t sell – that’s the way it should be. See, the distributor or supplier or manufacturer will sell items in bulk and if those items don’t sell, the retailer will be burden and may go under or take a heavy loss and can’t reorder a new stock and refresh. A distributor or manufacturer is in a better position to see what will move in the market and to stock the right products.
Even better, scan based trading allow entrepreneurs who manufacture products to work with distributors instead of running store to store. When I was making house music and had my own record label in college, I would press the 12” records and give some to the distributor who would ship them out to DJ record stores worldwide and if people bought the record, they would contact me and order more records from me and pay me. That’s the same setup we should be doing in the hood for retailers.
Definitely Something We Have to Take Serious
So let’s look at the opportunity if we do this right. The first thing some cats can do is work a deal with the manufacturers and large distributors and become a distributor themselves for the hood retailer. This is new entrepreneurship angle that is not promoted in the Black community and the lifeblood of enabling retailing in our community. Then that distributor goal is to promote their business to new and existing retailers to stock their shelves on a scan based trading method. The retailer just sell the products to the customer and the profits are split and cats get their money.
Scan based trading cannot be ignored in the hood because it will create entrepreneurs who will create real jobs and will enable the recycling and pooling of money and resources. In addition it will enable brothas and sistas to manufacturer products and have a whole distribution line to sell their products in. Definitely a serious solution we have to consider for the hood so we can start doing for ourselves, our people, our community and our future.