GameStop: Managing Inventory

I’m really curious about your core lessons from running such a large retail chain, specifically around retail management and really organizing operations, organizing supply chain to make inventory flow through the network as efficiently as possible, what were the big lessons that you learned from your career in that sense?

That’s a good question. First of all, the Chairman and Founder of our company Dan DaMatteo would literally spend every single day looking at inventory spreadsheets. Focus from the top is incredibly important. I try to continue that practice because if you don’t pay attention to it, it’s going to get out of control. I think that you need to be very careful in terms of what you’re buying and how much you’re buying and your skew proliferation. At the same time, you’ve got to make sure you’re not out of stock, so we would measure every day what the out of stock was and the items, which probably represents about 70 percent of the sales. It was really critical to keep your eye on the inventory because it was amazing how inventory can get out of whack in three days. We try to do a good job and always being vigilant on that.

What exactly did your spreadsheet have? Were they columns or rows, what were you really tracking, specifically?

We tracked obviously how much you have. Then you would track weeks of supply. On the spreadsheet, you would have how many sales were last week, and you would track returns on it and you would track – those are probably the key items, there might be a few other things, but it’s really a matter of knowing how many weeks of supply you have and if you start bumping up against more than something of like two, you know you have too much.

You aim for around two weeks’ supply and you obviously look at the skew level for the inventory?

Absolutely. You only need to look at the top 50 or 100 you don’t need to look at the little laggards that are not having any sales.

What would you do if inventory got out of control and you were at three weeks, pushing four weeks, for example, how would you react to that?

In that business, you have things like defective allowance, you have price protection with the vendors. There are things you can do to mitigate issues, or you just eat it and you try to sell everything off. The last thing you want to do is carry it because you don’t want to take a write down, which is always the first choice of your merchants. They don’t want to take the write off of 100,000 units of Fallout. They’d love to see it just carry. You don’t want to definitely do that.