‘Just in time’ and ‘just in case’ systems leave retailers with too much inventory

This is the fifth in a series of articles from members of RetailWire’s BrainTrust panel speculating on coming retail trends and developments for 2023.

Too many retailers had the bad habit of over-buying long before the pandemic created the supply chain chaos we are still living through. “Just in time” systems failed to prevent the overbuying problem.

“Just in case” thinking was supposed to prevent inventory outages and shortages. That seemed to have backfired. Retailers were announcing over-stocked positions starting in late spring and have been trying to promote their way out of the problem ever since. It’s unclear as we sit here in mid-December whether or not it’s working.

It’s hard to walk the sales floor on Black Friday or December 26 and gauge if inventory levels are in line. On the other hand, it’s easy to walk the floor on January 31 and make the same judgment. I’ve done precisely that several years in a row and I am shocked each year by the level of prior season residue inventory that is still sitting on the floor, at a moment when the vast bulk of holiday and sale shopping is over and done. The level of discounting required to clear all this prior season inventory requires selling it close to or below cost. It’s a profit killer!

The other way to express this issue is to talk about seasonal conversion. Exiting a season is equally important to starting a new one. The initial floor set is the easy part. But the buy must be smart enough that it can sell down at the seasonally appropriate time.

What’s the cure? It starts with better planning and merchandising, improved storytelling and less breadth and depth of SKUs. Assortment creep always happens when merchandising teams want to hedge their bets. There is comfort in more. There is discomfort in editing great work that the design team has produced.

Higher confidence would come out of more complete data and shorter manufacturing lead times. And the data would be available if the lead times were shorter. But shorter lead times are a huge ask right now. Discipline on the merchandising side is required. Flexibility on the manufacturing side is going to be the hard part.

Apparel will always be a hit or miss game, but retailers have plenty of data telling them they need to buy less to be more profitable. Create and manage scarcity!