Written by  John Pitman, CEO of Krunchbox

September 7th, 2023

Retailers the world over always knew that the COVID related bumper sales party would come to an end. 2023 has seen a return to a relatively more normal pattern, if the concept of normal has any residual value. Consumers are once again travelling and going out, which means that discretionary dollars are being spent on dining out, entertainment, and holidays as opposed to housewares, consumer electronics and hardgoods. Add to the mix a healthy dose of higher costs in the way of wages, rent and energy prices, and you have a perfect storm for some retail channels. 

Little wonder then that we are hearing more and more mutterings from suppliers, about retail buyers cutting back Open-to-buy. With slowing sales translating into bloated inventories, there is a ripple effect moving up the supply chain, with the breaks being applied to replenishment plans.

So, what to do when your Retail Buyer says, ‘I’m sorry, but circumstances have changed. I no longer have the budget to purchase what I had planned. I’m cutting back your OTB’!

The first thing to do is take a deep breath before responding. Before protesting, seek to understand the reasons for the cutback. Empathy can take you a long way. Is it due to declining sales, excessive inventory, changes in consumer trends, change in retail strategy, new financial constraints imposed at a corporate level – or all of the above? The answer may help guide you in regard to the best approach to mitigate the effects.

As always, it pays to be armed with good quality data analysis. How are your ranges performing in absolute terms and relative to the category? If certain parts of the range are under performing you need to consider what you can do to help your Retail partner, for example offering some support for markdowns or promotions in order to shift the excess inventory. Another example would be to negotiate some off location displays to help drive higher sales volume and reduce inventory.

Let’s assume that your ranges are performing at least OK relative to the category and within the context of the overall economic picture. The focus now is to optimise the precious OTB that you are going to be allocated, albeit less than the OTB you had hoped for. The key words now are collaborative inventory management.

We are going to break this down into three sections – Dead Stock, Clustering and Pareto. 

Dead stock.

Every retailer has dead stock; it is a fact of life. As a vendor it is your responsibility to identify dead stock and recommend ways of shifting it off the books. Whilst dead stock is inevitably associated with poor sellers / slow movers it is not always the case. You might have a good seller that doesn’t perform in certain locations, whether due to demographic profile of that store, competitive set or even store layout. That same item may be regularly out of stock in other better performing locations. Either way, it pays to liquidate the stock with appropriate incentives / markdowns and reinvest those dollars in better sellers and/or better store locations. In other words you can free up more OTB for yourselves by taking a proactive approach to fixing dead stock issues.

Krunchbox has a suite of Dead Stock reports that can be run either by product or by location. In each case, the list is default sorted by the highest value opportunities so that you can highlight to your buyer the quantum of stock dollars tied up and not turning. Carefully targeted markdowns can quickly free up significant incremental OTB.