by Paul Sobota on July 31, 2009
A few years ago I was in Australia in July and saw a lot of retailers advertising specials for “Christmas in July”; a novel idea as it is winter in the southern hemisphere at this time. I have started seeing ads for layaways from Kmart and Hallmark debuting their Christmas ornament collection. U.S. retailers are doing this for different reasons than our Aussie friends.
U.S. retailers are trying to stimulate sales now as merchandise is arriving in stores for Fall and back to school. U.S. retailers don’t want to be burned like they were last year, so inventory levels will not be purchased anywhere to the extent that they were last year.
According to Commerce department, inventories are down 8% through May from last year at this time.
Here is a sample of what our clients are saying about their Christmas inventory planning:
Hard Goods Catalog
Limited initial buying. Going to read sales forecast after the catalog is in the field and then place larger re-orders. Willing to sacrifice some early backorders to limit over inventory exposure. We can not have excess inventory on hand at the end of December.
Children’s Catalog
Ours is really business as usual, we have ramped up with a few more drop shippers than we have in the past, but we still continue to grow our import business and rely a little bit less each year on domestic shipments.
Hobbyists
Just in time as much as possible and attempt to carry less inventory Holiday 2009 vs Holiday 2008.
Home Catalog
Our plan is flat with Holiday 2008 actual demand. Less decorative and gift items, more focus on functional products which tend to carry over from campaign to campaign so a better exit strategy. In addition, we are ordering within lead-times, thus closer to demand. This has been a shift from the past when the need get your orders into the production cycle was critical. Consequently, our open receipts are significantly down from last year and even budget. We are finding that Chinese vendors, in particular, are turning orders very quickly.
Inventory is the biggest balance sheet asset in most businesses. Slow selling, discontinued and obsolete inventory can build up reducing inventory turns, cash flow and space in the distribution center.
Will consumers have the deals they had last year? I don’t think so. Scaled back inventory levels will sell out with fewer sales events leaving some consumers without much of a selection the closer we get to December.
U.S. Retailers touting “Christmas in July” are looking for consumers to commit on electronic and large ticket items now while they may have a few extra dollars or through the utilization of layaways to secure there Christmas gifts.
Is your inventory at the right level for this Fall selling season? Have you adopted the best practices for forecasting and managing inventory? Have you implemented vendor compliance policies? Do you need to upgrade your systems?
Contact us today to learn more about managing inventory profitably.
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