How NRF Members Are Ending Overstock & Understock Nightmares While Maximizing Margins

NRF logo 150 b&redAs thousands of retailers descend upon the NRF Annual Convention & Expo this week in New York, whether big or small, they all have at least two things in common: 1. The myriad challenges of multichannel functioning; and, 2. Having the right inventory at the right place at the right time AT THE RIGHT PRICE -- in order to preserve, increase, and maximize revenue margins.    

Thankfully, retail technology and optimization solutions are now readily available to give retailers many answers to how to manage their inventory and price wisely; but until these technologies began to be adopted, most retailers unwittingly created their own inventory distortions, which led to lost sales and overstocks, which they then discounted deeply!

The history of understock and overstock went something like this:

* Merchandise ordering was done seat-of-the-pants, instinctively, we've always done it this way...

* When products didn't sell well at specific stores, retailers would mark down remaining inventory in order to clear it out.

* Where products were still in demand, but before inventory could be replenished, retailers lost sales.

* When there was no more inventory in general in the distribution center, retailers lost sales of products that they could no longer procure.

* Not to mention, when there were out-of-stocks, customers would turn to another competitor for immediate gratification, and purchase from them.

Net Result:

The lost sales painted a (distorted) picture of lower demand; the retailer would then order and allocate less inventory to stores in the future; and the cycle was repeated based on the distortion.

Analytics to the rescue

Using a range of retail intelligence solutions such as price intelligence, assortment planning tools, predictive analytics, lifecycle management, advanced trending, and business scenarios, retailers are climbing back on top of the problem. Retailers are rapidly catching on to advanced planning based on historical demand and other analytics to make the most efficient use of their products, especially pricing right, in order to realize maximum value from their merchandise.

Armed with accurate data and analytics, retailers can now:

1. Plan ahead knowledgably, which merchandise to stock.

2. Plan ahead which merchandise to stock in a location where there is greater demand.

3. Decrease merchandise stock where there is less demand.

4. Move merchandise to where there is a high demand from customers willing to pay a higher price.  

5. Charge more for the merchandise that is still in high demand when you have it in stock but your competitor doesn't have it any more.

The whole idea is margin wins by having the right merchandise at the right place at the right time -- and getting rid of it at the best price.  

Bottom Line For Your Bottom Line

In today's fast-moving, competitive marketplace, every retailer needs to have the right product at the right place at the right time (Harvard Business Review) in order to make the sale and recognize the greatest profit.

Using retail intelligence technologies and analytics, retailers can fine-tune supply to fit demand, make well-informed consumer-driven pricing decisions, and, ultimately, minimize costs, eliminate costly mistakes, and maximize profit all around.  


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Naomi K. Shapiro, Strategic Market Communications

About Author

Seasoned strategic market communicator, Naomi headed public information for several academic and professional associations as well as founding Creative Brilliance Associates Market Communications. She created and published Brilliant Ideas for Publishers Magazine and authored popular newspaper trade reference, The Brilliant Book of Promotions, Sales Tools & Special Events. Simultaneously, Naomi savored the world as an adventure travel writer that included trekking on glaciers, fishing with saltwater crocodiles and swimming with piranhas. Naomi holds her M.A. from the University of Wisconsin, including participation in a unique industry-science-technical writing program.
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