With three weeks until the end of the year, retailers and brands are focused on their balance sheet, and it’s all about finding working capital to survive. Cutting inventory now - possibly in half - can bring retailers closer. However, determining which items to cut is a fool’s errand when done blindly, or worse, using historical data that doesn’t reflect the fluidity of changing consumer preferences right now.
To top things off, returns are also going to come in hot and heavy in January, particularly because online sales (which have ballooned during the pandemic) tend to have higher return rates than in-store purchases. Forecasts for holiday purchases made online will soar to $234.9 billion in the US this year according to one estimate, which also predicts as much as $70.5 billion could be returned.
Reducing inventory to reclaim capital is a strategy retailers and brands have been chasing all year, but it’s clear that they are still riding on past purchases for guidance.