PERSPECTIVES

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  Post COVID-19: Five Stages of Inventory Management

  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!
     
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  See the Sales Potential in Your Inventory

  Managing inventory – arguably the #1 responsibility of a retailer – has been beset by a host of new and sometimes daunting challenges since 2020.
  
  The last few months of 2022 only made matters worse. As supply chain issues seemed to subside, foreboding talk of a recession dominated, dampening customer spending. 
  
  Many retailers are feeling a bit over-inventoried as a result. Similar to that sense of having a few added pounds after the holidays.
  
  In other words, a situation that is crying out for perspective. And The ROI has you covered on that!

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  "The envelope, please"

  Here we are, in the first week of December, in this tumultuous pandemic year of 2020.
  
  Maybe more than ever, you need to have a grip on your cash flow! What will you cash flow look like during December, January and February?
  
  Since you must be able to make informed decisions about your business, every day, an up-to-date cash flow calculation is essential. Remember, profits are interesting, but it's cash flow that's significant!
  
  Cash flow doesn't have to be fancy. In fact, what most owners need is just to have the basics on the back of an envelope. The savvy ones always have that with them.

• "There's HOW much to know about retailing?"

  A few years ago we were on a PBS news show about retailing's ups and downs. Several months later, one of us ran into a teacher of one of our kids. That person excitedly mentioned having seen us on TV, saying "I didn't know you knew so much about retailing." (Yep, known just as someone's parent, right?)
  
  But then this very well-educated person said the key thing: "I never knew there was so much to be known about retailing!"
  
  Well, that incident happened a few years ago when retailing was perhaps more understandable, even more predictable. Alas, those days are history! Today, nothing in retailing is quite as understandable or as predictable as before. Or as manageable!
   

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  Not Just the Turkeys This Year

  Each year at this time, our thoughts turn to turkeys. 
  
  No, not the ones that will adorn many dining tables on Thursday. But the "turkeys" lurking amidst your inventory. You know; non-selling, distressed, slow-moving, old, unappealing leftovers among your merchandise. 
  
  But this year, frankly, our worries extend beyond the turkeys. 
  
  Here are some of the reasons why.

  • All the gloom and doom talk about the economy and recession continues, affecting consumer attitudes.
  
  
  • With few pandemic or supply chain issues, many retailers have more-than-ample inventory this year, unlike the previous two years.
  
  
  • Inflation is impossible to ignore, especially for those who drive cars or shop for groceries.
  
   

  As a result, in this environment, consumers are scaling back their discretionary purchases, and/or choosing to spend on travel, dining out, or other experiences versus retail merchandise. 
  
  Not an upbeat prospect for retailers, is it?

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  The New Dynamics of Merchandise Mix

  The Retail Owners Institute® has developed a retail strategy for "Inventory Management Going Forward." 
  
  As we often do, it was recapped as an unassuming chart (see above) identifying the Five Stages of Merchandise Mix Management, from "Before COVID-19" to the "New Normal?"