As we enter the season of giving, both in the US and the UK, Inventory Planner has published findings from a survey of 500 retailers. It seems like rising inflation in both countries is having a big impact on Christmas. The US inflation rate remained steady at 3.7% in September 2023, defying market expectations of a slight decrease to 3.6%. In the UK, it remained stable at 6.7% in September 2023.
However, the impact on consumers from months of high inflation is significant. The Office for Budget Responsibility (OBR) estimates that real household disposable income per person was forecast to drop by 3.7% in 2022/23 and by 2.0% in 2023/24. In the US, there are some signs of recovery. With the average disposable income hitting $45,345 in the US in 2022, down from $48,534 in 2021. In June 2023, that figure has risen to $46,646.
Another recent piece of research, conducted by Accenture, seems to suggest that retailers are right to be wary. In Accenture’s 17th Annual Holiday Shopping Survey, it reported that 6 in 10 consumers are planning to cut back on gifts, rising to 69% for friends and family. Furthermore, 52% of consumers have already agreed — or are planning to agree — not to exchange gifts with other adults.
Is inflation to blame?
Wisely, retailers are choosing to purchase less stock (US by 55%, UK by 41%). Many are also choosing to reduce profits by lowering margins on this reduced stock (US 63%, UK 59%). Lowered margins and lower profits will make this year tough in terms of revenue and profits, and many retailers are concerned.
They feel that by increasing prices in line with inflation, they will face accusations of greedflation and potentially alienate customers. The findings follow a tough few years. In the last year alone, many (US 49%, UK 45%) have written off stock – and 29% forced to dump up to 10% of stock in the UK. In the US, it is worse. 49% have written off stock in the last year – with firms writing off 22% of stock holding on average over the last 12 months.
Increased stock holding has led to cash flow issues for retailers that look set to continue into 2024. In the US, 56% of those surveyed said they struggled to effectively manage cash flow over the past 12 months. In the UK, 49% said their cash flow position was ‘precarious’, and 42% said they had had frequent cash flow issues this year. A third admit they fail to manage cash flow effectively. The outlook is bleaker than ever in 2024. Should we expect more retail failures in March on the quarterly rent day?
If inventory is the problem – how can you fix it
These are not old challenges, and yet many retailers rely on obsolescent technology to manage forecasting for both cash flow and inventory. 45% of respondents said they were struggling to forecast demand using manual spreadsheets. The survey did not ask how many successfully use spreadsheets for inventory planning.
Sage offers accounting solutions for retailers such as Brightpearl. Solutions that include retail accounting or offers integrations to leading accounting solutions if these are already invested in. Inventory Planner provides a specialist solution for retailers to assist with inventory forecasts and offers buying recommendations. It is already used by over 2,600 merchants worldwide to automate stock purchasing and better manage customer demand.
Inventory Planner is used by retailers from across different industries, such as Snow Cosmetics, SitStay and FurnitureBox.
Mark Hook, VP Brand Marketing at Inventory Planner by Sage, said, “Retailers are being hit by the double whammy of spiralling interest rates and inflation in peak trading as we head towards peak trading for the majority of merchants.
“Many are reluctant to pass on the full impact of rising prices – sensitive to accusations of greedflation – which means that margins are being lowered.
“The economic turmoil has made stock forecasting even more hazardous in 2023, and too many retailers are still relying on time-consuming manual spreadsheets to predict demand when new technology can and should be utilized to provide speedier and more accurate outcomes, and, most importantly, protect cashflow.”
Inventory Planner is used by more than 2,600 merchants worldwide to automate stock purchasing and better manage customer demand.
Enterprise Times: What does this mean
If retailers are still using spreadsheets to manage their business, it is long past the time when they should invoice with better tools. It is a false economy to retain spreadsheets for specialist tasks. Accounting and forecasting solutions algorithms have been developed over the years. These use the latest data science to deliver accurate forecasts.
Ultimately, the cost of the technology repays itself rapidly. For example, Looking Sharp, the Fashion Reseller, saved £320K in three months with Inventory Planner.
The inference from the research is that retailers will have less on the shelves, and consumers will be buying less. The question is whether this will be a good year for retailers and a happy Christmas, with a cash nest egg for 2024.
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