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Optimise your inventory to increase sales and mitigate against economic uncertainty.
The UK’s decision to leave the European Union has created a huge level of noise, ambiguity and uncertainty for retailers, and this is placing upward pressure on the cost of goods and on margins. We see:
- Inflationary impacts on imported goods are already leaving many consumers with less disposable income and are creating an ever-more competitive retail environment
- The trend towards global sourcing in retail means the weakness of sterling causes the cost of goods to rise, squeezing margins and profitability
- Uncertainty in future trade agreements may result in increases in duty and tariffs for imported goods.
Add to this the downward pricing pressure from an increasingly competitive omnichannel, cross-border retail landscape, and margins are under more pressure than ever.
So the challenge for retailers becomes how to maximise the return on the inventory that they own.
Reducing internal costs can mitigate gross margin pressures. An often-ignored opportunity area is in optimising inventory deployment to maximise availability and full-margin sales, while reducing markdown and clearance costs.
What if you could increase your full-price sell-through by 10%, or reduce the margin impact of markdown and clearance by 15%? Traditional store allocation and replenishment methods spread inventory across store estates and can deliver suboptimal end-to-end range performance, so sales potential is limited, leading to significant markdown.
At BearingPoint, we have worked with retail clients to develop and pilot new store allocation and replenishment approaches for fashion and seasonal ranges, improving store performance and deploying stock closer to the point of sale to more accurately reflect actual store sales potential.
This generates the apparently conflicting benefits of enabling reduced store stock-holding and improved stock availability as a driver of increased sales and margin.
The benefits are significantly improved in-season availability and cumulative sell-through:
- Cross-channel range availability and accessibility, maintained for longer in season
- A high percentage of SKU/store combinations maintained in stock for longer
- Greater cumulative full-price sell-through
- Lower residual markdown leading to margin gains.
When allied with sophisticated range and assortment-modelling and diagnostic tools, we can also optimise markdown and clearance, creating pricing strategies that enable retailers to optimise sell-through and minimise markdown.
These initiatives are changing the shape of in-season management for our clients and delivering improvements in margins and profitability.