7 tactics retailers can use to manage inventory amid coronavirus, - Business Insider - Business Insider

With stores indefinitely shuttered across most of the nation, retailers are finding themselves with a mounting surplus of unsold inventory and nowhere to sell it.
We spoke to several retail experts who weighed in on the tactics retailers might take to handle excess inventory, curb losses, and stay afloat during the coronavirus.
"The impact of the pandemic has been significant, but it's forcing retailers to rethink their past processes and create more agile ones in order to survive this crisis," a spokesperson at retail analytics firm Edited told Business Insider.
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As the coronavirus continues to sicken Americans and ravage the US econony, retailers are quickly finding themselves with a mounting inventory problem.

Under non-pandemic conditions, department stores and apparel companies would normally be luring throngs of shoppers into their stores with cheery displays of bright-colored clothing for impending warm weather months. Sales associates would have replaced down jackets and wool scarves with linen tops and seersucker suits; fitting rooms would be brimming with young consumers trying on swimsuits for spring break vacations or posing in dresses and tuxedos for prom and graduation.

Instead, these stores remain indefinitely shuttered as Americans stay home en masse in an effort to prevent the spread of the coronavirus. As a result, apparel companies have been left with mounting piles of inventory that they're struggling to sell as consumers eschew spending on nonessential items and unemployment rates skyrocket.

According to a recent survey of more than 2,000 retailers on their business responses to the coronavirus, the e-commerce platform NuOrder found inventory reduction was one of the top-ranked priorities for concerned companies. Specifically, the study found the retailers are generally evenly split among four main focus areas — increasing online sales, cutting operating costs, reducing inventory, and discounting existing industry.

We consulted a handful of retail experts to learn what tactics to expect from apparel companies looking to manage surplus inventory and stay afloat. While only time will tell their fates, here is what the experts said we can expect to see in the coming weeks:

Canceling seasonal orders

American eagle store inside — Warm weather looks at an American Eagle store.

Earlier this month, retailers like Gap and H&M announced they are halting orders of spring and summer apparel in an effort to offset losses and manage existing inventory.

"We'll start to see retailers and brands tightening up supply chains, pulling back on trendy items, relying on staple pieces, reusing fabrics when possible and applying smarter discounts," a spokesperson at Edited, a retail analytics firm, told Business Insider. "The impact of the pandemic has been significant, but it's forcing retailers to rethink their past processes and create more agile ones in order to survive this crisis."

Sucharita Kodali, retail analyst at Forrester Research, told Business Insider to expect to see additional cancelations of seasonal orders, as brands look to hold on to evergreen items and begin to lack space to retain new items.

"I do think that most are canceling or pushing off as much as they can," Kodali said. "Some of the merchandise they are holding onto for the future, such as perhaps athletic shoes which are evergreen, but anything seasonal like bathing suits they will likely try to sell with heavy promos."

'Pack and hold' of timeless apparel items

TJ Maxx resize shoes — Consumers shop for products like sneakers all year long.

JoAnn Martin, vice president of industry strategy and market development at Blue Yonder, echoed Kodali and said retailers are likely to stow away timeless inventory for next year. By doing this, they can focus their resources on clearing out excess seasonal items.

"One of the major themes I am hearing is the resurgence of pack and hold inventory," Martin said. "Retailers are determining iconic or basic product or timeless product and choosing to pack and hold the product to reflow next year. This has been taboo, but has definitely been a strong conversation among softline retailers."

Deep discounting through off-price retailers

All of the experts we consulted agreed that brands will seek to offload their inventory using a series of tactics like deep discounting and selling through popular off-price retailers like TJMaxx, Nordstrom Rack, and Macy's backstage, among others.

"Inventory liquidations through off-brand discounters or overseas outlets will be the norm, and we may even see some of this inventory ending up with online rental or liquidation players," Kodali said.

Flash sales and e-commerce promotions

Screen Shot 2020 04 17 at 2.33.20 PM — An Old Navy sale this week discounted everything to $20 and under.

Experts said that as stores remain closed, retailers will continue to focus on selling products online in the interim, even if e-commerce accounts for just a fraction of the sales of most traditional retailer companies.

"If [reopening stores] is not an option as we continue to move through the pandemic, brands could consider flash sales, given seasonality, or leverage calendar events like Mother's Day or Memorial Day to bundle or discount inventory," Olivier Schott, chief marketing officer at the digital commerce platform Scalefast, told Business Insider.

Turning closed stores into makeshift fulfillment centers

In order to manage an increase in online orders, Martin said some retailers are making use of their shuttered brick-and-mortar locations by turning them into "dark stores" that moonlight as fulfillment centers.

"I am hearing that companies are starting to leverage some of their stores as 'dark stores' to fuel e-commerce orders to try to meet customer needs where they are unable to fulfill from their fulfillment and distribution centers," she said. "They are trying to push product through online, and it will shift the channel fulfillment strategies."

Bankruptcy and liquidation

As stay-at-home mandates and store closures are extended, experts said to anticipate an increase of bankruptcies and liquidation sales for some of the most beleaguered retailers.

"If the lockdown holds through May and into June, or we ease restrictions only to see a bounce in cases that leads right back to new restrictions, then we really will see the loss of an entire season," Jim Hull, senior director of industry and strategy at Blue Yonder, told Business Insider. "I think this will fully cement the end for some of the weaker players, and those that survive will jump right into the next season.

Burning clothes

colorful clothes — A child plays next to "Personnes", a sculpture made with used clothes, at the Fine Arts Museum in Santiago November 12, 2014.

Experts were largely skeptical that retailers might resort to burning clothes — a tactic that has been used in the past to discard defective or surplus products by fast-fashion retailers like H&M — though didn't fully rule it out.

"I haven't heard of anything being burned — that usually happens when you don't want products showing up on a secondary market," Kodali said. "It could happen, but it's too early to tell."

Do you have a personal experience with the coronavirus you'd like to share? Or a tip on how your town or community is handling the pandemic? Please email covidtips@businessinsider.com and tell us your story.

Get the latest coronavirus business & economic impact analysis from Business Insider Intelligence on how COVID-19 is affecting industries.

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