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Our Thought Provoking Insights

Demanding good stock allocation

While Covid has impacted most aspects of life, non-essential retail has especially struggled having faced months of store closures. Online has grown massively over the last 9 months but this has failed to compensate for lost business through shut floorspace. Structural shift that might have taken well over five years to unfold has hit the industry in as many months. Retail was already struggling to cope with change pre-pandemic. Covid has forced demand online and has similarly forced huge change in the nature of that demand.

Retail has become much more complex, selling through a variety of channels: stores, online, wholesaling, concessions, international, platforms. Each has vastly differing demand patterns and stock requirements. Until 2020, the usual retail models of relying on past year’s data were relied upon. The dramatic channel shifts and radically different demand emerging this year have rendered historical data unreliable.

We estimate that online sales by value of non-essential or non-foods will have grown 47% in the year. Meanwhile, stores non-food sales by value have contracted by a staggering 45%. These figures demonstrate that past years are totally irrelevant. There are more challenges further back up the supply chain. A particular issue is long lead times in product planning and production. Orders are placed many months in advance, meaning stock for this autumn winter trading season has been ordered based on previous years trading history.

By far the biggest cost a retailer has is inventory. Historically, the industry has managed its cash far more tightly than its stock. 2020 will be the year when that changes. In a contracting market, demand softens and costs have to be trimmed. The industry can no longer live with slow moving stock, inaccurate allocations by channel and weak availability. As with virtually every aspect of the industry, the starting point for effectively addressing these issues is always the customer.

Demand forecasting permeates everything. Understanding in detail where your customer will be demanding what product is critical. With the complexity of channels being magnified by radical shifts in demand patterns, allocating the right stock to the right place in the right quantities will make or break your business.

TPC offers demand forecasting solutions to suit your business needs, with both plug in and tailored options. Our data science led forecasting approach coupled with smart allocation and replenishment recommendations helps rise full price sales and minimise markdown costs.



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