Tackling excess inventory is top of mind for brands and retailers as the off-price market has reached over $700 billion. And with shoppers’ increased interest in the “excitement of the treasure hunt,” a solution for inventory management is critical to aligning with consumer demands and expectations.
Ronen Lazar is a cofounder and chief executive officer of Inturn, an online marketplace that enables brands and retailers to streamline end-of-season or excess inventory sales to buyers in private online showrooms. Its platform is especially focused on increasing profitability for fashion and apparel brands. Prior to Inturn, Lazar worked as an advisor for retail solutions Skip and Backbone PLM and cofounded Charity Bids, a social media auction platform.
Here, Lazar talks to WWD about inventory strategies and strengths of the off-price market.
WWD: Off-price retail is one of the bright spots in the retail industry. Why do you think off-price has succeeded in this environment?
Ronen Lazar: Rather than focusing on products, shoppers are looking for and spending money on experiences, and retail is becoming more experiential both online and in stores. Off-price retail offers consumers the what they are seeking — excitement of a treasure hunt, searching for and shopping the deal. More brands are noticing this shift and evolving to align with these new expectations, and like most popular trends, it only takes a few early adopters to start a movement.
WWD: How has off-price evolved over the last few years?
R.L.: What started out as a way to close-out excess product has now become a significant retail channel. In the past, no one spoke about off-price or even admitted to having excess inventory. Now, however, it has become a mainstream, even popular, topic in the retail industry. And more and more retailers are making their move into this market to give consumers the experiences they want: quality goods at an attractive discount. According to a recent J.P. Morgan report, the off-price industry has grown 47 percent in revenue since 2010 and is expected to grow another 7.4 percent by 2021, an increase that equates to more than $19 billion.
WWD: What are some of the challenges that are driving this increased attention and how does the off-price market help address or solve these issues?
R.L.: The retail environment is challenging, as brands and retailers struggle to understand what their consumers want. They are making more and more commoditized product, flooding an already saturated market with more things to buy and infinite ways to buy them. The combination of product that is not differentiated and a shift in consumer interest has created major cash flow issues for brands and retailers as they struggle with their inventory management and catching their consumer’s attention.
Off-price directly addresses these issues, helping retailers and brands quickly move the product, capture revenue and increase cash flow. Plus, selling in the off-price market can be simple and easy for retailers. Because most off-price companies haven’t “gone digital,” selling products doesn’t come with the complications of omnichannel, such as shipping and returns, online versus in-store traffic, or reconciling inventory.
WWD: What are some of the strategies brands and retailers should be doing to maximize their ROI and how are they leveraging the $700 billion off-price market to increase revenue and avoid lost sales?
R.L.: The most savvy brands and retailers are investing in updating backend systems, a portion of their business that they have not looked at or innovated on in over 20 years. While most are still trying to understand the full magnitude of impact this generates, improved backend systems are allowing them to avoid manual errors as well as capture and access data in real-time. This offers them visibility into product locations and prices, information that can then be leveraged to identify sooner both in-demand product for optimized reorders and slow-moving product for improved markdown efficiency. All this results in more product being sold more frequently.
Brands and retailers are also expanding their off-price buyer networks, offering product to domestic and international buyers who are actually interested in their merchandise to get higher return margins and make room in stores and warehouses for new, full-price styles.
WWD: Are there specific strategies around excess inventory that retailers and brands should be implementing ahead of the holiday season?
R.L.: While analysts believe that holiday sales will grow 4.5 percent, as compared with 3.6 percent in 2016, retailers heading into the holiday season still need to move slow-moving product to off-price channels to make room for newer, full-price items in-store and online. The off-price market plays a critical role in moving this excess inventory, but retailers need to ensure they are getting the best price. Retailers that implement technology solutions to reconcile inventory across all channels and implement real-time inventory tracking, while leveraging customer purchase data, will have a better chance of capturing the most revenue on off-price items.
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