Magazines Archives - 2009 September

Retailers need to ‘localise’ inventory to win
Story 13 - Retail Technology

While the general consensus among retailers is that they have a good hold of their inventory positions, the reality remains that, increasingly, more retailers are plagued by out-of-stock situations on fast-moving goods. According to a new study conducted between May and July this year by retailer-led organisation Retail Systems Research (RSR) Group, retailers are “plagued by inventory stagflation: high inventories and high out of stocks”.

The report stated: “In a time of merchant princes, ‘product’ was once king — the right assortment could make or break a retailer. In today’s reality, inventory is the lifeblood of retail.” As a result of evolving consumer demand, as 73% of respondents indicated in the study, how retailers “respond” to consumer is crucial. “Consumers are not passive participants in the retail equation — they are more, not less, demanding of their retailers … [they] are using e-channels and catalogues to research products, compare prices and build shopping lists before setting foot in the store,” it continued.

Titled Precision Inventory Management in the Age of Localization — Benchmark 2009, the study also highlighted that localisation of retailers’ products, promotions and prices has also become a high priority among retail winners, adding that “pursuing a customer-centric strategy necessitates that the retailer must carry products that are relevant to its customers”. Apart from giving their customers what they want, retail winners also reported a 64% increase in their gross margin over the past two years of realigning their product assortment, compared with a 25% growth reported by laggards.

“Retailers adhere to the practice of getting the right product in the right place at the right time and in the right quantity … But in today’s demanding consumer environment, and with the expectation of local assortments, retailers are required to operate with an even greater level of inventory precision and sophistication,” added Casey Chroust, executive vicepresident of retail operations at RILA.

Brian Kilcourse, managing partner at RSR Research and co-author of the study, also pointed out that winners associate better inventory management with the ability to “localise the value of offering for consumers and to support emerging cross-channel shopping”, with 82% of winners working harder to meet those needs than 56% of laggards.

“I think the most significant finding from this report comes from Retail Winners — better performing retailers … Unlike in previous years, this year, winners reported an increase in inventory. But they were also able to simultaneously improve turns and margins as they did so. This shows that while localisation is going to put pressure on inventory levels, it’s also going to pay off by moving more inventory at better prices,” Nikki Baird, managing partner at RSR Research and co-author of the report, concluded.

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