Spring Season Merchandise Is Dead, Now What?

Will stores be able to sell spring inventory when they fully open? Unfortunately, no, and, moreover, surplus inventory will have long-lasting effects. Here are steps retailers need to take now.

When the economy shut down in mid-March many retailers had already received or were about to receive seasonal inventory targeted for warm weather, the Easter holiday, and graduation.

But instead of luring shoppers with brightly colored spring displays and turning it over, this inventory is sitting idle in warehouses and locked in closed stores.

The single biggest challenge for many retailers that plan to resume business in May is what to do with spring and seasonal inventory already in place and getting stale.

Best practices for social distancing and protecting the safety of customers and employees have already emerged and stores have a roadmap to follow. (For those who want review some practical tips click here.)

But what do retailers do with the surplus of unsold, out-of-season inventory?

Inventory Distortion – Seasonal Mismatch

After talking to retailers this past week on conference calls and webinars, especially during a webinar with The Parker Avery Group, here are some practical steps many are taking to shift gears and recapture their mojo in the “new normal.”

• Cancel orders not yet received. Ross was the first major retailer to cancel orders. It was followed by the Gap, Kohl’s and others. This will help retailers cut costs and reduce inventory.
• Instead of cancelling outright, push the date into the future for staples, basics and evergreen items to reduce costs and inventory. These items will eventually sell at profitable margins when the surplus has been moved out.
• Heavy promotion, flash sales, and discounts for surplus and seasonal items in online and in-store channels. Maximize buy-online-pickup-in-store.
• Increase the cadence for mark downs to accelerate sell through. Some revenue is better than nothing. Just as importantly, no store wants shelves filled with stale, out-of-season items, which create a poor brand image and shopping experience for customers
• Pack and hold inventory. In some cases, especially for iconic and timeless products, retailers should consider packing and holding items until next year. Difficult times call using all the options available, even those that are thought of as unappealing in less extreme times.
• Liquidate inventory through immediate, steep discounting and unloading to off-pricees, extreme discounters, and offshore retailers. Painful times call for painful measures.
• Bundle out of season items with in-season items. Retailers should get creative by matching in-season and out-of-season items into bundles, where logical, to coincide with holiday promos (Mother’s Day or Memorial Day).
• Do a thorough physical inventory count using manual labor and aggregation of data from applications, spreadsheets, suppliers, shippers, DCs, warehouses, third-parties, and product in transit. Retailers have product everywhere. They may wish they had instant inventory accuracy, but most don’t and know they don't. Solving the real-time inventory transparency problem should be added to the future to-do list, but for now it must be done no matter how laborious and painful. 
• Ship from store to customers and ship from store to store. Ramp up flexible fulfillment to even out the spikes of mis-located store inventory in stores and in transit to stores.
• Pull back on “all store” buys and instead buy in smaller quantities and more frequently. This will take a thorough review of purchase orders.
• Choose suppliers to partner with and work more closely. The retailer ecosystem must work together more closely and understand we are all in this together if we want to succeed. Put everything on the negotiating table including costs, payment terms, staggered deliveries, countries of origin, shortening the supply chain, simplifying processes, and more.

These inventory management recommendations are born out of crisis. While we hope we may never experience anything like this again, it is also true that important lessons are being learned that can provide lasting benefits when the economy recovers.