Navigating Retail Challenges: Balancing Inventory and Sales Boom in the Post-Covid Era

NSRA Nov/Dec 2021

Good News Bad News

First the good news… at least as I write this business is bouncing back nicely for most especially in categories where sufficient product is available. We saw many cases where July sales (latest month available) actually exceeded 2019 levels. Couple the sales increases with lower inventory levels and the result is faster turn and better cash flow.

Now for the bad news… the aftermath of Covid-19 has created many challenges for the footwear industry and retail in general to deal with in the coming months. In no particular order trouble spots include:

• Finding good help (or in some cases finding ANY help)
• Rising prices due to inflation
• Stock shortages
• Supply chain interruptions
• Rises in Covid cases in some areas of the country

When it comes to finding good people much has been extensively covered on this topic by Management One the merchandise planning company that I am affiliated with. In the interest of brevity and avoiding duplication I will attach a link to an interview that Management One CEO Marc Weiss had with Kim Pagano of Publik …. Not only will you find worthwhile ideas from this interview but you will be able to gain access to the webinar entitled Talent Acquisition: Finding and Attracting the Right Talent for your Retail Business.

Certainly this fall and perhaps well into 2022 and beyond the retail landscape will endure its share of stock outs and supply chain interruptions.

Whether caused by lower productivity at US ports back-ups at ports in China driver shortages here in the US factory shutdowns union issues or lack of anticipation of retail demand at the wholesale level the result is the same: anemic assortments and lack of availability for shoes your customers want to buy.

According to a well-respected equipment leasing consultant that I have known for several years the entire supply dilemma is analogous to a wave starting small at the beginning and getting bigger and bigger until it finally crashes into shore. According to this source these supply chain disruptions will most likely not smooth out until Q1 or Q2 of 2022 at the earliest.

Product distribution as it pertains to future availability in the footwear industry is a moving target

Uncertainty is the one thing that can be counted on at this point. I spoke with a buyer from a multi-store operation that offered the following advice:

• Write future orders for up to one month of earlier delivery to help offset late deliveries.
• Anticipate future needs by placing aggressive backups that can be modified prior to ship date if needed.
• Stay in touch with your key vendors and review the open-order position every week for updates. Don’t wait for them to contact you. In most cases it won’t happen! Be proactive!
• Overbuy your merchandise plan by whatever percentage you are comfortable with IF you are concerned about cancellations. Word of caution be careful if you employ this strategy for obvious reasons.

By the time you read this futures for athletic shoes most certainly will be pushed out to the end of 2022. Other categories in the shoe industry will most likely be impacted as well.

Positives Emerging from the Dilemma

Supply chain interruptions have forced many retailers including the one mentioned above to develop relationships with alternative vendors. This has proven to be a win-win-win for vendor retailer and consumer. The vendor gets a chance to perform at a store that has never carried their products before. The retailer gets to keep his inventory plan intact albeit with an alternate assortment plan and the consumer gets the products they want. What many retailers are discovering through all of this is vendors that in the past may not have been the first choice are becoming valued business partners.

Challenges in Merchandise Planning

All of these issues make merchandise planning at the retail level much more challenging to say the least. Business is good—very good in many cases due to the economic rebound. An even better scenario would be if stores could schedule needed deliveries without having to book futures out a year in advance or overbuy in hopes of getting half of what they originally ordered. Many retailers are rolling the dice by deciding what categories to gamble on (athletic shoes) by committing to future buys that are in excess of what they would normally place as the concern is that reorders and fill-in orders might well be non-existent.

Projecting Inventory Needs During Uncertainty

With business rebounding to 2019 levels and above and supply issues impacting many products and entire categories the question becomes how best to project inventory needs during this period of uncertainty? Hopefully you have a merchandise plan in place that incorporates sales trending to some degree. That will help you project short term (Q4 of 2019 through Q2 of 2022) inventory requirements.

One client I spoke with recently had just returned from market where she was counseled that if cash and space were available (both are) she would be well served to land ALL of her Holiday goods now to make sure that she would get everything needed. Given the uncertainty of availability closer to need I think that was good advice this year.

Current Business Trends

I am seeing many cases where business is currently up fifty+ percent over 2019 levels. Stores are selling everything they can get their hands on in many cases creating faster inventory turnover and solid cash flow.

Future Concerns

My concern moving forward is that when supply chain issues level out—which they will—and sales levels normalize—which they will—is that if stock-to-sales ratios are not closely monitored by store and classification the pendulum is likely to swing too far in the opposite direction causing the undisciplined retailer to end up in an overstocked situation. That would be unfortunate but is also easily preventable with accurate merchandise planning in place.

The Best of the Season to all!

Ritchie Sayner

Ritchie Sayner

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