Episode 42
Mastering Product Selection and Cash Flow: Retail's 'Stock Illusion' (Pt3)
Hi, I'm Clare Bailey, The Retail Champion - This is the 3rd and final part of our 'Stock Illusion' miniseries.
In Part 1, we explored the customer-facing cost of over-ranging — the overwhelm, the choice paralysis, the damage to the shopping experience. Now it's time to go deeper.
In Part 2 we looked at the operational reality of range creep — how it happens, why it feels like good management when it's actually slowly destroying your margins, and what data-driven decisions really look like when you're editing a range.
In this episode, I focus on unravelling the persistent myths of retail stock management. A key theme is the misconception that more stock and greater choice automatically drives more sales and profitability. I explore the operational and commercial challenges that arise from bloated, poorly curated ranges—highlighting how years of incremental, unchallenged buying decisions often create complexity, cash flow issues, and diminished margins.
What we cover:
- The Real Cost of Carrying More
- Commercial Clarity vs. Operational Chaos
- Good-Better-Best: Structuring for Success
Key Takeaways:
- More choice doesn’t always mean more sales.
- A bloated range can erode margin, tie up cash, and confuse both customers and teams.
- The best retailers excel not just at launching new products, but at knowing when to let them go.
Resources & Links
• Free Stock Assessment & Mini Guide: retailchampion.co.uk/retail-playbooks
• The Retail Champion: www.retailchampion.co.uk
• Other episodes: retailreckoningpodcast.co.uk
• Newsletter: retailreckoningpodcast.co.uk/newsletter
Subscribe to Retail Reckoning wherever you get your podcasts.
Connect & Share
If this episode resonated — and if you recognised your own business in any of it — I'd love to hear from you. Leave a review, share it with a fellow retailer, or come and find me on social media. Let's keep the conversation going.
Transcript
Imagine you could sell less, sell better, make
Speaker:more profit, have less stress. This episode is the final part
Speaker:of the Stock Illusion series and I'm looking to
Speaker:unpack how you can fix your range, your stock,
Speaker:your margin and your cash flow.
Speaker:I'm Claire Bailey and this is Retail Reckoning. The last
Speaker:two episodes I've covered things like how a lot
Speaker:of retailers feel operational stressed right
Speaker:now, and even if they haven't fully
Speaker:articulated it, because in part one, we looked at how
Speaker:a lot of businesses do not have a demand problem, they've got a decision making
Speaker:problem with too much stock cannibalization of the
Speaker:range, too much overlap and complexity which
Speaker:slows customers decision making down and in some cases can turn them off.
Speaker:In part two, I looked into how businesses
Speaker:are creating the situation through their range creep.
Speaker:Not through one simple decision about let's have a big range,
Speaker:but through years of additive decisions where
Speaker:nobody really challenged. And there's a lot of
Speaker:retailers sitting there right now where the range is not well curated.
Speaker:Bringing products in creates complexity and a
Speaker:lot do not want to delist products just in case
Speaker:that product is that one product that a person wants to
Speaker:buy. But unfortunately that ends up in a situation where they're
Speaker:carrying stock they really haven't
Speaker:overviewed or thought about or fully believed in.
