A Few Practical Tips on Ensuring You Don’t End Up with a Mountain of Clearance Stock in January

As we approach the holiday season, retailers face the crucial task of managing end-of season excess inventory. Here are a few practical tips on making sure you don’t end up with a mountain of clearance stock in January on a category-by-category or key vendor basis:

1. Review your sales forecasts for the next eight weeks, and make sure that they reflect true sales trends actualized since the onset of the cold(er) season, based on sales data from mid-September or early October as compared to prior year(s).
2. Decide how much inventory you want to realistically END the year with – that will give you a good starting point for planning next year buys, and suggest the optimal amount of vendor receipts you may need over the holiday season.
3. Immediately focus on your Past Due OnOrder – review your outstanding orders NOW, to make sure that what you still have coming in is appropriate to your likely forecasted/target receipts.
4. Consider the timing of late (incoming) vendor receipts – make sure your FUTURE outstanding OnOrder is timed to actually hit the stores or the ecomm warehouse early enough to be able to sell through them. If not, try canceling some orders. Backloading Receipts is one of the most common planning/forecasting mistakes that leaves far too many merchants holding the bag by January 1.
5. Review your forecasted inventory by channel and/or store, to make sure your inventory mix matches your sales mix. Too many units get stuck in places where they are not needed – and even on the shelf in the warehouse or DC.
6. Consider that you will likely get a ton of customer returns after the holidays, and those will settle onto your inventory as dead weight. Try to estimate what percentage of such returns are going to be sellable, and whether that might reduce your holiday vendor receipt needs.
7. The Early Markdown Gets the Sale – don’t wait until too late. Studies have shown that taking judicious markdowns while consumer demand is (still) strong tends to reduce the overall markdown amount needed to move excess inventory. Try to determine optimal timing and depth of markdowns, potentially increasing sell-through rates by as much as 20%.

Finally – remember, the goal is to have a clean(er) stock position at the end of the holidays, which should give you more OTB freedom and fresher stock for Q1 trading.