How do you evaluate sales versus tonnage?
Mike Mauti: The first thing to look at is why tonnage is important. And it's easy to forget about tonnage and think only about sales. There is an old saying in retail, 'you don't put tonnage in the bank, you put sales in the bank'. But if you rely too much on that way of thinking, you could be driving one short-term metric (sales), to the detriment of a long-term metric (tonnage). Tonnage is the volume of product you're putting into the customers carts. In many ways you can almost use tonnage as a proxy for customer satisfaction. If your customers are buying a lot of your product you can assume they're happy and that they will continue to buy a lot of your product. If your sales are going up and your tonnage is going down you can assume that your customers are not very happy because they are buying less. And if they're not happy with you, they could potentially be happier at a different grocery store.
A lot of times tonnage and sales are opposing metrics. When sales decline, you need to react. Sometimes that reaction includes increasing prices. The result can be inflation driven sales increases at the expense of tonnage. Again, in times of declining tonnage you need to react, so you do the opposite, you drop prices to increase tonnage, the resulting deflation can cause a sales decline. It can become a real tug-of-war. Skilled buyers know how to manage that balancing act, backing off when they need to drive sales and putting the pedal to the metal when they want drive tonnage. That comes with experience and a group of suppliers who understand your needs.
Read the full interview here: Retail 101: Part One with Mike Mauti