Speaker:And they've run ranges that have evolved and evolved and evolved
Speaker:and become complex and chaotic rather than being well
Speaker:designed and curated. So in this third
Speaker:part, I want to get to the big question, because that is
Speaker:for a lot of people, if more choice is not the
Speaker:answer, what actually is? And this is where a lot of
Speaker:retail conversations can go badly wrong. Because the
Speaker:instinct when you end up with a bloated range is to
Speaker:push harder. Well, obviously needs more marketing, we need to do more
Speaker:promotions, we need more stock to create more
Speaker:availability and campaigns and urgency. But
Speaker:I think often the issue is not the effort in selling,
Speaker:it's the lack of commercial clarity. This is a shift that
Speaker:I've seen a lot of retailers, particularly independent, struggle
Speaker:with. And they've got all their working capital tied up in
Speaker:unproductive lines. Because once a product enters the
Speaker:range, a lot of businesses become obsessed with trying to make it
Speaker:work instead of just getting it out again, which would
Speaker:be actually a commercially sensible decision. Because
Speaker:instead of having to discount it, promote it, bundle it, push it
Speaker:harder online, move it to a different place in the store, or
Speaker:include it in an email campaign, they should just say, right, that's it, we're calling
Speaker:that product, we're not rebuying it. It's got to go. A
Speaker:lot of this chaotic activity
Speaker:creates operational damage control for a
Speaker:bad buying decision. And those buying decisions should have
Speaker:been challenged a lot earlier. And that is unfortunately an uncomfortable
Speaker:truth. But I can so totally see why
Speaker:businesses large and small go to a trade show,
Speaker:see something they think, oh, that might work, that might complement this, that might complement
Speaker:that. And one by one, the number of
Speaker:lines on the stock file increases and that
Speaker:creates the stock growth issue. That
Speaker:creates the fact instead of being created clear
Speaker:and understood, it just grows and grows and grows.
Speaker:I've seen it many, many times, having mainly worked
Speaker:within sort of supply chain buying and merchandising in my corporate
Speaker:career, that retailers often seem to want
Speaker:to try to solve their buying problems with marketing activity.
Speaker:But that costs me money. And if the range doesn't
Speaker:make sense, it hasn't got the structure and the
Speaker:discipline. Marketing just adds more cost and
Speaker:complexity. So
Speaker:range is directly linked to stock. And I always believe that range
Speaker:is not just an operational function, it's a
Speaker:strategic model. It is the entire positioning. It's the
Speaker:customer understanding. And it takes considered
Speaker:choices to manage the range. Because an out of control
Speaker:range leads to out of control buying, out of control
Speaker:stock, and out of control cash flow, because it's
Speaker:going to tie everything into something that isn't working.
Speaker:I also think what you choose to put on the range and to put
Speaker:in stock determines how people understand the brand. Going back to
Speaker:several other conversations about positioning and clarity and so on,
Speaker:it drives where the margin comes from. It's
Speaker:how easy your business is to shop
Speaker:for a customer and how much
Speaker:stock risk enters your system.
Speaker:So the operational complexity that teams have
Speaker:to manage every single day with an out of control range
Speaker:directly impacts an overstock situation.
Speaker:And it isn't just about simply merchandising or
Speaker:buying or stocking or how much you've got. It's actually about a
Speaker:very clear strategy. And I think that a lot of ranges that
Speaker:you see these days are not really strategic anymore. They're historical.
Speaker:I guess they get built through accumulation
Speaker:as opposed to intention. There's a lot of,
Speaker:well, I bought that product because I thought people might like it and it did
Speaker:quite well. But it's no longer valid. The product's no longer
Speaker:valid. It's tying up stock, it's tying up space
Speaker:and it's tying up cash flow. And there's a certain level
Speaker:of historical uncertainty sitting inside those
Speaker:product ranges. Something that was a trend from two years
Speaker:ago, or perhaps a supplier promotion that
Speaker:nobody ever went back to ends up with category
Speaker:expansion that's never been reviewed. And there it
Speaker:is. All your money's tied up in stock that's just not moving. Think
Speaker:about the value of that. If you could liberate the value of
Speaker:that cash tied up in stock and reinvest it
Speaker:in now your best sellers and your most high margin products,
Speaker:how much better would the business be? The
Speaker:products that might have been a temporary
Speaker:promotion have sort of accidentally become permanent
Speaker:and that creates all that drag and
Speaker:weight in the business. And I think this is why some of the
Speaker:strongest retailers that we see right now are
Speaker:being so much more rigorous and disciplined about
Speaker:their range structure. They clearly have
Speaker:purpose in intention and they're curated. It's
Speaker:not just if I add more stock, I'll get more sales.
