BJ’s is a string of warehouse clubs. These clubs function mostly in the eastern states. The clubs operate through memberships only. Even though the annual revenues amount in billions of dollars, the membership fees constitute only a small percentage. Majority of these clubs are, on an average, 10,498 square metres in size, the remaining being of 6,596 square metres.
The main objectives of BJ’s are to offer value for products to its customers, to generate exhilaration among its customers to buy products, and to maintain a well-organized supply system.
Due to unforeseen effects of some decisions, BJ’s is facing some problems. The decision to create different categories of its customers resulted in the increase in the cost of merchandising products to each category. Since there was no increase in the sales, in order to maintain the overall profits, BJ’s had to increase the prices of some basic products. This had a negative impact on the customers.
Nonetheless, the idea of having separate areas for different categories of customers is a good move the decision to increase the prices of basic products is somehow not good enough. Basic goods are those that people buy on a daily basis. They have idea about the prices and as soon as they notice the increase in prices, they pull back. In my opinion, instead of increasing the prices of basic products, NJ’s should increase the prices of products that are not bought so frequently. These may include towels, soaps, detergents, sugar, pulses, etc.
The success of any business depends solely on the satisfaction of its customers. The business owners have to understand their customers’ expectations and needs and make arrangements for the availability of such products. Different customers have different requirement and choices and as such, in retail business, the business owners have to have an assortment of products.
While comparing the merchandise planning process in Best Buy and that in BJ’s, it should be understood that the main difference in these two is the nature of their business. While Best Buy is a traditional electronics store, BJ’s is basically a departmental store, albeit, at a larger scale. The shelf life of products in both these businesses is totally different. While electronics don’t have any expiry date (except their being outdated), food items are perishable. So obviously, the merchandise planning in these two businesses has to be different. It’s not that people visit electronic stores very often. It’s only when they have any specific requirement that they have to go there.
Moreover, when a customer enters an electronics store, he/she already has thought of the product to be bought. It’s not that he/she comes to buy a television and ends up buying a refrigerator. The only thing that Best Buy has to take care is that the company should have stocks of the most popular brand products with competitive prices. However, in the case of BJ’s, when a customer enters the store, even though he/she has some particular things to be bought, there are chances that if something special is spotted, he/she may buy it as well. Products can be made attractive by attaching some offers to them. It is human tendency to have something extra if possible, at the same price.
So the management of BJ’s has to search for products that can be bought at lesser prices so that the company can attach some offers to them. BJ’s also has to take care that it buys only such quantities of products that it expects to sell before the expiry dates.
So in my opinion the merchandise planning process in the case of BJ’s is more demanding than that in Best Buy.
In my opinion, there are three different stages where the inventory shrinkage is possible; vendor’s ill-doings, customers stealing, and expiries. Firstly, the vendor ill-doings can be checked by appointing an employee to count/weigh/measure each and every delivery. A random check by the management will keep that employee on his/her toes. Secondly, keeping a check on the customers who steal products involves a little investment. The management should install close circuit TV cameras at all crucial points.
An employee should always keep an eye on all the screens. Finally, expiries can’t be controlled. One cannot change the expiry dates. So a better way to avoid shrinkages due to expiries is that the management should have an idea about the customers’ choice of products and should, thereby order accordingly. A better option would be to order from such companies that are ready to take back the products that have expired or are nearing the expiry dates.
BJ’s will be able to offer better prices to its customers only if it can keep the overhead costs of the products to the bare minimum. One of the major chunks of overhead costs is the logistics. BJ’s has devised certain systems to control these costs. Firstly, BJ’s plan to purchase truck loads of different products. Secondly, instead of having a separate warehouse, the products are to be off-loaded directly at the stores. Thirdly, there will be no extra fixtures to accommodate the products. Fourthly, the management conducts meetings with suppliers in order to devise means of reducing the costs. Finally, the company plans to keep a daily record of sales figures.
The advantage of reducing the inventory will be less expiries hence fewer losses. The disadvantages will be more. The customers will not be able to find their preferred products and will prefer going to other stores. The sales will decrease and will result in less profit. The company image will be spoilt.