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How Advanced Analytics Can Put an End to the $50 Billion Retail Overstock Problem

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Some retailers are facing backlash over images showing piles of unsold inventory that have been burnt or destroyed. This overstock issue is not new, and retailers have tried to manage their unsold goods through donations and resellers, but there is simply too much inventory. Retail giant H&M recently disclosed that they had $4.3 billion in overstock — an amount that is hard to picture and even harder to deal with.

Far from simply a financial issue, overstock is devastating the environment. Raw materials are destroyed, and a huge amount of energy is consumed when producing and moving products across the world. Not to mention the hours of people’s labor, blood and sweat that is poured into each product, only to have them destroyed with no purpose.

It’s a frustrating problem, given that it’s so easy to solve. Those who embrace modern technology are already optimizing their inventory with advanced analytics, entirely preventing these massive amounts of overstock.

So, if a retailer is wondering why consumers and investors are pulling away, it’s because they are still using a traditional approach in a modern world.

Whether it’s fast fashion or high-end brands, at the end of the day, the goal of a business is to maximize shareholder value. As such, retailers can’t afford to risk losing sales because they ran out of stock.

The consequences of out-of-stocks are severe, from losing profits to losing customers and inevitably market share. The direct and indirect damages of lost sales are so great that retailers prefer to markdown unsold inventory, or even get rid of it at cost.

Retailers face the challenge of figuring out what the product mix should be, and how much of each product to purchase. On top of........

© Entrepreneur

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