Speaker:It comes down to a really good range architecture.
Speaker:It helps customers to navigate. It's about the customer
Speaker:decision tree. How do they buy, what do they want,
Speaker:and then that flows into how you can merchandise
Speaker:it. You also have to consider the financials. How
Speaker:does demand margin get distributed? Because it's also important
Speaker:to make sure that the highest
Speaker:cash margin contributors are well stocked and
Speaker:well presented so that it directs
Speaker:customers to the products that actually put cash in your pocket.
Speaker:What it doesn't do is create stock risk and
Speaker:margin loss exposure. So fundamentally it's all about making
Speaker:it easy for customers to make decisions, but make the decisions that
Speaker:also finance the business.
Speaker:I think it's probably one of the simplest but most powerful
Speaker:structures in retail.
Speaker:And I also believe that all of this
Speaker:comes back to things like product lifecycle management.
Speaker:Everybody's great at entering products,
Speaker:but they're not always great at delisting products because they sort of
Speaker:cling onto them, hope that they'll make a profit. But
Speaker:actually the simplest part of range architecture is
Speaker:something around the good, better, best entry level,
Speaker:core and premium. And often
Speaker:ranges don't have that clarity. It's just all sort
Speaker:of a mess in the middle, which I talked about about in past episodes
Speaker:of getting trapped in the middle. And I think that strong
Speaker:retailers understand each layer has a different
Speaker:commercial purpose.
Speaker:Entry level products help reduce friction.
Speaker:They bring people in. And if people are feeling a bit
Speaker:cash strapped at the minute, that's what they're going to buy. So they're
Speaker:needed to sort of set the lowest level price point for
Speaker:a solution to the customer's need.
Speaker:Core products, so it's good, better, best, so core would
Speaker:fit within the better.
Speaker:They help create some sort of consistency,
Speaker:dependable volume, slightly higher margin, and
Speaker:people who want to trade up to something a bit better than
Speaker:entry level will go to the core level.
Speaker:And the premium products probably don't sell in high volume, but they've
Speaker:definitely got the highest margin opportunity. But what they do is create
Speaker:aspiration. If somebody wants to treat themselves, that would be your
Speaker:best. And just even having good, better, best or
Speaker:entry, core, premium, whichever you want to call it, is
Speaker:giving a structure and a price ladder that allows
Speaker:customers to decide. But when that's made, missing
Speaker:it all sort of falls apart. It
Speaker:goes into confusion. And I think the customers
Speaker:struggle to understand the value of each solution to their need.
Speaker:If they can't trade up or down, depending on their feeling in the time
Speaker:and their spending power, then what do they
Speaker:do? Everything's the same, so they just look
Speaker:at a big mess of everything's in the middle,
Speaker:feel overwhelmed and potentially walk out because they can't
Speaker:choose. Similarly,
Speaker:teams might struggle to merchandise that effectively. And when
Speaker:pricing is inconsistent and you're trapped in
Speaker:endless promotional cycles because it's not
Speaker:commercially balanced, so you can't present the range. I
Speaker:often talk about the good, better, best when referencing
Speaker:Ikea, because obviously if you think about the marketplace in
Speaker:Ikea, you're literally walking along almost on a conveyor belt. And
Speaker:the simplest product, the good, is at the beginning. And as
Speaker:you walk along, you're going through better and best, and the
Speaker:price points are going up. It's quite difficult to go back to the beginning again
Speaker:as well. And they almost commercially
Speaker:merchandise you still through the range to
Speaker:the point where you end up at the more expensive product.
Speaker:And obviously that increases their margins.
