A recent report from ROI Hunter has shed light on a major problem plaguing UK retailers – overstocking. This issue is causing a significant loss in revenue, with an average of £882,781 being lost every quarter due to overstocking. Alarmingly, 62% of retailers are struggling with this problem.
The consequences of overstocking are far-reaching. Nearly half of retailers (48%) are forced to discount their inventory, which not only eats into their profit margins but also increases the risk of more items becoming deadstock. Surprisingly, 56% of respondents admitted to lacking insight into which products are likely to become deadstock.
The report also highlighted a lack of coordination between marketing and purchasing departments. An alarming 47% of the marketing budget is spent on promoting items with low availability, such as the last size available or out-of-stock items. This indicates that the marketing department has minimal impact on what the purchasing department orders.
The fashion industry is particularly vulnerable to this overstocking crisis. Karel Schindler, CEO of ROI Hunter, emphasizes that fashion retailers are not only dealing with excess stock but also experiencing a surge in returns. This exacerbates concerns surrounding overstocking.
To understand the impact of overstocking on consumer behavior, ROI Hunter surveyed 2,000 UK consumers. The results revealed that 43% of respondents are becoming more cautious with their spending, opting for second-hand shops and apps instead of traditional retailers. This shift in consumer behavior further worsens the overstocking problem faced by top retailers.
While overstocking has always been an issue, it has become more acute in recent years. Schindler attributes this to misconceptions about consumer demand and a lack of foresight into the retail industry’s current cost of living crisis. Retailers are also unknowingly exacerbating the situation with their promotion strategies. For instance, they struggle to promote seasonal items online quickly enough at full price, resulting in the need for discounts as it takes weeks for advertising algorithms to catch up.
These findings serve as a wake-up call for UK retailers. The issue of overstocking not only leads to financial loss but also impacts consumer perception and behavior. Retailers must take steps to effectively manage their inventory, improve coordination between departments, and adjust their promotion strategies to successfully sell their products. Failure to address this overstocking issue could have dire consequences for the future of the retail industry.
Useful links:
– Retail Gazette
– The Guardian – Retail
