Interview conducted by:
Lynn Fosse, Senior Editor, CEOCFO Magazine, Published – October 7, 2019
Mr. Fields, what is the focus at Park City Group, today?
How do most retailers handle these three areas of business?
The Park City Group way is an automated version where we have an extraordinary database, easily the largest in the world, which are suppliers vetted in our compliance management system. It’s tens of thousands of vendors. We know what product categories they are in, and more importantly we know their level of compliance and safety so we can help a retailer select a vendor that at the end of the day, he could do business with from a compliance and safety perspective. Why waste your time vetting someone that in the end could not be a vendor to you? We automate supplier discovery and vetting, taking weeks or months out of new vendor discovery and onboarding.
Next let’s talk about compliance management. Prior to the enactment of the Food Safety Modernization Act seven or eight years ago, supplier compliance management was not done well, done manually, and frankly had major gaps in the safety of the food supply chain. We have an automated system by which we can help retailers evaluate the compliance and safety of their typically one to two thousand vendors, to meet not only regulatory requirements by also the expectation of consumers, who have frankly become much discriminating over the last decade. As consumer tastes and expectations have begun to become more segmented, meaning now you want mustard that is locally produced that is non-gmo, and so on, and the more social variables or health variables, organic, natural, etcetera, that consumers gravitate to, the more difficult the job of retailing has become.
One of our customers two years ago had forty varieties or SKUs of mustard and today they have well over two hundred. Let us think about what that means. The proliferation of SKUs driven by consumer changing preferences, is reducing the shelf space per SKU, that is called shelf holding power. In other words, if you go into the mustard section of a store, it is not ten times bigger than it was ten years ago; it is a little bit bigger, but that means each one of the products has fewer items on the shelf, less holding power. Instead of having a whole case on the shelf, they might only have three or four, so what has that done? It means the SKU you want is more likely to be out of stock than in the past. It is harder to stay in stock than it was. Furthermore, that is exploding the balance sheets of retailers because they have to carry more products at a one-case or more level so their balance sheets are exploding inventory, but at the same time out-of-stocks are going up. What is that doing? It is driving consumers out of stores. What’s the result? One recent study shows that 24% of Amazon’s first time shoppers were there because they could not buy the product in their retail store. Out-of-stocks are driving consumers to the Amazon platform. Consumers changing tastes are driving the out-of-stocks, so it is sort of a Catch 22 for retailers. The more they try to follow the consumer, the greater their out-of-stocks and the more consumers are leaving their stores and going to the Amazon platform.
Do retailers understand that?
No, it appears not many do, or if they do, they aren’t doing enough to address it.
We have developed some interesting technology that enables us to see if something is in stock, out of stock or likely to be out of stock and we help our customers with that information, as well as management to significantly reduce out-of-stocks. And we are getting incredible results. As a retailer, you have to give the customer what they want, but now you have to double down in terms of watching the level of out-of-stocks that all the product variation is creating for you. Another important element of this evolution is that retailers have reduced in-store labor to maintain their margins, and that has resulted in less attention to out-of-stocks in the store, at the same time out-of-stocks increasing. And that is how it got out of hand.
How does this work with fresh merchandise?
You mentioned vetting the vendors. How do you continually do that?
How are you reaching out to retailers, vendors and others?
How is business?
Business is unbelievable!
Are you strictly in the US?
Do your customers take advantage of all the areas you can help them with or do they sometimes pick and choose?
How do you implement your service?
How does ReposiTrak AI come into play?
Why should the business and the investment community pay attention to Park City Group?
Honestly, we are really good at what we do and the proof is in the pudding and we can demonstrate it pretty short-order. From an investor perspective, I think the kind of investor that should be interested in us is someone who goes, wait a minute, I am not here for the quarter. I think companies that deliver on their brand promise, that help their customers become more successful and that are themselves profitable, are the kinds of companies with compelling growth potential and therefore that kind of investor should be interested in us. But not all investors.