In this interview, moderator Keith Jelinek, co-leader of our Performance Improvement Advisory Practice, leads part two of a five-part series dedicated to helping retailers excel in the crucial fourth quarter. This segment features Jesse Lehman, who shares insights on effective replenishment and allocation strategies, emphasizing the importance of maintaining optimal product levels in stores and distribution centers to meet holiday demand and enhance customer satisfaction.
Keith: Black Friday, the official kickoff to the holiday shopping season, is imminent. Retailers have spent months planning for this pivotal period. They, and consumers alike, have had to weather a storm of challenges: geopolitical tensions, inflation, supply chain disruptions, increasing labor costs, economic uncertainty, shifting consumer confidence, and to top it off, a presidential election cycle.
The final two months of the year can be a make-or-break period for businesses. By fine-tuning strategies and tactics, companies can improve their chances of ending the year in the black. This year, with a shortened selling season, these adjustments are even more critical.
As final preparations are underway, our retail expert team has prepared a holiday readiness checklist spanning across five key functional areas: supply chain, marketing, store operations and labor planning, digital commerce, as well as inventory replenishment and allocation.
Blending years of retail experience with shopper feedback from our recent consumer holiday survey, we are excited to share our holiday checklist, which provides a fresh perspective on what is most important to your customers this holiday period.
Today, in part two of our series on the holiday shopping season (see part one here), I will be talking with Jesse Lehman about strategic insights for replenishment and allocation. Jesse is a Senior Director with expertise in merchandise planning, inventory management, demand planning, and supply chain operations.
Let's jump in …
Keith: Jesse, thank you for joining us today. Let’s dive into replenishment and allocation. When you think about replenishment and allocation in the stores and balancing the flow of product this time of year, it's a challenge. Retailers have to calibrate how much to put in the stores and how much merchandise to keep in the DCs to fill e-commerce orders and hold back for flow. What are some of the most critical elements that retailers should be thinking about and monitoring daily? What are some typical actions to improve that critical intersection around having the right amount of product available in the stores and the right amount of product in the DCs during the holidays to fill those critical e-commerce items?
Jesse: Keith, thank you for having me. Daily PO tracking from vendor to DC for both domestic and international shipments is a critical activity. If key item shipments are identified as not in route or arriving late, this allows the allocation team to avoid any surprises and communicate effectively with their cross functional partners in merchandising, DCs, stores, and e-commerce. Marketing obviously can make adjustments to promotional timing that need to be made to avoid disappointing customers. Another thing to focus on as we're going through the season is replenishment. Teams need to be lined up to read and react to the promotional demand. This can take place on the morning of Black Friday or Saturday morning, depending on systems capabilities, to ensure rapid replenishment of top performing items to key stores. A focus on aggressively maintaining in-stock and appropriate levels of depth on promoted items will ensure that customers are delighted with their shopping experience.
Keith: That's very interesting, Jesse, when you think about that. And those are great tips, but we also know that no matter what happens with the type of replenishment or allocation that we make to the stores or how much was bought and how much is left over in the DCs, as we start tracking sell-through going into the holidays, there's will be a need for some markdowns to try to profitably exit the product while we still have a lot of traffic available for the holidays. What tips do you have for our readers on how to maximize profitability on those types of products?
Jesse: Absolutely, Keith. Retailers need to prepare for end-of-season clearance ahead of time. It's best in class to have a weekly plan by SKU with forecasted sales, discounts, margin, and inventory levels, to allow visibility to the financial impact and the meltdown schedule. Create a playbook for meltdown execution across stores and e-commerce with marketing support that includes an online landing page as well as prominent in store placement and signage. Our recent holiday Consumer Survey revealed that 49% of consumers will be prioritizing percent off discounts when shopping this holiday season. As a result, as we progress through the season, it will be important to monitor weekly sell-through and adjust discounts as needed in order to ensure the inventory meltdown is on track to hit the planned out date. Taking lower discounts on SKUs with higher sell-through, while addressing lower sell-through SKUs more aggressively, will preserve margin while still driving the needed sales lift to achieve clearance of seasonal inventory. The third thing I would recommend is that hindsight meetings should be conducted with business teams to document insights from promotional events and high traffic periods, to enhance preparation and forecast accuracy for future seasons. This will allow a more precise alignment of inventory levels versus demand and decrease the need for aggressive discounts to clear inventory in the future.
Keith: Jesse, these tips are very helpful I'm sure to our readers today. When you think about the product flow, how to get the right product into the right stores, how to think through the holiday season upcoming and also how to address some of the product that just isn't selling at what the plans were, I know that this will be very beneficial, and we appreciate your time today.
We appreciate our readers joining us today and hope you will find our holiday checklist of benefit. Along with the experiences shared from our team, as a reminder, you'll find a link to our checklist at the bottom of the page, and you can download it for your use.
Our Ankura performance improvement team has a proven track record of executing strategic plans to achieve sustainable performance improvement and targeted operating results to help maximize EBITDA, cash flow, and shareholder value. Our expertise extends to all critical aspects of the retail enterprise. We work alongside clients to reduce costs and improve efficiencies. Ankura leverages its vast internal resources to assemble the perfect team for each client's unique challenges, guaranteeing optimal outcomes for complex problems.
Let us know if we can be helpful to you, and happy holidays.
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To assist retailers in preparing for this crucial holiday sales period, Ankura’s Performance Improvement team has developed the 2024 Holiday Readiness Checklist. This checklist outlines key focus areas to ensure your organization is aligned and ready to deliver on the essential drivers of sales success in the coming weeks. By adhering to the guidelines provided, retailers will be well-prepared to delight shoppers and gain a competitive edge.
Click here to access the 2024 Holiday Readiness Checklist.
© Copyright 2024. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.
