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How Can Retailers Reduce The Need To Steeply Discount Inventory?

Woman taking inventory

The business catchphrase “the customer is always right” usually describes a store’s customer service philosophy. Now it dictates a store’s inventory management system, too.

The notion seems to makes sense — if you sell what people like, they will buy. But inventory management is more than catering to people’s interests. To capitalize on consumer buying patterns, retailers need to capture Big Data through an ERP system.

Here are four tips that can help retailers make strategic product selection and pricing decisions, reducing the need to steeply discount inventory in order to move inventory.

  1. Analyze historical data to select a store’s ideal product mix: Retailers can use historical data as a baseline for what-if scenarios, and evaluate those scenarios against the budget for the fiscal year. Are weather patterns affecting the sales of certain products? Can store managers expect a more positive economic environment during Christmas this year? Then apply various retail budgeting methods to determine the most effective product mix to maximize profits. The key is to select inventory that will sell without resorting to deep discounts.
  2. Use an integrated customer data system: Tracking customer data through a customer loyalty program can help retailers see overall product trends and patterns, as well as help move products that are not selling well. For example, a retailer could use a customer’s recent purchase history to pinpoint what the customer is most interested in purchasing and target deals to them for those products.

    According to an article on, the analytics of consumer buying patterns helped NCR, a self-service technology company, to customize ATM product configurations to “defined customer segments.” The analytics provided “insight into what’s selling where, to whom, when and how often,” which became leverage for company sales teams to guide customers to purchase products in stock.

  3. Maximize profit margins through economic order quantities: If a retailer is able to purchase a product at a low cost based on economic order quantity, the store can maximize profit margins by selling the product at the original retail price. Or, the store can lower the retail price so the inventory sells faster and profit margins remain on target. That’s why it’s critical that retailers negotiate the best inventory price with the vendor.

    Retailers can offer small incentives, such a $5 discount off a customer’s next purchase, before resorting to deep markdowns and having to sell the product nearly at cost. A lot of retailers start selling an item at a high price, which still attracts some shoppers, and then gradually lower the price over the lifecycle of the product.

  4. Prioritize stocking items according to customer purchase history: Customer buying patterns for certain products coincide with the level of customer satisfaction a retailer wants to provide for those items. If your store offers a signature item or is known for selling specific products, those items should always be in stock. This may require the buyer to specify a higher level of safety stock for replenishment calculations. Every retailer will have different products as their priority stock. For example, a convenience store and a grocery store sell many similar food items, but more people likely buy eggs or expect to purchase eggs at a grocery store. That makes eggs a priority item to have in stock at a grocery store compared to a convenience store, where the priority items might be snack foods and soda.

Every retailer wants to avoid having to deeply discount products. The above tips can play an important role in helping retailers to better identify buying patterns and improve product selection, therefore reducing the need to slash prices on inventory.