Speaker:And I think that thinking about the ranging, the
Speaker:merchandising, and ultimately how that affects your stock and
Speaker:your cash flow is something that is very, very important,
Speaker:particularly in the current economic climate. Quite a lot of customers might
Speaker:be trading down, so your demand profile might shift
Speaker:down towards the bottom end of the range, the entry or the good,
Speaker:and away from the premium. But there will still be the occasion where
Speaker:somebody's like, I want to treat myself and they'll take the best, so it's
Speaker:important to have it there. But the stock profile
Speaker:may need to be reviewed just because of inflationary
Speaker:pressures and cost of living pressures and so on.
Speaker:I mentioned Lifecycle as well. I think something that the best retailers do
Speaker:is really manage Lifecycle well, because
Speaker:they don't just think about the launch, because
Speaker:everyone gets excited about a new product launch. They also really
Speaker:carefully think about the exits, and that's also
Speaker:really where margin gets protected. Brilliant launches are great,
Speaker:but disciplined exits are Essential
Speaker:we can all add products, but that leads to the confusion and the chaos
Speaker:and the stock going up. Control and cannibalization. And there are
Speaker:fewer businesses I genuinely have met who are good at
Speaker:exiting products. But exit strategy is where the
Speaker:operational control exists, where the stock control exists
Speaker:and where the margin control exists. And it means that
Speaker:every product needs to have an effectively managed life cycle. It
Speaker:launches, it performs, it gets reviewed and
Speaker:it gets exited when it needs to be. And I say it's simple. It's
Speaker:not actually that simple. There's a lot of data management involved
Speaker:and so on, but there are disciplines and
Speaker:strategies to manage lifecycle to ensure you don't end up with
Speaker:an overstocked, over bloated range that just
Speaker:isn't moving, tying up all your cash.
Speaker:And I do think that a lot of businesses do
Speaker:really well on launch, but then the product has this
Speaker:sort of indefinite survival. And it's almost
Speaker:as though nobody really wants to challenge a product
Speaker:because maybe it was really good at
Speaker:the beginning, but that's how your range and your stock pool
Speaker:fills up with history and
Speaker:legacy instead of relevance and intention.
Speaker:And it becomes operational
Speaker:baggage. It's not an effective assortment. I'm not going to name a retailer, but
Speaker:I'm sure everyone will know what I'm talking about. There is a certain
Speaker:retailer that you walk into and it just feels like a jumble sale and
Speaker:it's chaotic and I personally can't
Speaker:cope with that. I walk in, it's
Speaker:just a big mess and I walk straight out because
Speaker:actually there's just too much going on.
Speaker:And I think that a lot of people feel like that, especially if you're time
Speaker:pressured or you're busy and you just want something that makes sense.
Speaker:And also you've got the issue where people become
Speaker:emotionally attached to a product and that's
Speaker:maybe commercially dangerous. We've always
Speaker:stocked it or I don't know, it used to be a brilliant
Speaker:seller or even trying to convince yourself the customer expects
Speaker:it. I'm pretty sure if it disappeared, the customer wouldn't mind if there
Speaker:was something else to solve their need. And
Speaker:I think it's because of nostalgia.
Speaker:And retail is a performance
Speaker:business, not a nostalgic business. If products
Speaker:stop earning their place, the cost of the stock, the cost
Speaker:of the space, the cost of the merchandising, the promotions, the
Speaker:management, if those products stop earning their
Speaker:place, then they need to go.
Speaker:And that's why I believe the most successful retailers are
Speaker:constantly not only editing the range,
Speaker:but also looking for new. Yes, of course, Newness is essential,
Speaker:but there's only so much room. E commerce has made
Speaker:this worse because obviously you can just keep adding products.
Speaker:And it's not because the smaller range is
Speaker:necessarily better, but it's a hell of a lot
Speaker:clearer. And that clarity creates confidence.
Speaker:It's easier to shop, it's easier to merchandise, it's easier to
Speaker:manage the margin. And I believe that those
Speaker:retailers who are performing best right now
Speaker:are not the ones marketing and shouting and
Speaker:broadcasting and so on. They're also not the
Speaker:ones carrying the widest ranges. They're not
Speaker:trying to be everything to everyone, so they've got clear
Speaker:about their customers, customer, their positioning.
