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10/23/2020

Here’s How Retailers Should Address Inventory Amid COVID-19

Storefronts are reopening, but many shoppers will be browsing early-March styles that were abandoned in physical stores at the beginning of the pandemic. 

Excess inventory has been a concern among apparel retailers, and most are having to make quick decisions on where to re-allocate their goods — a decision that could impact them for years to come. Below, I’ll outline how retailers are likely to approach stockpiles as a result of store closures, and how this could affect the way they address inventory long-term. 

Balancing Act Between Shelf Life & Manufacturing Relationships 

Right now, retailers must first evaluate their products’ shelf life, and how this plays into fiscal value and manufacturing strategies. 

When confronted with the term “shelf life,” most people think of food and perishables. Shelf life in the apparel industry, however, is a crucial consideration — not only regarding whether the inventory itself can withstand weather changes, insects and other factors that could come from sitting in a warehouse, but also whether an item can stand the test of time and market perception.

Stagnant inventory past its shelf life also throws off retailers’ manufacturing relationships, as it puts product schedules off course and even halts production altogether. 

To combat these issues, retailers should create major incentives for consumers to add more units per transaction, even if it is at a loss, to create a faster inventory turn cycle and prepare for the upcoming holiday season (reviving an otherwise strained manufacturer relationship). Getting consumers to buy more units, even at a loss to the brand, is still more preferable than completely devaluing a product with steep discounts.

Brands that specialize in higher-end apparel, however, will struggle with this tactic more than those in fast fashion. 

Leveraging 3PLs 

Right now, brands have a strong incentive to make inventory turn as quickly as possible to keep their supply chain running smoothly. In addition to shelf life and manufacturing considerations, retailers should use a third-party logistics provider (3PL) to keep their inventory closer to the customer in a time when supply chain speed matters more than ever. 3PLs ensure that brands aren’t holding inventory for too long, and also gives the customer a faster order to delivery cycle.

With that, the ability to "kit" items efficiently (orders in pairs, groups of orders, etc.) will become more important as retailers leverage “buy-one-get-one” sale strategies to make their inventory turn faster. Kitting is a function that 3PLs specialize in, and brands are going to be hard pressed to find better experts than 3PLs when it comes to this need.

COVID-19 will have a cascading effect on inventory, especially as we enter the holiday shopping season. Brands might have to adopt a just-in-time supply chain for a period post COVID-19 to balance inventory turns without bottlenecking their supply chain long term.  

For now, considering product shelf life, manufacturing relationships, customer value and 3PLs will be crucial for brands looking to organize, decrease and cycle through excess inventory caused by store closures. 

Krish Iyer is a respected supply chain executive with 17 years of industry experience with companies including FedEx, Pitney Bowes and now ShipStation. An expert in cross-border ecommerce, Krish is quoted in publications such as The Wall Street Journal, DC Velocity and Business News Daily. Krish is currently Head of Industry Relations and Strategic Partnerships for ShipStation.

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