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The need for resilience

Matching supply & demand has never been more challenging

The pandemic & subsequent disruptions have exposed weaknesses in the global retail supply chain. Shifts in demand & supply have seen retailers chasing inventory & overbuying, only to be faced with a consumer under pressure leading to less than forecasted demand. The effect? Matching supply and demand has never been more challenging.

Excess stock & margin erosion

Weaker customer demand has led to excess stock & margin erosion. In the US alone, retailer inventories increased by $78 billion, reaching approximately $740 billion in 2022. This overstock has led to brands resorting to heavy markdowns to stimulate demand.

Fragmented merchandise performance data leads to slow & inaccurate response to trends

With no single source of merchandise data and metrics like sell-through, achieved margin and stock cover merchandise teams waste valuable time building much of the planning analysis they need in Excel. This fragmented approach to merchandise metrics and data impacts the clarity and speed with which teams can respond to changes in demand.

Strategies to build resilience

Inventory visibility and collaboration

Forward thinking retailers are developing short & long term strategies to become more resilient across their merchandise business units. The core of these strategies is developing inventory visibility & collaboration around the right merchandise data. Being able to accurately and immediately analyse sell-throughs and inventory levels (store & warehousing) empowers buying & planning teams with a higher cadence of interventions. This data helps decisions around pre-season and in-season assortment planning to become far more accurate and efficient.

Segmented approach to assortment planning

Another strategy that retailers are adopting is the segmented approach to assortment planning. Being able to analyse your merchandise by customer segment, margin, colour, style and seasonality allows merchandise teams to build far more targeted and customer-centric assortments and conduct robust in-season and post-seasonal reviews. These reviews then serve as opportunities for targeted interventions which in turn maximises the bottom line.

Leveraging data analytics through cloud merchandise data warehousing

Centralising all merchandise data into a cloud merchandise data warehouse reduces the time it takes for teams to access critical data and metrics needed in the planning and buying process and improves the accuracy of measuring key trends. Having multiple versions of the truth when it comes to a retailer’s sales and inventory data and metrics introduces mistrust in critical sell-through information and key-person risk as well as means teams waste valuable time building metrics and assortment plans in Excel.

By taking targeted action in the areas above, retailers can build resilient & agile merchandise assortment planning practices which will help prepare for future disruptions. Building resilience requires both short term measures to address immediate inventory issues as well as long-term strategies to develop the necessary process and organisational capabilities. Retailers who successfully implement these changes will emerge as industry leaders, while those who fail to adapt may struggle to compete in the evolving retail landscape.