According to the Centre for Retail Research, this year is predicted to be the worst for UK high street store closures since 2008, with roughly 10,000 stores expected to shut within the year. This comes as little surprise given that in April the BBC reported that almost 650 stores and restaurants had shut or were at risk of closure in the UK, with this number continuing to rise. Amongst these businesses are retail giants like Toys R Us and Maplin, with the two stores collectively accounting for over half of the total 650 store closures after both chains went into administration on 28th February, putting 5,500 jobs at risk.
The rapid closures of some of the UK’s biggest high street retailers brings into question what was responsible for their downfall. While both Toys R Us and Maplin were in debt, what contributed to this outcome and could it have been avoided? Though factors like the rise of online retail undoubtedly played some role, this is certainly not the sole cause.
Despite the businesses’ troubles, many have reported that Toys R Us’s prices are still very high, with retail analyst Kate Hardcastle stating that “Even in clearance now, trying to turn things around, they’ve been undercut by discounters and big brands like WH Smiths and The Entertainer.” Yet, had Toys R Us taken a more strategic approach to its discounting and markdown process at an earlier stage, perhaps it would have been able to reclaim some of the revenue that is instead ended up tied up in excess stock, further contributing to the retailer’s debt burden.
Amidst this retail apocalypse, off-price continues to be one of the bright spots of the retail sector, with hundreds queueing for the launch of UK chain TK Maxx at the opening of a new store this year. It’s clear that retailers could stand to learn from the off-price structure by introducing a better approach to markdowns in which discounts are applied earlier to help companies reclaim revenue that would otherwise be tied up in excess stock.
Excess stock can happen at any stage of the product cycle due to a variety of reasons such as economic instability, unpredictable demand for product or changes in customer spending habits. Whatever the root cause, excess stock can quickly become a crippling weight on retailers, directly contributing to store closures. With this in mind, here are three top tips to help other UK retailers improve their inventory management:
1. Update your backend
Often, legacy systems continue to be used by businesses without ever being updated. However, without reviewing your backend, chances are you haven’t optimized your systems and workflow processes in a long time. A strong foundation and full visibility across all systems is necessary to allow businesses full insight into inventory management and markdown optimization. A backend is the basis for a company’s operations, so you should ensure that you update or replace it and your operational processes to bring visibility and structure to your inventory management and overall business performance.
2. Identify where cash is tied up
Products move between a number of different locations throughout their selling lifecycle as a result of unexpected returns, cancelled orders and other factors. However, in order for you to be able to establish where cash is tied up before it becomes an issue, it’s essential that you have full view of products across your wholesale, retail and ecommerce platforms. Aggregate data for all of your channels in one place ensures that your reporting is up-to-date. This will help to give you a better real-time view of your inventory, as well as enable you to identify the specific products that tie up your cash. From this information, you can then focus on discounting these items before they become a financial burden.
Implementing effective inventory management strategies to help recover income is only made possible through collaboration. A solid internal communication system goes a long way in helping retailers get inventory levels under control and make the biggest possible return. Ensure that you promote teamwork and facilitate internal insight to help create a more efficient process for turning over inventory. Working effectively with your team helps save both time and money through streamlining processes.
As is clear from the wave of recent shop closures we’ve seen in the UK, it’s more important than ever for retailers to be on top of their inventory. Poor inventory management can swiftly lead to excess stock which ties up money, financially inhibiting a business. Ensuring that your company has full sight over its inventory means that you can more efficiently identify products that are tying up cash, implement discounting strategies early on and ensure maximum recovery value from these products. The amount regained through selling this stock can make a huge difference to the annual success of a business, making off-price sales an integral focus for brands.
INTURN can help you gain visibility of your stock as well as optimize and build out your buyer network, providing increased product visibility to help you monetize your excess stock. To learn more about how we can help you better manage your inventory, get in touch today.