10 Larry Miller Smart Retail Solutions

0:00 Well, good afternoon everyone. Welcome to this learning lounge session, mastering store data analytics to unlock hidden gross margins. Larry Miller is a ger with over 50 years of store operations experience as an operations executive at AM big box stores and an independent operator. He is the creator of shrink tracks and total store manager programs, the national shrink survey and the profit track system for whole store profit optimization. Over 17,000 store managers and supervisors have taken his training. Welcome Larry Miller. Thank you. Well, welcome. It's been a long day already, I am sure. So, I do appreciate everybody for coming. I don't speak from behind a podium. I get lost behind podiums. So, I want to thank everybody for coming in today. You came here looking for ways to unlock hidden gross margins, and we're going to give them to you. How many of you people really want to raise gross margins in your stores?

0:59 Please raise your hands. We're going to do that today. This is a learning lounge, so I'm going to move quickly through some information, but I will be in booth 10002 out here for questions after the session if you'd like to come over and visit. So, the idea is this. We have one system that I'm going to share with you, but you can take it in parts to reduce your store shrink 15%. Improve your inventory turns 10 to 12%, improve your labor efficiency 9 to 11% and grow your gross margins 18% or 150 to 200 basis points. And we guarantee that program. We can be live in any stores within eight weeks depending on how fast you feed us the data that profit tracks needs. So as we look forward, as Alberty was said, I've been in this business for almost my entire life. five years short of my entire life. So as we look at it, everybody is here today. They have data. We all have data. There's data, data, data, data. And there's AI, AI, AI. Everybody's selling some new trinket. We want to get beyond data.

2:05 beyond program switching between this program and that program, this program and that program for absolute gains beyond your expectations. As we do that, I really want to encourage you to think about your operations, your business, whether you're a vendor partner or whether you're a retailer, say, how can I apply that? And then we're going to have a retailer tell you the stories. I'd like to introduce my board of directors first. Just so that you know, we are driven by advised by retailers just like you. The results that we get are very very clear and simple. Inside of a 100 days, we will start to show progress toward 150 basis points of improvement in in fresh departments, 240 basis points storewide, and 100 and 200 basis points in meat and produce. So we apply our technology to the enterprise making sure that all departments are affected by best practices and smart data.

3:01 Everybody came to the sessions today, the conference today with goals, objectives, and looking for new results. And if you're here, you're looking for the next best thing. Raise your hand if you're looking for the new shiny object to drive your business. You are. Okay, Douglas, you and I will talk later. And nobody else is looking for the next thing to make yourself better. Well, then help me. I know it's late, but come on. We're looking for results. So, the next shiny object is what we're all looking for.

3:37 The fact is the next shiny object is only going to be effective if we manage and understand the execution risk. You can buy a new program, but will you be able to implement it effectively? What are going to be the obstacles to implementation? Execution risk becomes a key factor that we help you manage in our system. But the real shiny object is simple. The real shiny object in many cases is you. The real shiny object is all the teammates in your stores who need to understand a better business practice. So people equal culture. And it doesn't matter whether you're using technology or not. How many of you use technology? Come on, help me out. The Here's my next fact that you can absolutely trust and go with me on. No technology will solve your problems. Not mine, not theirs or theirs or theirs out on the floor. The only technology that solves your problems, Douglas, is going to be the technology that people use.

4:44 So, it all comes down to people using the technology, getting the best results from that technology. Over the years, we've worked with every one of these companies and rolled out our technology andor our training programs to all of them. We founded the National Supermarket Shrink Survey, which we hold dear to our hearts because it tells us not only how much shrink there is, but what are the causes of that shrink and then what are the cures of that shrink.

5:11 No other company in the country that I know of has ever measured shrink to determine what solves it. We do surveys to report numbers, but the question is, how do we put programs together that will purposely result in the reduction of this shrink? Shrink is caused 68% by a breakdown in operational best practices. It comes out in these nine primary categories. If you don't have effective ordering, effective production, planning and space allocation, effective storage and handling of what you ordered to achieve inventory turns on a regular every single day basis, you will not reduce your shrink to drive your gross margins up. Does that make sense? Everybody do this. Very good. So, what we're looking at is five pieces of the puzzle to drive your gross margins. If you want to unlock hidden gross margins, you must have inventory opt variety optimization, inventory optimization. You have must have the right things in your stores that are selling and constantly selling with the right space allocation. Then you have to order for that space allocation. Ordering for turns, not back rooms, not coolers, but ordering for turns. Space allocation, production planning, and most importantly, measuring your shrink loss. How many of you measure shrink? Okay, I'd like to change that paradigm for you. You measure shrink.

