Retailers Do More With Less Inventory

Saks and Macy's are among the retailers showing new discipline in response to the slowdown in consumer spending.

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Wassner pointed out that his vendor clients are making corresponding adjustments to cuts in orders, from cutting back on staff to reducing styles within a collection. “They’re also not speculating on inventory levels. They used to anticipate reorders of a certain percentage, but now they are anticipating cancellation of a certain percentage,” Wassner said.

And they are delaying receipts in many cases, he said: “Many retailers are asking for staggered deliveries. It used to be retailers couldn’t wait until mid-June for fall goods, but now they are having merchandise shipped later and closer to season so they are not sitting in the stores. This is how people are buying now and it means there will be less to mark down later on. Our vendor clients had been trying to get the ship dates to change for a long time, but retailers had refused to accept it. Now this sea change in shipping is seen as a logical move in both good and bad times.”

Retail consultant Walter Loeb of Loeb Associates said, “Retailers are planning very tightly. They are finding that they can now do 5 percent more with the stock they have on hand. If business continues to be even a little bit better than expected, that will drop to the bottom line and help a lot. It helps even more with lower inventories. I see retailers editing the merchandise and being more focused. They are eliminating peripheral merchandise. We are also seeing a new business model where they are asking for goods to be shipped closer to season for the consumer to buy when needed.”

Loeb said every retailer is trying to have goods shipped from overseas in less time, and said J.C. Penney Co. Inc. has reduced overseas shipping to just 17 weeks. That’s a drop from the former customary time frame of 52 weeks within the last year. Stores such as Zara, H&M and Forever 21 have shown that fast turnarounds are indeed possible.

Loeb sees all these changes as good news for the retailer. “The more the retailer can control its inventory, the greater is its ability to improve margins. There is a direct relationship between inventory controls and better sell-throughs, because those two factors help boost margins,” he said.


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