NEW YORK — Inventory management — let's call it inventory mismanagement — has emerged as an Achilles heel for department stores.
Those retailers, along with others selling third-party apparel, were particularly vulnerable to softer sales and margins during the past holiday season, according to a recent client note from MKM Partners Managing Director Roxanne Meyer. Inventory was a major factor (though not the only one) in rendering the period possibly the "most promotional holiday since the recession," she said.
Many current sourcing methods in apparel lead to overbuying and then markdowns, according to a Supply Chain Dive report. Moody's warned that inventory management has become "a chronic problem for the industry [that] will once again be a performance hot spot in 2020," in a Wednesday report on the outlook for the department store sector.
Belk runs nearly 300 stores across 16 states. Like its peers, it's faced with what Belk Vice President Tim Carney, speaking at the NRF's Big Show, calls "time boundaries" and merchandise demand by color, size and style, across its physical stores and e-commerce channels, including in-store pickup of online orders.
Carney credits AI for Belk's recent mastery of inventory management. While the technology is touted as a way to spur personalization and marketing, Belk's revamp, which entailed moving from spreadsheets to SAS Analytics, is demonstrating how useful the technology is for backroom operations.
Carney told the NRF audience the department store integrated machine learning into its ordering, replenishment and allocation systems, including measuring demand for specific sizes by store.
"Our virtual assistant does the heavy lifting," he said, noting that some obstacles remain, including the level of willingness among vendors to pack things differently.
In her report on the NRF's Big Show, Meyer wrote that AI may be finally nearing "a tipping point." Although most of the companies studied by her team, "are likely exploring AI, we believe very few are leveraging it in a meaningful way," she said. Moody's analysts called on department stores "to mine data to leverage resources more efficiently, particularly for inventory."
Productivity and efficiency in inventory management is critical if what agency WD Partners calls "O2O," or "online to offline," is to succeed. A high level of execution in backroom operations is critical, Lee Peterson, executive vice president of thought leadership and marketing at WD Partners, which is working with Google on such services for retailers, said at the NRF's Big Show.