6:36 Yes, sir. You call it shrink. Okay. Shrink is actually gross margin erosion. And when we make that switch happen in our heads, a whole new paradigm comes alive. Every buyer, every merchandiser buys goods, checks his variety, prices goods to get inventory turns and then get a gross margin. When we don't get a gross margin, there's two ways to get it. You either raise your price as high as you need to raise it to get the gross margin that you need or you reduce gross margin erosion in these five factor areas. So, we provide this. This is a dashboard of all of your store data coming into one exact place.

7:21 sales shrink, out of stocks, hot keys to many things, including purchase to sales ratios, store orders, all the things that drive your business, and cashier metrics. But that's not the secret. The secret is how do we grow sales? How do we reduce shrink? I don't want to provide numbers to retailers. I want to provide real solutions to retailers. So, we're out at booth 102. We'll be happy to show you in more detail, but they only give us 25 minutes, so we have to rush. But we take all that data, we throw it over to the right hand side, and we provide plain English causation analytics. How many people in this room have ever heard of causation analytics? Nobody raise your hand. There is one company that does it and this is it. And that's what drives your profit. What caused my gross margin erosion is what matters. Not that I tell you it's high or lower, it's big or it's little, but what caused it? So, we can get to curing it. And that's what the plain English analytics does.

8:25 Additionally, you don't have to ask anybody what are my top selling items or what are my high shrink items because when we throw the data all the way over to the right hand side, we have buttons to say what are my top selling items, what are my high demand items for each and every department. And with one click, you get that information right on your desktop at eight o'clock every morning, seven days a week, 365 days a year to be able to drill down to see your top selling items or drill down to see your shrink gross margin erosion.

8:56 Right. Okay, just checking. And if you do the processes of managing variety optimization, production planning, space allocation, ordering and tracking your gross margin erosion and following certain steps, in particular the steps that are called out in the plain English causation analytics reports that every single store gets every single day for every single department. Then we rush through and we say, "Okay, if I have a $10 million store, $200,000 a week, how does that drill down to what am I going to save?" We're going to save or capture $19,000 for every single store in gross margin erosion, generating a six to one ROI if you follow the steps associated with variety optimization. Follow me. Ordering production, planning, space allocation, and tracking shrink. Does that make sense for everyone? Are there any questions? Does it it make sense? Who would like to do it? No, Douglas. All right, we're gonna keep going. I'd like to Okay, I'd like to introduce John Stanzy.

10:15 He's director at Constantino's food stores. He is a profit tracks user, but more importantly, he is a savvy business leader, right? When it comes time to running your better stores, we need to lead that. Leadership is at the heart of everything we do, whether you're a direct vendor in this room or if you're a retailer. So, John, come on up. You can take the podium up there or you can stay on down.

10:54 Good afternoon. I'm John Stanzy. I am the director of operations with Constantino 31 stores here in Kansas City. and I would like to share with you today our journey with profit tracks growing sales and reducing shrink. so like most stories of success, they start with failure. And in 2018, our operations team at Constantinos, we dropped the ball. Oops is a nice way of saying we screwed up. The P&L that year was not very good. Sales were marginal. U, the margin was down, labor was up, and expenses were up. Right?

11:41 That's not a good combination on a P&L. now as ops folks, we can't always control the expenses. We can control some, but as you all know, the last few years, there's a lot of expenses are out of out of control, which is why it's even more important that the ops team delivers on sales and margin and control the labor. So, our story starts with 2018's failure. And what all good leaders do when they have that is they go sit in the corner and cry. No, that's not what we did. We we we looked at and we said, "Okay, what was the breakdown?"

12:12 And we realized the breakdown and we got together as an operations team and we committed to the ownership that in 2019 we would do these things. We would reduce shrink and we would grow sales. Now, we operate a lot of price choppers here in Kansas City. So, you can imagine with price in the name, pricing is important to us. So, we wanted to keep our competitive pricing. So, you can raise margin sometimes, you can even raise sales sometimes by raising retails, but we didn't want to raise retails, right? So reduce shrink gross sales same retails not an easy task. So we said how do we do this? So we went out and we looked at the industry for some tools and resources to help us.

12:48 That's where our journey started and it ended in the end of 2019 actually about six months through and I'm happy to report that we grew our perishable departments gross margins by one and a half percent. great meat, deli, produce, bakery, all the perishable apartments. Now, we grew center store margin, but it's harder to pinpoint, right? Because my role is to go back to the ownership and say this worked or this didn't work. So, I can say with a great deal of confidence in the Parisville department that what we did with profit tracks is what grew that margin. And we also grew sales that year and we we lived up to our commitment not to raise any retails.

