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A case could be made that
the lifecycle of merchandise
could be looked at in much the
same way as visiting relatives;
excitement for arrival, and
shortly thereafter anticipation
for departure. Merchants are
excited to receive the next sea-
son’s fresh new inventory, yet
once it lands they try to figure
out how fast it can sell to begin
the process all over again.
Each style, size and color
has its own life expectation.
This cycle of life begins when
merchandise is received and
is complete when the goods
have left the store. Several
factors help determine a prod-
ucts lifecycle. Gender, product
classification, selling season,
whether the item is a fashion
or basic, all affect the length
of time an item remains in the
store. Circumstances that play
havoc with lifecycle most cer-
tainly include weather (a warm
fall can delay the start of boot
selling, but at the same time
extend the life of sandals,
for example).
To best understand the con-
cept of product lifecycle (and in
particular, the exit strategy of
same), a merchant need look
no further than the local grocer.
Bananas illustrate the point
beautifully. Most grocery shop-
pers buy bananas with a hint
of green (preseason delivery)
knowing that they will ripen
quickly on the home counter
within a day or two and be
perfect to eat (in season). If,
however, you have purchased
more bananas that you can eat
in a given time period (overbuy-
ing), the fruit will soon become
overripe (out of season), be
covered in little brown spots
and be suitable only for mak-
ing banana bread (markdowns).
(Pardon the digression, but
my banana nut bread recipe
is pretty darn good, if I say so
myself – see insert below). This
timeframe represents post-peak
season and is where clearance
activity occurs.
Retailers should have a
well-defined exit strategy for
all merchandise. As in the ba-
nana example, each item has
a shelf life, if you will. The exit
strategy is a function of the
store’s sell-through and GM-
ROI goals. The execution of the
exit strategy process is subject
to a category-specific mark-
down cadence.
A cadence is a natural
rhythm or flow of something.
A markdown cadence ensures
that all remaining inventory is
sold through as profitably as
possible while making room for
the arrival of new merchandise.
Many stores are helter-skelter
on this concept and as such
end up taking too many mark-
downs and usually the timing is
wrong. As a result of no prede-
termined markdown schedule,
retailers often end up waiting
until too late in the season to
take clearance markdowns and
never maximize the true margin
potential of the classification.
Another symptom of a lack
of markdown planning is the
“Retailers
should have
a well-
defined exit
strategy for all
merchandise.”
by
Ritchie
Sayner
One Banana, Two Banana
Floor
Space
The Lifecycle of Merchandise
Inside
Outdoor
|
Summer
2016
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