Speaker:It's just that they're sharper, more intentional, and more commercially
Speaker:disciplined. And if a product
Speaker:has strengths and weaknesses, it needs to be analyzed.
Speaker:And if it's weak, it has to go and something else can come in its
Speaker:place. And this is because I think that
Speaker:customers in a world of endless choice and
Speaker:endless marketing are already feeling overwhelmed.
Speaker:Not only are they under financial pressure,
Speaker:the digital world is just sending them messages
Speaker:all the time about buy this, buy that, and you've got
Speaker:TikTok shop and Facebook reels and this and that and the other, as well as
Speaker:E commerce sites, email marketing. It's just like too much.
Speaker:And all I really wanted was this one thing. So having a
Speaker:clear range of the right standards
Speaker:for a customer that you want to attract will
Speaker:limit the level of stock you're carrying, limit the level of
Speaker:cash tied up in the business, and also potentially
Speaker:reduce the amount of marketing activity that erodes your margins.
Speaker:So to bring the whole series together,
Speaker:in part one, I talked about the illusion that
Speaker:more stock and more choice automatically creates more sales.
Speaker:In part two, I talked about how
Speaker:an additive buying culture creates the
Speaker:operational complexity and the range creep or range
Speaker:bloat. And now in this
Speaker:part, the most important truth from my mind
Speaker:is more is not a strategy. And it never was. Because. Because more
Speaker:stock creates slower decisions on the part of the customer.
Speaker:It creates weaker clarity as to who
Speaker:you are as a business and who you are for.
Speaker:It adds more operational complexity
Speaker:and it makes controlling the range more difficult because there's
Speaker:more data to analyze. And
Speaker:the real question is not how do we sell more
Speaker:products, it's how do we sell
Speaker:more effective product? So
Speaker:less product and more effective product.
Speaker:And I always say, does
Speaker:this product deserve to exist in this range in the
Speaker:first place? Is it paying for its space on a shelf? Is it delivering
Speaker:effective margin? And that's cash margin, not
Speaker:percentage. Does it earn its right to be in
Speaker:my stockroom or on my shelf, because that is where the
Speaker:cost lies. Stock is not just the cost of the
Speaker:stock, it's the cost of the space. And once you focus
Speaker:on a ruthless determination to a question,
Speaker:maybe every week, by using
Speaker:exception reporting from epos and so on, does this
Speaker:deserve to be in my store, on my site,
Speaker:in my warehouse, and so on, then
Speaker:you'll see your stock holding improves the flow
Speaker:of stock, improves margin, it's easier to merchandise,
Speaker:customers probably can find it easier to shop,
Speaker:and the proposition of the entire store
Speaker:becomes so much clearer.
Speaker:So if this series has made you recognize parts of your business
Speaker:and most businesses already know where the pressure sits, where the
Speaker:complexities crept in, where the range feels bloated and the margins
Speaker:being eroded, then we have created to
Speaker:go alongside this a free stock audit
Speaker:assessment and companion Mini guide
Speaker:so you can do a personalized stock audit via
Speaker:retailchampion.co.uk
Speaker:stock clarity audit.
Speaker:And this is to help retailers identify where overlap,
Speaker:duplication, old stock and complexity is
Speaker:perhaps impacting profitability, cash
Speaker:flow and commercial control. Alongside that
Speaker:and our other wider retail playbook, you can get the
Speaker:mini guide@retailchampion.co.uk
Speaker:retail-playbooks and you can also sign up for a
Speaker:weekly newsletter about these
Speaker:podcasts@retailreckoningpodcast.co.uk
Speaker:Newsletter I hope those resources
Speaker:and this mini series has been of use to you. I'm
Speaker:Claire Bailey, this is Retail Reckoning. Thank you for listening
Speaker:to to the Stock Illusion series. Take care.
Speaker:Owns the floor.
Speaker:Sam.
