Allocation, allocation, allocation. How’s your regular stock level versus Christmas stock?

I’ve been doing some random tours over the last week or so. Mall stores, department stores and Walmart mostly. What I’m noticing lean shelves at mass merchants. Each retailer has its own challenges in different categories but I’m seeing a common trend in the health and beauty section. While seasonal sections seem to be busting at the seams. I wonder if resources were pulled out of regular items so that seasonal could get pumped up. Is that a strategy that really makes sense?

How does this imbalance in inventory affect the retailer? There are 2 core operational items you should consider. You are now dealing with thinning sections which require more maintenance and can easily spiral into a merchandising nightmare. You will eventually spend more in labor trying to catch up with filling if you let sections empty out. Empty sections are also a potential loss prevention problem. Allowing large hiding spaces is just inviting shoplifters to your store.

How does it affect your bottom line? You will these effects on several line items. The most important line items to consider are your total average basket and intake margin. With reduced stock on hand, the basket will shrink. Aside from missing skus and associative products, research suggest that shoppers are hesitant to make a buying decision when presented with a thin section and only 1 or 2 units presented. Common sense suggests sections that look full and maintained sell better than their messy or empty counterparts. The effects on margin are obvious. A shrinking basket means less actual product out the door. Those ones and tows wont’ turn into cash so quickly. This is where a well maintained and stocked clearance table comes into play. Remember, our job as retailers and merchants is to keep merchandise flowing.

So why the imbalance? Christmas stock has notoriously high margins and moving this type of merchandise during the high velocity period up until Christmas can be profitable for a retailer. If the expectation of slower traffic does materialize, there is going to be a lot of repacks this season. Is there any rhyme or reason for making the core lines suffer? The margin opportunity for Christmas cannot be ignored, but there has to be a responsible use of resources to maintain the body of your merchandise mix. Independent retailers should take note and develop a detailed strategy for allocating inventory dollars (granted most of you have long since done your Christmas buys, it’s important to track this year’s stats and then develop a strategy). It pains me to see a location with a beautifully merchandised seasonal section while the rest of the store has an image problem.

The profit opportunities makes carrying seasonal goods a given. But there has to be some planning behind it. And your Christmas plan should also include maps for your core items as well. Utilize checklists to maintain areas key areas and products. Make sure execution is followed up on. There is nothing worse than a shrinking basket because of low service levels. I mean, why are we in retail anyways? Oh yeah, to sell products…