Out-of-Stocks: An Article From Retail Systems Research

By Paula Rosenblum, Managing Partner

Last Friday, the Wall Street Journal acknowledged what some retail insiders have been talking about for several months: holiday inventory plans are down – way down. The article quotes the National Retail Federation (NRF) report of a 16.5% reduction in cargo traffic plans for the peak holiday receiving months of August, September and October. It also cites continued inconsistency in consumer demand as reflected in erratic monthly comparable store sales results as justification for ordering fewer goods.

On the surface, reducing inventories appears to be logical and sensible behavior. Working capital is in short supply, consumer demand seems really unpredictable, and Wall Street has been rewarding retailers whose reductions in comparable store inventories exceed reductions in their comparable store sales.Whether or not specific retailers ended last season with excess inventory, RSR believes there is probably not enough merchandise in the pipeline to satisfy pent-up consumer demand this year. Without careful, timely and clinical business intelligence and reaction, this could put retailers in the worst of all possible worlds: lack of merchandise to satisfy demand driving down the top line, continued consumer expectations for a highly promotional environment driving down net gross margin dollars, and dissatisfied shoppers unable to find the products they want for the 2009 holiday season.

This is where a good seasonal plan developed from your POS software with built-in retail stock ledger and open-to-buy planning will get you closer to that magic mark of inventory stock perfection. You will never get it on the button, but you can get it close enough to have enough inventory for sell and very little to mark down. This might be the most testing time of your retail life and some good advice from your POS software will not hurt.