13:27 So, the question is, well, how did we do that, right? Well, a lot of hard work, a lot of investment. but really in in two points is that we took our data and we made it actionable. And the second thing that we did, as Larry alluded to, is we fundamentally changed our culture because we built this business on being in stock, fresh, full, and clean. And by gosh, we won't be out. Okay. Well, in 2025, you can do all those things and not have a whole bunch of extra product in the back or on the shelf because we have a lot of analytics to tell us how much we should make, production planners and and those kind of things. So, the culture is a big piece and what I realized the longer that I do this jobs, this operations job, it's not an operations job, it's a marketing job because you can have the best answer in the world, but you have to get your team behind it. so we spent a lot of time and effort to get our team to support this program. And that really is is a key of what profit tracks is because yeah, it has analytics and it has software and it has data, but really it's a system. It's it's a rallying cry to our team to talk about, hey, this is when we talk about shrink, we're talking about profit tracks. When we're talking about this, we're talking about profit tracks. So it gets everybody on the same page. it is a whole store profit optimization system.

14:48 And what I mean by that is like Larry said, it gives clear direction, not just data. it's customizable, right? So you don't run the meat department like you run the deli department, right? So you can customize what that clear data and that actionable stuff is. it's connected. So we have all of the stuff all in one place. And the biggest piece and the biggest takeaway is it's easy to use. Okay? because I have department managers out there that I just taught how to open up an email, right? So, if I don't have some software and some data that's easy to use for the store teams, dead on arrival. So, the interface is very simple for for all of senior level management to use to is easy for the store level for the stuff that they need. I don't want to make that sound like the system is is simple. It can be as complex and you can dig as deep as you want, but it can be as easy as you need for your store teams.

15:45 we had data everywhere. I'm a data guy. I've been a data guy. There was no new data that came to the system in 2019 that I didn't have in 2018. But what I had was data all over the darn place. Right? So this is where we were. We had data scattered across many platforms. What happens in that case is the data is just darn overwhelming. Right? I had so much data I couldn't sift through all of it and find the actionable stuff. The other thing that we had is I had a few people looking at the data, me and our operations team, right? So as we went from data scattered everywhere to this with data in one place what happened was I had one place everybody went one source of the truth. It had clear and actionable deal. So 500 pages of data that I used to look through were condensed to three pages of the most actionable important things that would drive margin. And the biggest thing that happened, and I alluded to this earlier, is that I was playing whack-a-ole. Me and my operations team are sitting there looking at, oh, well, the shrink's high in this store on this sandwich. Let's get rid of this sandwich. Oh, it's high over here. Oh, this is over here. And boom, boom, boom, boom. And we're solving like five things a week. We got thousands of issues out there. But when I opened it up to 300 department managers, store directors, and assistant managers with one-click data, now all of a sudden I got 300 people looking at shrink. And guess what? Who's going to fix shrink in a store when you're making too many sandwiches? The department manager, not me. I may fix it once. The other thing is I had few people looking at the data.

17:18 I had even fewer people fixing the issues. And I had no one trying to make lasting changes. If the department managers are ones that identifies the issue and they change it themselves, they're going to make sure that stays in place. If I go out there and say, "Hey, you had shrink high this week on this sandwich," they won't maybe not make too many sandwiches next week, but three months from now, they're right back to it. But if they change it, they change the whole picture and it's lasted. I call it the power of 300 because we just so happen to have about 300 department manager, store directors, and assistant managers.

17:49 the benefits that we gained out of it. One click, one touch, top selling items, top shank plans and production planners, right? So when you can push one button and see what your top selling items were last week and build your merchandising plans off or your top shrink all at one click, it becomes actionable for you. the other piece of our business, and those of you who've been doing it for a while, every morning, our opening manager, the store director, whoever, assistant manager that's opening, we go walk the store in the morning. We've done it for 100, 20, 30 years, right?

18:25 So, you get your cup of coffee, you get your sales, you walk over to the bakery department, you say, "How you doing today, bakery manager? How's your kids? How's vacation?" Boom. You're on the way. Right? That was a typical store walk. Literally with profit tracks, you take a tablet, you take a phone, and you walk over to that bakery department and you still say hi and you still talk about sales. but if you want to talk about sales more in depth, you push a button. You say, "You know what? You sold a whole bunch of these yesterday.

18:48 Did you know muffins were your top selling item yesterday and last week it was this?" it gives you alerts, right? We're busy. So, I'm walking the department. I get to produce and I have an alert on my phone when I get to the produce department and it says shrink high. push one button and on the sales floor with the produce manager, we can look at what caused the shrink to be high yesterday. Okay? It is a purposeful profit walk of the store that we didn't have before, right? It also under this umbrella, it forces you into operational issues. So when you walk that thing in the morning, are you walking the cooler?

