Stores like J.C. Penney are facing an uphill battle with online competitors, increasing seasonality, and evolving customer preferences. For its first fiscal quarter this year, J.C. Penney’s inventory was down 1.4 percent, but up by 2.6 percent with comparable store sales.
With competition from stores like Amazon and Target, J.C. Penney hired a pricing strategist. What else can be done to trim excess inventory? And why is seasonality so difficult?
When inventory increases
The problem with competitors like Amazon is that they are often more convenient than brick-and-mortar stores. For instance, even in bad weather, shoppers can jump online and utilize Amazon’s two-day or same-day shipping.
This shift in how merchandise is delivered is changing customer preferences and leading to shorter product life cycles, which impacts inventory levels. Businesses need to be customer-centric and develop proper inventory optimization strategies. Inventory optimization strategies should be created, implemented, and managed via software that delivers flexibility, what-if scenario planning, and testing.
Developing inventory optimization strategies
For omni-channel businesses, excess inventory is a problem. E-commerce advances mean customer expectations are higher and “out of stock” isn’t acceptable. Retailers have to break down silos to access and offer the entire network of inventory.
Omni-channel inventory optimization is a way to accommodate the multiple purchasing requests that come in. It aligns replenishment objects and forecasting with fulfillment strategies to fine-tune inventory levels across selling experiences.
Retailers should include “pick up in-store” and “ship from the store” options in today’s e-commerce world. Because inventory demand fluctuates across sales channels, given promotions, trends, and seasonality, retailers need insight into the forecasted demand and how customers want to receive goods.
Addressing inventory pain points
In addressing inventory problems, following are a few suggestions:
- Warehouse maintenance: Instead of renting space, consider contracting with third-party logistics providers.
- Tracking inventory: Utilize inventory management software and don’t track inventory by hand to avoid human errors.
- Overstocks and seasonality: Seasonality can be difficult. Items have to be stored between seasons, may not be in demand next season, and still have to be counted. To address this, use demand forecasting software to track trends and forecast future demand.
With seasonal sales and overstocks, use omni-channel inventory optimization software and inventory forecasting software to forecast higher online shopping and lower brick-and-mortar sales during bad weather.
- Expediting: Tracking shipments can be time-consuming, but B2B e-procurement networks can streamline connections between retailers and suppliers.
- Supply chain issues: Supply chains may have areas that need improvement. Consider a supply chain consultant and supply chain management software for expert assistance.
Establishing omni-channel best practices
Typically, with omni-channel shoppers (those who utilize both brick-and-mortar and e-commerce stores), retailers need strategies to engage them, bring them into stores, and have them shop online.
To maximize omni-channel best practices, focus on:
- Online-to-store and store-to-online options to fuel traffic
- Store personalization and demand-driven replenishment to optimize “custom” shopping features based on historical demands and seasonal impacts
- Data-driven marketing to channel messages across all media platforms
- Retail mobile engagement and dynamic customer segmentation
- Online activity to fuel personalized engagement
- Big data and customer-centered loyalty to drive loyalty programs
- Social CRM optimization techniques, including sales driven insights and real-time merchandise marketing
As retail evolves, the pressure to meet customer demands becomes even greater. Retailers need to optimize channels and integrate brick-and-mortar with e-commerce. In an ultra-complex and highly competitive world, retailers will need to analyze data, derive value on shopper preferences, and take an omni view of inventory to keep inventory numbers down and sales up.