According to the survey* results, “misjudgments regarding inventory account for a total of 53% of unplanned markdown costs for retailers.” This equates to $— of unplanned markdowns for you. If you eliminate this completely, it would improve your margin by –%. However, we believe it is likely not possible to reduce 100% of your unplanned markdowns since a variety of factors can contribute to this beyond the reasons listed below. We recommend that you reduce these calculations by 25–50% or a rate commensurate with your business to account for unforeseen factors.
Let’s break this down:
- “The inventory ‘mistake’ with the biggest impact on markdowns is overbuying inventory, which the survey* estimates, is the primary impetus for around 30% of all markdowns.” This represents for you a $— savings, and a potential margin improvement of –%. » See how merchandise financial planning can help prevent over/under buying.
- “Buying the wrong type of products also accounts for a double-digit share (16.5%) of unplanned markdowns” equating to $— for your business, with a potential margin improvement of –%. » See how to plan the right assortments.
- “Misallocation of inventory accounts for a further 6.9% share,” which translates to $— savings for you with a potential margin improvement of –%. » See how to layer your buys.
Again, we recommend that you take a more conservative approach and reduce these improvements by 25–50% or a rate that better reflects your business.
See below additional resources of strategies you can implement to prevent overbuying or buying the wrong products, and misallocation of inventory.