19:22 Is the cooler dated? Well, it's all on the walk. Check the cooler. Click date it. Click. Right? So very helpful. The difference is just walking your store and walking your store with purpose. and again, if it identifies that shrink alert, you can have fixes for your store. So, if you know you have X problem and you want to say when X happens and you have shrink on this, here's what you should do. Make sure that we're using the production planner could be a solution. You can customize all of those different solutions.

19:57 The biggest thing that happens with this system is that it gives you a platform to talk and talk and talk. And what it says is that in our business, particularly in the perishable department, inventory is not good except for selling on the sales floor. So it forces you to get in there and use this. We said this so many times. Get it in, get it out, get it sold. Turn, turn, turns, right? And so when you get that mindset going on, this is before, right?

20:26 Besides the fact it's disorganized, I can tell you this meat cooler, there's enough product in that meat cooler to take care of Super Bowl, Fourth of July, Labor Day, and Memorial Day, right? That's how we did business because by gosh, we weren't going to be out. But when we focused on inventory control, we still aren't out on the sales floor. I'm not allowed running a Constantine or store to ever be out on the sales floor of anything at any time. But we just are doing it smarter. Okay.

20:53 shrink, right? I'm embarrassed. I hope there's not a Constantino in the room. That's our story, right? That's what happens when you don't have a system where you're talking about shrink and good best practices. When you do and you get your entire team engaged, you can go from that to that. Production planners. if you don't have a production planner, you have to ask yourself who's deciding how many sandwiches we're going to make today. And I think what you'll find, at least in our case, we found is if maybe it was the deli manager, maybe it was a clerk I hired two days ago, right? But if you don't have, and what we really found is that in the production planner side, it wasn't just that we controlled the shrink. Really, the biggest piece we grew sales. What we found out is we weren't making enough.

21:44 and actually our sales went up. Now then we stopped making the stuff that we weren't selling and we got both sides of the coin, the increased sales and the reduced margins. in our and I'm a retailer, so I I support retailers. I wouldn't give a recommendation on something that didn't work for us. we in the last five years, we've been able to reduce our milk shrink to below 1%. We were running about two and a half percent. and there's he they have a computer assisted ordering.

22:17 we using the production planners like I said we reduce shrink 20% and grew the sales at the same time. And our big takeaway was the one and a half percent that we picked up in in gross margins. in summary for us I think the power of the system was the daily purposeful store walks. it allows you to know your numbers. More importantly, it allows those 300 people at the store level that make can make a difference know their numbers. the whole concept of turn turns get it out, get it sold.

22:47 and really it gave us a way to build a c a culture that was aligned on selling more and shrinking less. I'll share one last thing with you. When I first the first report that I pulled up was truck to trash and it's exactly what it sounds like. you you put it on the truck from AG, it gets into your store, you spend time in labor, put it on the shelf, you don't sell it, and you throw it in the trash.

23:16 So in profit tracks, there's a report you can push, it tells you the last 90 days, stuff that you threw away had shrink, more shrink than you sold. And when I pushed that button for the first time, it was hundreds of thousands of dollars. And it was easy pickings that we paid for the system probably with just that one report. So with that, I know we're short on time. I want to turn it back over to Mr. Larry Miller.

23:37 Thanks, Dad. John does a great job. He's a power user and he's proven this system for other retailers all across the universe. I'd like to offer you six takeaways. If you're a retailer and you want to take a picture, take out your camera. These are your six takeaways. Simplify your data. There's a data glut out there and we need to streamline our data. We need to put it all in one place. We need to get it all together and make it simple, fast, and easy to use. That's number one. Implement clear ordering standards. If you can't walk into every single perishable department and say, "What is our ordering standard?" and get a clear sentence in but a minute. You don't have a standard.

24:20 You just have a discussion. So, oh, sorry. Measure your known loss. If you can see it, you can fix it. If you're not consistently measuring your known loss, scanning it out, and doing something with the reports, not just having reports, you will not reduce your shrink. Begin every day looking at your known loss and your top selling items. And at the number six, train people to do a purposeful profit walk in less than 30 seconds. What makes a profit walk purposeful?

24:53 Anybody pardon me? Identifying your losses. Absolutely. We want to look at that. Identifying your turns. What's turning? What isn't turning? What's turning really fast that I can sell more of? What's not selling fast enough that I can shrink down my space allocation? It's all variety, ordering, production planning, space allocation, and measuring your shrink. I really appreciate your time today. If there's any questions, the lady in the back is going to open the door right now and make sure everybody's leaving, but I'll be happy to take questions at booth one2. And if you're interested in profit tracks, we'd love to talk to you further.