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Why Retail’s Inventory Issues Are a Good Thing

In the late 1790’s, William Blake wrote “The road of excess leads to the palace of wisdom.” The intent was to provoke thought via the use of contradictions.

Unknowingly, Blake offers valuable and timely insight into retail with those 10 words.

The road of excess today is a practical matter: inventory levels.

A road that we have been on for some time now.

Headlines of inventory woes are the same today as they were years ago. Actions to right-size inventory are also similar: discounting, canceling orders and selling to liquidators. Typical, short-term solutions salvage whatever revenue possible. Long-term, these are pieces of inconsequentia as product creation processes remain unchanged.

But, we would argue, that excess inventory is a good thing for retail.

It has to be.

Taking Blake’s words literally—there are valuable lessons to be learned along the road, leading up to the destination. There is an opportunity for self-reflection while asking, “How did we end up on this road to begin with?”

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A clue is found looking back to 2019 at Sourcing Journal’s Sourcing Summit. On a panel, John Thorbeck commented that bad management or leadership is not responsible for excess inventory.

Rather: There’s something deeply flawed about the business model of the industry.

We couldn’t agree more.

It appears that retailers operate on the belief that if more product is created, then consumers will buy more. Excel files cloud the art of merchandising as product assortments are made with profitability in mind. These are industry best practices as work—all contributing to excess.

What we need are better practices. Based on refreshed thinking, raising the bar for performance and elevating our wisdom.

Here are five points of refreshed thinking to consider:

Acceptable Inequality. Not all products are equal, so not all products should be created equally. A basic, black t-shirt and a complex technical jacket are different. Their fit, feel and function are distinct. So are their materials, supply chains, and testing needs. As such, their process for creation should also be different which is not always the case today.

SPF for Assortments. Ditch the view of dropping collections in seasons. Move to a model of Seasonless Plus Fashion (SPF). For example, seasonless items include core and basic tees. They do not go on markdown and as sales increase, they are recolored or replenished. The fashion product mix is a combination of new and innovative products, accounting for up to 30% of a collection. Fashion styles move into the seasonless bucket if the consumer wants them repeated.

Materials-First Mindset. Buy into material upfront, before the concept-to-market calendar begins. Further, tested and pre-approved materials should be ‘banked’ in a library. Product creation is limited to the materials which exist in the library.  This way, finished goods are rapidly produced when needed. Designing into already approved materials saves time, effort and cost.

From Providers to Partners. The operational model evolves to recognize factories as partners in product creation. Retailers invest in their factories, enabling real-time collaboration using digital tools. Responsibilities like fit and testing needs are then delegated to the factory partner.

Cut It. A brand’s product assortment should have a distinct point of view. Every product must serve a purpose. But, being “Over-SKUd” is a real thing. Audit the assortment seasonally and identify the top and bottom performers. Teams can do this by quantifying the sell-through of products. Then, cut the lowest-performing SKUs from the assortment.

We find that market-leading brands are slowly adopting these ways of thinking. As more brands do the same, they will reap benefits including increasing full-price sales, preserving gross margins and preventing the accumulation of excess inventory.

An unintended benefit also emerges with this new way of thinking: speed is redefined. One would think a retailer’s speed meant keeping up with trends or next-day delivery. Instead, speed is redefined as getting products to market faster. Products hit the sales floor closer to when the consumer wants them. Supply matches better with demand and excess is avoided. We are not the first to articulate this; experts at Cowen describe this as “Speed = Value.”

Blake proclaims in his work that “Without contraries is no progression.” With excess inventory touted as such a negative, the opportunity for progress must be equally significant. This is exactly the opportunity needed to start vital process innovation. Doing so eliminates the culture of excess that we have become accustomed to.

The question is, how long will retailers continue on the road of excess before reaching the palace of wisdom?


Liza Amlani and Raj Dhiman PhD are Co-Founders of Retail Strategy Group. They work with retailers and brands to help them accelerate their speed to market, preserve gross margins and deliver products that their consumers truly want. More information can be found at retailstrategygroup.com