Retail Strategy Group’s Liza Amlani on facing excess inventory
Posted by Amanda McLaughlin on Aug 17, 2023
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In the dynamic world of retail, achieving success means navigating challenges and embracing innovation. Among the most crucial concerns for brands and retailers today is the issue of inventory management. In recent years, Coresight Research found that misjudged inventory decisions like overbuying, incorrectly buying, and misallocating inventory accounted for 53% of unplanned markdown costs for retailers.
To shed light on the topic of inventory, specifically the current challenge of excess inventory, Liz Amlani, the Principal & Founder of Retail Strategy Group, sat down with Marcus LaRobardiere, NewStore’s Senior Director of Marketing, on the Endless Aisle podcast. Read on for several highlights from Marcus and Liza’s conversation, some of which have been edited for clarity.
There is a delicate balance in the world of retail between supply and demand. Liza thinks that striking this balance requires sharp prediction of changes, as well as innovative strategies to adapt swiftly to market dynamics. “Brands and retailers are trying to navigate supply chain disruption, which is still a very real thing. What they’ve done is bring product in earlier, resulting in them sitting on a lot more inventroy and contributing to excess inventory levels. A lot of these brands are also using back and hold strategies. This is nothing new, but it costs a lot of money – especially when we know consumers are buying products on markdown. This is going to erode profitability for brands and retailers, and it could also devalue them.”
As noted above, Liza pointed out that consumers are inclined now more than ever to spend on markdowns. This could potentially drive brands to prioritize promotions rather than invest in full-priced products. “Take the Nike example. Although a market leader, they were sitting on a lot of excess inventory and were aggressively trying to clear it out. What this does is drive consumers to buy on promotion, instead of investing in full price. So, what does that mean for next season? How will that reflect on inventory levels? How does that impact the way the consumer is going to look at you? Are they always going to look for sales? Probably.”
Liza believes that brands have the power to impact their assortment plans and seasonality immediately if they rethink their approach. By adopting a more flexible and consumer-centric mindset, brands can align their inventory levels with demand and avoid the accumulation of excess stock. “The key lies in how we categorize products. Because a black t-shirt bought for spring is the same exact product bought for fall. It does not need to be a new item with a season attached to it. It can live as a seasonless item. So can denim, socks, sneakers, leggings, and even swimwear in many cases. This will allow brands to spend time on creating something new and focusing on innovation instead, such as creating materials that are better for the environment.”
Change is one of the only constants in the retail space, but that doesn’t always mean doom and gloom. For Liza, there are a few things happening in the industry that are really exciting. “The first is innovation. From a materials standpoint, the investment in materials innovation is one of the most exciting things in our industry. I especially love it when brands [like Stella McCartney, Allbirds, Reformation, and Patagonia] team up for the greater good, which we see in their work with natural fiber welding. Next is that brands and retailers are seeing the light around consumer insights. They know they need to leverage data to make better decisions that not only connect them with the consumer, but also get them to market in faster and smarter ways.”
The issue of excess inventory poses significant challenges for brands and retailers, impacting profitability and brand value. However, Liza provided a glimmer of hope by advocating for a shift in assortment planning and seasonality. Additionally, she’s optimistic about the innovation unfolding in retail, which will allow brands and retailers to position themselves for success in the years ahead. Overall, it’s important to recognize the need for change and take proactive steps to adapt to the demands of the modern consumer.
