Four Ways to Manage Distressed Dark Store Inventory

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Four Ways to Manage Distressed Dark Store Inventory

By Greg Flinn - 10/06/2020

During uncertain times, retailers must stay prepared and forward-thinking. The retail industry’s paradigm is shifting, and retailers need to focus their strategies and operations on the road ahead – that includes leveraging new innovations, understanding customer expectations, and managing a backlog of inventory.

Now is the time for retailers to ask themselves whether they are prepared to manage their distressed inventory when stores reopen. Seasons are changing, trends are evolving, and customer preferences aren’t what they were three months ago. As stores reopen, brands still have a responsibility to get their inventory out on the floor and into the hands of shoppers.

Managing distressed inventory can be quite difficult at any time, let alone during an era of dark stores and social distancing. But that does not mean it’s impossible. Below are four challenges – and corresponding solutions – for most effectively managing retail inventory.

Having Enough Inventory
With limited (if any) new warehouse shipments and plenty of canceled orders, retailers are struggling to ensure they will have enough inventory when stores reopen. Managing through non-productive inventory and determining where and at what price to sell items can be rather complicated.

It will take time for stores to fully restock and for businesses to get accustomed to the new reality; however, with strategic planning, precise execution, and up-to-date technology, stores can properly allocate current backroom stock. For orders that have not been canceled, it is imperative to consider a location strategy.

Location plays a critical role in inventory based on consumers’ preferences and trends, since what is trendy in New York City is different than in Portland. With proactive in-season item management and strategies in place, staff will be well-equipped to adjust assortments, stock shelves, and fill racks at the most optimal levels to increase margins.

Disrupted Data
Brick-and-mortar store data has been halted with physical shopping at a standstill, but online continues to prevail. However, this partial data disrupts the accuracy of retailers’ understanding of customer preferences, potentially leaving them with incomplete information when they look to identify trends for future seasons. Brands are faced with the challenge of interpreting fractioned data for the path ahead.

Although stores may have limited information at the moment, historical in-store data and online data is available. Furthermore, details from online order fulfillment, online shopper demographics, and curbside pickup location information can help fill in the gaps. With this information, retailers can better anticipate how consumers will behave in the future. With contextual intelligence about their customers garnered from first- and third-party data, retailers can also better predict shifts in demand, location preferences, and short- and long-term sales trends.

Here, There or Where?
As stores reopen, businesses will be able to increase productivity and operate optimally. Retailers must manage not only inventory but also channels. E-commerce is continuing to grow; understanding the most effective channel or location to place distressed inventory can be a crucial challenge.

First, retailers must decide if it is more advantageous to shift stock out of idle locations to another store or channel but potentially price it differently than they might in-store. Second, retailers must create new location planning processes to ensure inventory is in the right stores to recoup maximum sales and margin at the time of reopening.

Profiting in the Months Ahead
With fluctuating revenue in recent months, brands face new challenges as they look to plan for their next quarter profitably. Should they focus on innovation? Sales and promotion? Or avant-garde marketing campaigns? Businesses must discern how to increase revenue and get rid of backroom inventory.

It is integral to place guardrails around current strategies and plans to understand future margin risks and opportunities. Retailers should consider hypothetical, ‘what-if’ situations, and challenges to help determine the best price point for each item. Every channel and location poses its own unique potential challenges and rewards, so it is essential for brands to run different scenarios to understand how to profitably place inventory.

The harsh truth is that certain items will not be in style next month or even next season, and retailers must be prepared to manage their distressed. Utilizing past strategies in modern times will not suffice. With the right strategy, solution, and technology, retailers will be ready to handle the balancing act no matter what comes next.

Greg Flinn is  Oracle Retail’s planning and optimization product solutions manager.

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