Predictive demand analytics can help retailers sustain healthy stock levels and minimize markdowns.
Retail Dive reports that retailers “have largely gotten their inventory under control ahead of the holiday shopping season, National Retail Federation CEO Matthew Shay told the press on Monday.”
“The industry is in a better place and will be well positioned for what happens after the holiday season as we get into the spring selling season,” Shay said during the Port of Los Angeles’ monthly media briefing.
In a related article “By the numbers: How retailers stack up on inventory”, Retail Dive reported year-over-year metrics from Walmart, Target, Kohl’s, Macy’s, Dollar Tree, American Eagle Outfitters, and other leading retailers. Most reported reductions in inventory, improved inventory turnover ratios, and increased operating margins compared to the prior year.
In the effort to maximize margins, the leaner inventories are a good place to start heading into retail’s “golden quarter” as clothing and accessories chains, department stores, and other retailers may be able to clear inventories with fewer markdowns as they exit the holiday season. Improved demand forecasting that can better inform store-level inventory replenishment as well as marketing and promotions will be key to effectively navigating the season as it peaks and then winds down.
Of course, the overall economic environment, consumer confidence levels, and other factors remain fluid and will impact retail spending. One of the variables, as always, will be the weather. A Planalytics’ blog post looked at weather sensitivity during the end-of-year period: “Sector-level sensitivities can translate into millions of topline dollars – to the positive or the negative – as it applies to a retailer’s total sales. Specific seasonal product categories are generally subject to larger swings and oftentimes have sensitivities of 10-25% or higher.”
Predictive weather-driven demand calculations enable retailers to address the impact that changing conditions have on consumer buying behavior. Adjusting demand outlooks to account for weather impacts helps retailers strike a better balance between having enough on hand to avoid lost sales and absorbing the costs of having too much inventory. Many retailers have made great progress on inventories in the last year and leveraging weather-driven demand analytics for planning, markdowns, and digital marketing can help sustain these improvements.