From The Co-Founders


Tips, Tactics & Strategic Insights and Commentary
from The ROI Co-Founders, Pat Johnson and Dick Outcalt
Outcalt & Johnson: Retail Strategists LLC; Retail Turnaround Experts

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"Unprecedented." What? Again??

Consider these front-page headlines and the accompanying chart (see above) from the June 6 Wall Street Journal*  "Surplus Inventory Piles Up", "Stores Are Stuck with the Wrong Items." 

Look at it carefully, and think of your operation in comparison. How do your numbers compare? Are you as shocked as we are?

How did this happen? 

Partly as responses to the unprecedented impacts of the pandemic. 

In retrospect, these seem to be over-reactions

  • Some retailers had decided to "buy products aggressively amid supply-chain snarls and out-of-stocks in past quarters." 
  • Retailers are placing orders with factories earlier to ensure goods arrive on time. That has made it harder to forecast demand and style trends, some executives said.
  • Some of the bloat is due to inventory that arrived late as a result of factory closures and other supply-chain delays. 
  • Plus, there has been a sudden improvement of moving goods through U.S. ports. 

But there are other unprecedented factors at play. There is no "getting back to normal," and the proven methods of anticipating consumer behavior don't seem as relevant today. 

  • Shifts in customer spending have "caught some retailers off guard and leaving them with excess goods to be marked down." 
  • According to Macy's chief executive Jeff Gennette, "the shift in consumer spending was dramatic and happened faster than the company had anticipated."
  • “There was a lot of misforecasting in terms of how fast that shift would go back the other way,” said Citi analyst Paul Lejuez.

No one is immune to "being caught off-guard" by rapidly changing and disruptive events, whether worldwide inflation, war in Ukraine, gun violence in America, inability to hire or retain good employees, etc. They are unprecedented, after all. 

So, what to do?

First, don't delay.
Be ready to take action. Especially if your sales are below plan, take steps now to reduce your inventory levels. Get out in front of major markdowns by the chains.  

Next, look ahead. And adjust!
Revisit your inventory buying plans, by department. (See The ROI's Multi-Department Open-to-Buy Calculator to make that happen quickly.)

Benefit from seeing, in advance, how your purchasing plans would change with each change in sales, margins, and turns.

  • Considering a major blowout sale? Raise sales, slash margins, adjust turns – what does your purchasing plan look like now? 
  • Consider other scenarios, as many as you want, for as few or as many departments as you choose. 
  • You – and your buyers – can do all this comparing of choices. And, each one includes its own buying plan. By month. By department. By YOU!

Then, your judgment comes to the fore. But, thanks to the power of "playing what if...?", of looking ahead, comparing outcomes, yours will be informed judgment. 

There is power in that. Unprecedented power!

Surplus Inventory Piles Up in Stores as Spending Shifts, Suzanne Kapner, Wall Street Journal, June 6, 2022.

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