Inventory Management

Beating the markdown game

Better inventory management is needed to prevent markdowns from taking a major toll on the bottom line.

Markdowns clearly take a toll on the bottomline – but the extent to which is staggering.

An article in ChainStore Age came out in early February that laid out how much money retailers leave on the table when it comes to markdowns. The article, which centers around a recently published survey of 200 senior retail decision-makers in theU.S., indicates that non-grocery retailers lost a whopping $300 billion in revenues last year alone as a result of markdowns – roughly 12% of their total sales. In fact, only two-thirds or 60% of non-grocery sales in the U.S. were made at full price.

The “Revealing the Hidden Costs of Poor Inventory Management” survey asked respondents about their inventory management practices, including how much inventory they sell at full price, factors they believe impact their markdown rates and what they are doing to make more informed inventory decisions. Many retailers cited issues like unseasonal weather, sudden shifts in consumer behavior, the influx of additional selling channels, rising customer demand, and unforeseen promotional activities from competitors as the reason many of their products failed to sell at full price. However, the report also revealed that poor inventory decisions – such as overbuying, buying the wrong type of products and then misallocating inventory – are responsible for an estimated 53% of unplanned markdown costs for retailers.

The results of the survey were worse among retailers that sell both online and offline: Only 6.3% of multichannel retailers said they are able to sell 90-100% of their inventory at full price, versus the 15% overall average. Just under 30% indicated that they sold between 70% and 100% of their inventory at full price last year, versus the 49.5% average across retail.

Clearly, better inventory management is needed to help retailers reduce unplanned markdowns and thus improve their bottom line. The biggest challenge retailers face in doing so, according to the report, is adopting advanced planning technology and letting go of their spreadsheets when it comes to making inventory decisions.

Amicis Solutions can help. Our end-to-end omnichannel demand management technology enables retailers to keep pace with trends and seasonality, provides inventory modelling to ensure products are in the right place at the right time, as well as builds cost-effective ordering plans to achieve targeted service levels. Retailers rely on Amicis to optimize their entire retail planning process in order to make informed decisions that help them earn more revenue and market share. Contact us today to learn more.

Justin Aggelakos
Director of Marketing
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