Balancing Act: Managing Seasonal Inventory
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October 2003 | Vol. II - No. 10

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Balancing Act: Managing Seasonal Inventory

It may be equal parts prognostication and promotions all year, but managing inventory in the final quarter of the year has turned into a game of spinning plates. As retail seasons for Christmas and Halloween expand, store managers need to get creative to make the most of the opportunities. Generally, the expansion of Christmas and Halloween has turned Thanksgiving into the weak sister of the fourth quarter holidays, according to Ellen Tolley, spokesperson for the National Retail Federation.

"In the last several years from the retail standpoint, Thanksgiving has lost a lot in the shuffle," she notes. "When Halloween is over, it's all about Christmas. Really, most of this starts with the onset of the fourth quarter, though most people are starting to shop for Christmas early in the summer."

Complicating matters is an explosion of products competing for shelf space, according to Johnny Girson, president of the American Specialty Toy Retailers Association and owner of The Learning Tree in Prairie Village, Kansas.

"Too many manufacturers [have] ‘me too’ products," says Girson, assessing the situation. "With manufacturers copying each others’ product ideas, we are overwhelmed with product choices."

Retail consultants acknowledge the difficulty managers face, but there are things retailers can do to reduce their risk.

"Inventory is a balancing act because you don't want to end up with inventory left over, but you also don't want to have empty shelf space. That's just telling the consumer you are not a reliable supplier."

"There's a lot of stuff that's under their control," notes Howard Davidowitz, chairman of Davidowitz & Associates, a national retail consulting firm based in New York City. "How they promote the merchandise. How they display the merchandise. How they romance the merchandise. How you price the merchandise. You're limited by your own creativity, imagination, drive and ambition."

Davidowitz notes that among the challenges for the toy retailer is advanced ordering.

"There are sections of retail where just-in-time inventory has been great," he says. "Take the food industry. They can turn their inventory over 18 times a year. In the toy business, you have less opportunity to do that. You can plan on flowing-in inventory. The problem is you have to commit to it. If you don't commit, you risk not getting [sales]. You really have to be a swami."

While peering into a crystal ball might appeal to some, Tolley notes many retailers are searching for the "next big thing," a phenomenon that has not really been present for several holiday seasons.

"I see many retailers taking cues from pop culture, whether that's two weeks out or two months out," she says. "Some of it comes down to dumb luck, and some comes down to good research."

Jon Schreibfeder, president of Effective Inventory Management Inc., favors the latter.

"What we do is keep meticulous records on successes and failures. We try to define meaningful characteristics, see what sells and what doesn't sell,” he explains. “How well have the products with the same characteristics sold in the past? If you have a toy store and three of your buyers say it's going to sell, it's going to sell. If one says it will sell, and the other two say they don't know, it probably won't sell."

Generally, Schreibfeder believes 80 percent of sales come from 10 or 15 percent of a retailer's stock, so it makes sense to identify those products and keep them on the shelves. He believes balancing the shelf space for the competing seasons is a growing challenge.

"The season is certainly longer than it was in the past," he says. "By September 1, most stores will be setting up their Christmas displays or have their displays up already. They want to look for impulse purchases early. The more opportunities consumers have to buy, the more they will buy."

To manage these challenges, Schreibfeder says many of his clients establish a seasonal section of their stores.

Eighty percent of sales come from just 10 or 15 percent of a retailer's stock, so it makes sense to identify successful products and keep them on the shelves.

"I have one client who had their Halloween stuff out by October 1 and some of their Christmas stuff out," he says. "The morning of November 1, we struck all of the Halloween stuff. We did put out some Thanksgiving material.”

"The key to all of this is keeping the shelves stocked," Schreibfeder continues "In this case, we rented additional space. They were in an area where finding additional warehousing space was difficult and expensive, but it still paid off."

The importance of keeping the shelves stocked is essential, Schreibfeder says.

"It's a balancing act because you don't want to end up with inventory left over, but you also don't want to have empty shelf space," he said. "That's just telling the consumer you are not a reliable supplier."


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