A recent study by Coresight Research revealed that 40 percent of U.S. non-grocery sales are sold at a discount, representing roughly $395 billion in lost revenue, or 12 percent of sales.
Retailers seek to avoid markdowns and sell out of the season at full margin, but it isn’t easy to predict how much inventory to acquire. Merchants often complain about over-buying (resulting in markdowns) and under-buying (resulting in out-of-stocks). Both stem from demand volatility and long supply chains.
Two factors cause volatility, typically.
- Changes in consumer behavior, including external factors such as weather, competitors, and social effects.
- More consumer choices, including new channels and alternatives, such as direct-to-consumer startups.
Balancing demand with supply is tricky. The traditional view that inventory is a back-office function is outdated. Merchandising is fundamentally linked to inventory. Most leading brands and retailers now closely coordinate the two functions, if not join them at the hip.
In this post, I’ll address four online merchandising tactics that balance consumer demand with inventory levels, to maximize profits.
Merchandising Hacks to Increase Profits
1. Show variants in images. The exposure that a product receives directly impacts its sales — more exposure, more sales. Direct marketers learned this years ago with printed catalogs. Last-minute art decisions would have a significant impact on which product variants sell. For example, if the art director featured a red fleece prominently on the front cover because it was a good photo, the red variant would usually sell much faster than the other colors. Showing multiple variants in category images can lessen this problem.
Online merchants are not stuck with one image. Rather, we can change the featured image much faster, even in real-time, with help from artificial intelligence. But we usually do not. Merchants rarely optimize…