Post COVID-19: Five Stages of Inventory Management
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- by ROI Co-Founders |
- April 10, 2020 |
- COVID 19 |
Customers have become very tentative and “prone to thrift”, as the economists say. As the economy reopens, the lowered sales demand drastically reduced inventory levels.
- However, as the inventory quantity is reduced, the new imperative is the mix of merchandise.
- Discretionary spending will lag; retailers must expand and feature the basics, the “never-outs,” like never before.
Here are our BIG PICTURE thoughts on the stages that might unfold.
- Total inventory levels must be reduced, especially at first, and then grow over time as sales levels return.
- Importantly, the MIX of merchandise must change. Significantly!
FIVE STAGES OF MERCHANDISE MIX MANAGEMENT
STAGE 1: WHERE YOU WERE PRE-COVID 19
STAGE 2: RE-OPENING MIX
- Reduce inventory levels drastically; generate cash (eBay? Your own e-commerce? Etc, etc.)
- Expedite liquidating discretionary merchandise; upon re-opening, that likely will be the least desired
- Have predominantly basic stock (“never-outs”) when re-open
STAGE 3: THE NEXT PHASE
- Tempered increase of inventory levels
- Adjust mix; more “expanded basics”
- GMROI will be more important than ever
STAGE 4: “WHEW! NOW WE CAN GET BACK TO NORMAL!”
- Careful! The customers will be back, but still with a frugal mindset.
- Beware too much “discretionary” merchandise, too soon (even though that’s what you love!)
STAGE 5: THE NEW NORMAL?
- Customers will continue to be cautious for the foreseeable future
- Overall inventory levels may need to settle back a bit
- Assortments and mix must be carefully edited for your “most profitable customer”
AND NOW, YOUR BIG PICTURE THINKING
Experienced retailers know this instinctively. We offer these charts (which are not based on any specific operation or numbers, or timeline) as an example of how you might quickly bring other folks up to speed with the changes you must be making.
And we hope it might inspire you to make your own "Big Picture" charts. Remember, no specific numbers, no definite timetables. Just Big Picture ideas: What might your merchandise mix look like at each of these five stages?
Nobody knows your business better than you. Get cracking!!