This holiday season, big-brand retailers are doing a delicate balancing act when it comes to inventory management. Having just the right amount of merchandise for in-store and online shoppers is the name of the game, and since this time of year is crucial for sales and profits –the National Retail Federation is predicting that holiday sales will grow 3.6 percent from last year – inventory management is critical to long-term success. For many retailers, holiday sales could translate to 20 to 40 percent of overall sales for the entire year.
Wal-Mart doesn’t want to run out of anything this year. Their strategy is to stock up on popular sellers and is preparing to “make tens of thousands more items from its online assortment available for same-day store pickup…”
However, Kohl’s, which has experienced declining sales, is “ordering more cautiously and judiciously” so that stores do not end up with too much unsold inventory at the end of the holiday season. The department store chain has recently seen improved profits and believes its “less is more” inventory management strategy is helping with that.
Macy’s and Nordstrom are also taking on a similar strategy. In fact, The Wall Street Journal reports that, “lighter inventory is in vogue…But light inventory can cut both ways. Having lower inventory makes it more difficult for retailers to maximize sales. That, in turn, makes it tougher for them to cover the fixed costs of running stores and administrative expenses.”
There are so many factors to consider since “it doesn’t take much to disrupt the inventory balance.” Selling out of an item and ordering more doesn’t necessarily mean more profits, which is why retailers must have an inventory management system in place to help maximize long-term growth.