Omni Channel Retailers Break Stocking Norms to Avoid Losing Their Shirts

The big E, eCommerce, may not be eating big omni channel retail’s lunch just yet, but it’s certainly gobbling up its breakfast.

This past Thanksgiving Day was no exception, with shoppers spending almost $3 billion online on the holiday alone. They came back for seconds with heartier appetites on Black Friday: eCommerce hit an all-time record by raking in an astounding $5 billion, with another billion expected Cyber Monday. That’s an almost 17% increase over 2016.

Comparing in-store shopper traffic, which saw a dismal 2 percent decrease over the two shopping days, it’s a bad omen for the usual big gobblers like Macy’s, Kohl’s, and JC Penney. Poor Macy’s had the added misfortune of stirring up a tweetfest with pissed-off customers who had trouble processing their credit cards on Black Friday, of all days, leading to more lost sales.

These big omni channel retailing chains don’t want to become the next meal, but rather walk off happily into the sunset like Drumstick and Wishbone, the two birds that received the 2017 presidential pardon. To avoid crashing and burning during the next holiday season’s shopping crush, many are cutting their inventory levels, and shortening their lead times.

Here’s more of the scoop on why they’re doing it.

Burying the Lead

Typically, big department stores like Nordstrom place their inventory orders many months in advance, generally between six and nine months. What’s been happening though is the trends are changing so quickly that they’ve been getting stuck with tons of fits and styles that are already outdated by the time they hit the racks. Flare jeans, anyone? Okay, maybe it’s not that off-kilter, but you see the potential dilemma.

All that wasted inventory has naturally been a cash flow killer, because people aren’t interested in buying off-trend merchandise when they can hop over to H&M or Zara, or other stores that make versions of the latest fashions so quickly – in as little as four or five weeks – that the category they sell under is called “fast fashion.” Be on the lookout for the rise of so-called ultrafast retailers, said to be firing off fashions in less than four weeks. So, something had to give.

In a break from what’s considered the norm, the big omni channel retailing chains are now ordering goods much closer to the delivery time – in as little as a few weeks, especially for the holiday season. The hope is that by reducing the lead times, they’ll be able to catch lightning in a bottle by having the right merchandise at the right time. This move is expected to increase foot traffic and sales.

 

Getting a Leg Up with Less Stocking

Reducing the lead time is only one promising cost-saving, profit-boosting initiative; another is ordering less stock. By putting the kibosh on large inventory levels and ordering smaller batches instead, traditional retail chains hope to avoid the high cost of excess inventory. To be sure, this isn’t about simply ordering less stuff; after all, having a stockout problem makes for neither a good customer experience nor healthy sales. Rather, again taking a cue from fast-fashion retailers like Forever 21 and Mango, it’s about having the right product in the right amount to match, or even spark, demand. With this type of improved demand forecasting, traditional retailers can eliminate uncertainty and avoid stock shortages and surpluses.

Feast or Famine

With eCommerce in their cross-hairs, department stores and other traditional retailers are doubling down on ways to improve their inventory management to prevent future foot traffic snarls. Doing something radical like cutting lead times or ordering less stock may be just what’s required – and maybe even Macy’s will be pardoned by the people for its holiday hassle.