Why you lose up to 40% of sales

Why you lose up to 40% of sales

Nairobi transforms at sundown to become the ultimate partying hub and centers for football fanatics. Full of revelers busting about trying to find the perfect spot to unwind and while the night or time away. Bars owners invest heavily on décor, furnishings and sound systems. Some of these investments run into hundreds of millions. As an investor, you don’t leave anything to chance. Just as the saying goes, ‘use money to make money.’ If you talk to some of these investors, you will be surprised by the kind of revenues they generate on a good day and perhaps this could be the reason they don’t realize how much they lose in sales. When they see good revenues coming in, they think everything is ok hence no cause for alarm.

As an investor, your main goal is to safeguard every coin to your investment. You want returns within the shortest time possible hence every coin should count. In a club setting there are 3 main avenues of generating ROI: sales from beer, spirits and wines. How do you determine beer inventory? The record of what has been bought, less the record that is remaining after a busy night. If you bought 200 bottles of beer and what remains is 20 bottles, you made sales of 180 bottles. Therefore inventory for beer is easy to determine. How do you determine spirits’ inventory? Spirits are sold in 2 forms; as full bottles and as tots/shots. The first form is very easy to calculate its inventory, same procedure as beer. What about when it comes to tots/shots? This is the most challenging part of determining inventory and this is the focal point of shrinkage and you could be losing up to 40% of sales on average.

How do you determine available stock? How do you determine remaining stock after a busy night? How do you determine stock sold? As an investor every item sold at your premises should be accounted for to the latter. This is the only way you can safe guard your investment and ensure faster returns. Research conducted in various clubs indicates that tot/shots sales generate very good revenue. Many revelers prefer to purchase tots/shots to full bottles of either whisky or vodka for various reasons. On average a club sells about 20 bottles of spirits in form of tots/shots in a week.

For illustration let’s use a bottle of Johnnie Walker Red label 750ml which is very popular. This bottle has an inventory of 25 tots/shots of 30 ml. Before the bottle is opened, it contains 25tot/shots. If a club sells 20 bottles in a week, total sales are 500 tots/shots of 30ml. On average a tot/shot of this bottle goes for 250Ksh. Having sold 500 tots/shots of 30ml, one should generate revenue of 125,000Ksh in a week with zero shrinkage. However, on the other hand, the average shrinkage of each bottle is between 3-5 tots. Selling 20 bottles in a week makes a total shrinkage of 80 tots/shots. At a cost of 250 per tot/shot, the total amount lost through shrinkage is 20,000Ksh in a week. This simply means that profit margins are affected by every shrinkage. As a bar owner and investor the only way to safeguard investment is to device strategies that will help reduce shrinkage. Read my next article on how shrinkage happens hence losing 40% of sales generated from tots/shots.

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