For customers, is there a downside to retailers having good inventory management? That might seem like an odd question to ask, but it brings up quite a few intriguing ideas, which we can now address. To start with, the answer to this question is: Yes and no. At first glance, that may appear to be no answer at all, but a deliberate obfuscation of the truth. However, we promise that it is not that, but it is the beginning of a discussion that is worth having about the effect of inventory management on the customers of the stores that use it to their advantage.
The answer is yes because good inventory management leads to fewer products that retailers have to sell at deep discounts. So companies can save quite a bit of money and avoid having to waste as much money as they have in the past on products that are difficult to get off their hands, even though this means that customers do not get as many deep discounts on products that the company is desperate to sell.
But the answers is also no because good inventory management practices save retailers a lot of money, so they can lower their prices and be more competitive. Thus, retailers do not have to offer enormous discounts on products in order to move them, but they can lower their prices across the board or use targeted pricing rules that are aimed at getting specific customers and groups of customers to be more interested in purchasing their products. In this way, inventory management that helps stores be more efficient creates a positive situation for both retailers and consumers to benefit from.
In other words, outlet stores could soon be a thing of the past if retailers’ inventory management keeps improving. And that is a good thing, in the long run, for everyone involved. It is like the difference between a healthy diet and a crash diet. Both are meant to allow a person to lose weight and be healthier, but the former is much more enduring than the latter because it creates a sustainable routine instead of one that causes needless pain.
In late 2013, J.C. Penney announced that it planned to close down virtually all of its outlet stores because it was running too efficiently to have enough extra products to sell at a discount. The clothing retailer uses inventory management software to find smart ways to balance its inventory needs so that it can keep costs to a minimum. It has done such a good job that it is now able to focus on its core business of department stores and get rid of unprofitable sides of its business.
It might seem like bad news for consumers that J.C. Penney has closed its outlet stores. No more deals, right? Actually, the more retailers who use inventory management software, the more downward pressure there will be on prices. As companies reduce the cost of doing business, they can cut prices to take customers away from their competitors.
Good inventory management is a winning strategy for both businesses and their customers.
Much like eschewing crash diets in favor of long-term healthy eating habits, outlet store closings are good news because they mean that retailers are being smarter with their inventory management and so they are offering customers reasonable deals instead of making desperation moves to sell goods that people aren’t willing to pay high prices for.