Last year we identified a worrying trend of excess inventory building up in our client stores.
Although all of these stores were forced to run lean in 2020 and 2021 due to pandemic-related supply issues, many returned to their old buying habits. This was despite the fact that we proved that we could make just as much money, or more, on limited inventory.
So, we issued a client challenge to drive down their inventory levels by July of this year. What we don’t want is retailers entering the unpredictable fall election season burdened by extra inventory.
So far, most clients have begun to work on this challenge, but others are just starting. Looking at the data, some stores are overbought through May of this year.
So, what can we do? ‘We can start making sure we are taking the appropriate markdown levels to clear extra inventory. Then we need to look at the on-order for future seasons.
At this point we recommend that you hold back more of your open-to-buy than you have in the past year for the fall season. A general rule is that we hold back 10% to 25%, depending on the category. For the Fall season coming up we are leaning more toward the 25% range.
New Receipt Planning Tool
To make this easier for our clients, we recently introduced a new tool to the Blacks Portal called “Automated Hold Back.” This allows our analysts to easily select a percentage of their client’s planned receipts to hold back for each month of the season, excluding the first month when we always need inventory to jump start sales.
As the season gets closer, the hold back can be lowered until the first month of the season. Then, when each month becomes current the hold back will release because we always need to spend our OTB as we enter a current month to generate sales.
With this tool, we hope to help merchants take a more systematic approach to landing receipts, in order to optimize sales and reduce excess inventory.
2024 Receipt Planning
So, what is your approach to minimizing the risk of excess inventory this year? Remember that the spring season is forecast to be fairly strong, but we will likely face headwinds going into fall. This happens every election cycle — uncertainty takes a toll on consumer confidence. The good news is we have time and tools to plan for it.
If you need help with your 2024 planning, please get in touch.
