Using Retail Markdowns for Optimal Inventory Performance

Inventory is a retailer’s most significant investment, and knowing how to manage inventory effectively is a key to success. You want to maintain adequate supply to meet customer demand, so you’re not turning away disappointed shoppers and losing sales because of outages. But you also don’t want to get stuck with an excess of items that aren’t selling. When that happens, it’s time to implement retail markdown strategies; and your point of sale (POS) solution can help. Here’s what you should know about markdowns.

You need to keep your inventory moving. Products that are stagnant on your shelves are a chunk of capital that you can’t use; plus, they’re incurring maintenance costs (e.g., warehouse storage) and taking up valuable space that could be used for other items that would sell faster and at full price. Retail markdown strategies can help you recoup some of your investment on those purchases.

Every product has a shelf life—particularly in fashion, where trends can shift quickly, and hanging on to non-performing items hoping to still get full price is counterproductive. Many items are seasonal: you don’t want to have a store full of bathing suits and flip-flops when customers are ready to start buying sweaters and scarves. Or perhaps you simply misjudged consumer demand, and an item you thought would be popular, isn’t.

So how do you know when and how much to markdown? Every store owner will have different factors to consider, but here is a good general guideline to start with when products aren’t moving:

The sales data from your POS system will help you identify which items are performing poorly and may need to be marked down, and it will help you gauge the effectiveness of your reductions.

Retail markdown strategies can have a positive impact on your business. They can rejuvenate your cash flow, releasing money that was tied up in stock sitting on your shelves. They can free up store space for new products that will entice buyers and will sell at full price. And they can be learning experiences that will help you make better purchasing decisions in the future.

While retail markdown strategies are useful, a better goal is to minimise the need for them by optimising your inventory levels and avoiding overstocks. The right POS system will provide a wealth of historical data that you can leverage for strategic forecasting of consumer demand. Analysing previous inventory performance will help you make informed decisions about which items to stock, in what quantities, at which store locations. An integrated omnichannel retail store should have visibility across all locations and access to data from all sales channels, making forecasting better so your inventory will keep moving at full price.

iVend Retail offers integrated POS solutions that include roust inventory management and forecasting functions that will improve your efficiency and your profits. Contact us to find out more or request a demo.