Inventory Management is Margin Management

'Tis the week before Christmas and all through the mall, retailers are frantically trying to sell it ALL!?And in the process trying to extract the maximum gross margin $$$.?And also, in the process proving how difficult it is to achieve 5R inventory.?RIGHT product, at the RIGHT price, at the RIGHT place, at the RIGHT time, and in the RIGHT quantity.

Design is done.?Manufacturing is done.?Transit is done.?Distribution is done.?The promotional calendar is done. ?The hard part is done, right? ?It’s the week before Christmas and all that’s left is evaluating rate of sale and managing sku level pricing with an eye towards a timely exit of Fall/Winter product.?The high-volume gift shopping window is about to close, and the serious clearance efforts are about to kick in.

It's been a difficult season, but ever since early November it has been a lot more predictable, just based on the natural rhythm of the calendar.?Any early efforts to accelerate sales were over and the results were on the books.?At that point, inventory levels and days left on the calendar were hard Knowns.?Whether a retailer is counting weeks of supply (WOS) or days of inventory (DOI), the math starts to make most of the decisions in maximizing sales and gross margins $$$.?Or does it?

I walked the mall Wednesday, December 20th just to get a feel for how several different retailers looked.?Overall, most stores looked thoroughly shopped and comfortably sold down.?It was kind of a relief.?But a couple of sightings stood out as “Huh…???” moments.

I had walked Kohl’s the day before, 12/19/2022.?It too, looked thoroughly shopped and sold down.?Except for the fixture pictured below of men’s flannel shirts at $14.99.?Bulging.?And upon close inspection I could see why the fixture was bulging.?Color.?Somebody had decided to inject yellows and oranges and pinks and purples into many of the patterns.?It wasn’t working.?Kohl’s clearly owned more flannel shirts at that point than would be considered optimal.

Now let’s look at the fixture of men’s flannels in JCP.?Same retail price, $14.99…and almost empty.?But with totally predictable color and pattern work.?Very straightforward stuff.?The same fixture a?month ago was stacked 12-15 deep in each pattern.?Unfortunately I didn’t note the promo price a month ago.

It’s a week before Christmas and we are talking about men’s flannel shirts.?Both retailers probably have decades of data on this category and yet both retailers look like amateurs in managing the rate of sale and pricing and gross margin $$$ outcome.?

Why wasn’t Kohl’s at $12.99 or $9.99 by now??They had to have known 6 weeks ago that this category wasn’t tracking to plan. ?From the look of most of the rest of the Kohl’s store, they had plenty of traffic to sell down on a lot of their inventory.?How does a slow seller like this not get addressed in this highly time sensitive window?

Why wasn’t JCP still at $19.99, or even higher??Why would they allow themselves to sell out the week before Christmas??EOM January would have worked just fine.?This was a give-away of markdown $$$ that could have been spent MUCH more efficiently, if not outright saved and banked.

This is a simple observation on a simple, and long standing category of product.?There shouldn’t be anything tricky about managing men’s flannel shirts.?And yet two major retailers got it very wrong.?Based on prior years’ observations, LLBean will be carrying regular price flannel into February.?And when they do take markdowns, it will be a very surgical exercise, pattern by pattern.?History has taught them well.

This is all a painful reminder that achieving 5R inventory is damned difficult, even when there is abundant history and a low fashion quotient.

Right PRODUCT.?Right PRICE.?Right PLACE.?Right TIME.?Right QUANTITY.

#retail #assortmentplanning #inventorymanagement #OTB