Paula Rosenblum, Managing Partner
November 17, 2009
I’m not quite sure exactly when it happened. You could get a slight sense of it in June, even though it wasn’t showing in comparable store sales. The “cash for clunkers” program in the US made a bit of a statement – but the pundits thought that would just trade sales from one month to another. We felt October would tell the tale, partly because of Halloween sales. Now the secret’s out. Comparable store sales are up, and it seems that the consumer is coming out of her foxhole. We don’t pretend to say retail is back at 2007 spending levels. The era of conspicuous consumption is still dead and unemployment still high. But if merchandise is priced right, and carries some level of value message, there’s a good chance it’s going to sell. Value is hot, gift cards are not.
This is a bit of a mixed blessing. Now that sales have picked up, the drumbeat in mainstream consumer media has begun. It appears that as an industry we’re just a tad…under-bought.
We saw this coming early. Back in June 2009, after months of talking about it amongst ourselves, we published our first “official” article on the risk of rampant out-of-stocks for this holiday season: Out-of-Stocks: Will this Grinch Steal Retail’s Holiday Season?. Probably ‘rampant’ was an overstatement – there’s no single “must-have” product consumers clamor for, but there’s little question that sales forecasts have gone out the window.
Beyond all logic and rationales, there remains one clear truth – consumers really like to buy. That’s why they call us consumers. You can hold back the tide for a while, but sooner or later, the sun is shining, the store windows gleaming and it’s just time to go shopping.
So as retailers, what can we do now? How can we make the most of this shift, while not suffering the pain of being out-of-stock on those items consumers want to buy?
In our earlier article, we recommended a three-pronged approach to surgically managing the upcoming uncertainty. Those steps included localizing assortments, promoting judiciously and surgically, and creating inter-department teams to facilitate planning and execution of stock balancing.
Retailers are clearly taking the first two steps. Black Friday is still two weeks away, but promotions have already begun. Sears is advertising “Black Friday doorbusters and one-day specials now,” Walmart has already announced it will be selling more than one hundred different toys for $10 per toy, and other chains are leaking Black Friday promotions to the media. Kmart’s layaway program appears to be a success. John Lewis is offering “fabulously festive decorations” and “a treasure chest of toys.” Carrefour is offering “D’offres de Rudolf.” Sharp pricing is in, and the consumer knows it.
You have consistently told us in our benchmarks that you’re working hard to localize assortments along with sharpening your pricing pens. Now comes the tricky part…the stock balancing. Fortunate is the retailer who has the tools and technology to treat inventory as a shared resource across channels and stores. Cross-channel visibility is more than just a nice-to-have….it’s a real money and sale saver.
Absent the ability to share inventory across channels, retailers must become aggressive in moving it from places where it’s not selling to places and channels where it will. In our just published Business Intelligence benchmark, Using Business Intelligence to Help Control Outcomes in an Uncontrollable World, we find Retailer Winners using near-real-time business intelligence to react to forecast deviations quickly and decisively. Doing this requires 1) the knowledge to help decide what needs to be done, 2) quick-witted decision-making to mitigate potential disasters and 3) the ability to execute on those decisions with cross-departmental partnerships.
The largest retailers may well be at an advantage, with more stores, more distribution centers and more resources, but mid-sized and small retailers must also be ready. If we have to brute our way to inventory-balancing, so be it. Bring on the vans and small trucks. This holiday season is very important. The customer will remember her experiences both on-line and in the stores for years to come. Frugality fatigue breeds high expectations…and it’s up to us to meet them with the tools and products we have in hand.
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