Let talk about retail's dirty little secret!
Having a successful retail business depends on offering the right product that customers want, (size, style and colour) at the right price, at the right time. There are so many factors that retailers must consider when buying new stock. They decide on a couple of items that they think will sell in ten colours and in every size imaginable.
But carrying the wrong stock (the kind that your customers don't want) or being out of stock, can be a true retail nightmare and in the worst case, it can be the single decision that will make or break your business. Not only do wrong and out of stock situations lead to lost sales, but they also result in reduced customer satisfaction and lower loyalty levels, as shoppers often feel let down when you don’t have what they’re looking for, and the last thing you want is to disappoint your cash cows.
Furthermore, according to a survey done by iVend Retail by CitiXsys, a global company that delivers Enterprise Retail Management Solutions via the Cloud, as many as 96% of global shoppers have left a store without making a purchase on at least one occasion for a number of reasons, including:
They couldn’t find the product they needed (67.3%);
The store didn’t have the items they wanted (66.3%);
Lines were too long (51.3%); and
Poor customer service (39.1%).
The top two are the biggest struggles small brick and mortar stores face today. Results caused by these top two problems are:
heavy discounting – reducing the potential profit per product all the way down to as little as 10% (if not more).
dead inventory – no profit made at all and a solid contribution to the 63,000 tonnes of textiles that are sent by Ireland (only) to landfills per year.
This dead inventory becomes the silent killer of retailers.
As a Menswear store owner, depending on your margin (but let’s assume you hold a 60% mark up), you can have €10,000 of dead inventory that can actually represent €25,000 worth of retail sales and €16,000 in gross profits. Instead, valuable capital is now tied up in what could have been put towards hiring better talents, marketing or more the obvious, new styles and designs that could actually bring in increased revenue.
Part of the solution isn't in addressing how little consumers are buying, but in how much retailers are purchasing in the first place. Buying leaner (and thus being more comfortable with stock-outs) has been the source of recent success for some retailers, but much of the industry still needs to catch up.
But hey, learning to buy lean is tricky. Without a sixth sense, how can a retailer predict what styles, colours and sizes will sell at the right volume? Even if retailers knew exactly what customers wanted, they can’t predict what foot traffic will be or control what their competitors will be offering. But that doesn’t mean there are no solutions either and some retailers are already responding to these risks in a few ways.
Some brands turn to inventory software solutions to quicker analyse their product performance from previous seasons, to see what sizes, colours and styles did and did not work.
Others, invite their VIP customers into their store or turn to social media to share photos for upcoming collections to see what styles their customers prefer before placing an order.
Some spread their risk across more products to minimise the threat of certain items not performing. Retailers should also reassess their "need" to produce a certain amount of new styles each month.
But these solutions still don't solve the problem of dead stock.
So what can retailers do to really move forward in a more cost-efficient, sustainable way?
Well, a few things.
First, retailers can choose to only stock a few garments to test for product hype, then, order on demand.
Second, they can stock a small number of garments in store (<10), but also offer their customers the opportunity to easily change colour, fabric, size and designs on these "10 pieces".
As new B2B retail technology companies are emerging, like RJ MTM, retailers now have the opportunity to reduce stock while still meeting in-store customer demand. Margins are maintained all year round (imagine), and with less capital tied up in unpredictable stock sell-through, watch your dead stock disappear.
Regardless of the path, you take to success, retailers Worldwide should address their inventory operations not just with their business in mind, but also with the Global environment in mind, constantly assessing ways to better help reduce overproduction and global textile apparel waste.
Thanks for reading, I hope you guys enjoy the content I assemble.
Cheers,
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