How can retailers creatively use e-procurement tools to limit upcoming losses from below normal holiday spending?

October 15th, 2008

Retailers all know the economy is the worst that most of us have ever seen. Panic is the emotion of the day. What is a good e- procurement strategy to limit retail losses?

Retailers all know the economy is the worst that most of us have ever seen. Panic is the emotion of the day. What is a good e- procurement strategy to limit retail losses?

For those of us who have been around the race track more than a few times, the time tested saying “this to shall pass” may provide some level of comfort during these trying times. This author believes that to often the knee jerk reaction of most executives is to immediately cut spending, reduce headcount and batten down the hatches until the present down cycle plays itself out. A former boss reminded me on more than one occasion that” it’s about the money” which is a common mantra taught in most business schools. The secure executive however looks at these times and try’s to make business decisions that will move the company forward by quantum leaps as the market recovers.

What might we expect from retailers? According to a USA TODAY article by Jayne O’Donnell titled Fearing a holiday letdown; retailers shifting strategies, consumers will see fewer selections, fewer sales people to help them and more promotions.

Let’s not be fooled, most of the product destined for stores during the holidays has already been ordered and is in the queue to be delivered to stores. What’s at risk for retailers beyond just reduced consumer spending during the holidays, are next quarter’s sales? If consumers are honest, they don’t see much in the way of personalized service during the holidays even with the ramp up in hiring. The real opportunity here is in the area of promotion. How a retailer moves product that is already committed to, is the real issue. The reason for getting the product out earlier is to extend the season including the markdown period generally planned as part of the sell through process.

One real opportunity for retailers in a down market for which inventory has already been committed is an aggressive plan to reduce overstock as soon as seasonal spending hits a planned bottom. First to market companies with this type of strategy will get a better bang for the buck than laggards. Forward auction tools are an excellent way to accomplish this. There are a variety of typical audiences for this type of inventory including internet sites such as overstock.com and all of the dollar store formats. What retailers may not be aware of are the dozens of other organizations that would be willing to participate events of this nature. The SafeSourceIt North American Supplier Database includes this category of resellers to support forward auctions.

An additional note, this plan will also help to reduce fourth quarter shrink which is the largest shrink quarter in both dollars and as a percentage of sales.

We look forward to your comments.

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