5 Signs Your Off-Price Business Is Inefficient4 min read
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For many sellers, off-price is often the last thing they want to think about at the end of the day. It’s easy to see why–the painstakingly manual, time-consuming, and error-prone process of selling excess has historically led to unhealthy profit margins. These pain points largely stem from the fact that the way excess inventory is sold has remained exactly the same for over 30 years. And with many brands thinking, “Well, it’s the way we’ve always done it!”, it’s not always immediately apparent to them how their off-price business is inefficient.
There are new opportunities to move inventory faster and increase margins due to recent innovations in the space, but first, it’s critical for brands to identify the areas in which they need to improve.
Have you ever wondered where your off-price business sits on the efficiency spectrum? Here are five signs your process may be inefficient:
1. Error-prone inventory management
If your off-price inventory management process requires employees to compile information from several systems into one file and manually manipulate the file to determine what is available to sell to the off-price market, your process is extremely error-prone.
Layer on multiple email exchanges where spreadsheets are being passed back and forth with various tweaks and formatting changes, and you open up the possibility of quantities being entered incorrectly, information being mistranslated, and, ultimately, the wrong inventory data being passed to the off-price market. This inevitably creates complications further downstream when the seller has to reconcile what was actually available to sell and ensure no buyer relationships were damaged in the process.
2. Minimal visibility into inventory levels
When sellers send the same inventory spreadsheet to multiple buyers, but are unable to dynamically update inventory as buyers make their commitments, sellers have no way to keep accurate stock levels throughout the negotiation process. With manual off-price processes and linear order fulfillment, an imminent risk of overselling exists. Therefore, sellers are unable to update buyers when inventory levels change and effectively manage their expectations during a transaction.
3. Misallocated employee resources
If you read the first two points above and thought “Yes, this describes my business,” then there’s a good chance you’re also misallocating employee resources. When processes are not optimally efficient, employees often get caught up in the time-consuming task of gathering all excess inventory information from multiple cross-functional partners and inventory systems. These employees are likely to spend a significant amount of time reconciling oversold products and tracking offer commitments via spreadsheets and emails. Instead of focusing on strategic off-price go-to-market plans and their full-price business, employees are trudging through tedious, time-consuming tasks.
4. Limited control over negotiation
Historically, retailers have largely benefitted from the off-price sector because they’ve had greater control over 1) time spent viewing and selecting inventory, resulting in long transaction periods, and 2) negotiating prices down, resulting in lower margin recovery for sellers.
The longer inventory sits in warehouses, the more it depreciates. Unsold products typically lose value exponentially as they become less current and potentially out of season. Normally, sellers struggle to easily create offers with rich product content and get to market in a timely fashion, elongating the overall transaction period. Once the seller does get to market, the ball is mostly in the buyer’s court with how long he or she would like to spend making selections on the inventory.
In addition, it’s often difficult for sellers to make reasonable margins on their excess inventory. Sellers don’t usually have the power to command certain profits on this inventory due to age and urgency, however, they also don’t usually have a more efficient method of dynamically pricing their products throughout the negotiation process.
5. Lack of actionable insights
When your excess inventory process is very manual, or if you don’t have a central repository of off-price information, very little transaction data is captured for business intelligence. Since excess inventory is often an afterthought, brands usually attempt to offload this product as fast as possible instead of using data to strategically determine the best way to move the inventory.
For example, if sellers could see sell-through by category charted against average purchase price by category for each off-price retailer, they could make smarter offers to retailers with the healthiest sell-through and highest average purchase price. By leveraging actionable insights, sellers can move the most amount of inventory at the best possible margin.
Each business is different, and there are countless other pain points within each process. It’s important for brands to take a hard look at the way their off-price business operates today in order to implement the right processes and tools to improve efficiency.
In the next part of this three-part series, we discuss how you can identify and evaluate the best tools to optimize your off-price business.
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Does your off-price business exhibit any of the five signs above? If so, don’t fear. Off-price is hard, but INTURN makes it easy. Using our platform, businesses gain full visibility into their inventory and create content-rich assortments for off-price retailers—all while protecting their brand.
With INTURN, brands have increased their margins up to 85% and reduced overall transaction times by up to 88%. Want to learn how your organization can capture its share of the $1.5 trillion off-price market? Get in touch.
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