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Welcome to Part 1 of our Specialty Retail Series. In this 4-part series, we’ll talk about: 1. Why your demand forecasting strategy must fit your retail model (Fashion vs. Replenishable), 2. How to get a handle on retail inventory management with store-level inventory automation, 3. Why your 2020 retail tech investments should focus on adaptability to the macro-economy, and 4. Inventory optimization strategies including how to use data-service assignments to achieve CX domination  

Part 1: Does Your Demand Forecasting Strategy Still Fit?

Modern retail is shrinking our ability to make balanced inventory decisions.

Inventory Management 101 tells us that if we want to be successful, we must find the fine line between stockouts and overstock. So we apply what we know about demand forecasting and we do our best.

What you probably don’t know is that many retailers are using the wrong demand forecasting strategy for their business model, and it’s leaving money on the table.

Profitable brands have realized that demand forecasting strategies are not one-size-fits-all. Especially in an industry where consumer trends are changing faster than a 14-year-old boy.

So does your demand forecasting strategy still fit? Which inventory management approach should you use? It really depends on what type of retailer you are – ‘Fashion’ or ‘Specialty Repenishable.’ If you want to make the best decisions for your inventory investment, start by identifying where you fall on the spectrum. Then go in with the right demand forecasting system for the job.

Fashion Retail vs. Specialty Replenishable These two selling models are on completely different ends of the spectrum. On the Fashion Retail side, you have short-lifecycle goods, such as fashion apparel, where the supply chain planning strategy is to plan one season at a time. Fashion items have different SKUs that turn over frequently and restrict the buyer to a one-time plan-and-purchase process.

Women’s 2018 fall apparel, for example, will have different SKUs from the Women’s 2019 fall fashion season. That makes the 2018 Women’s fall fashion apparel a “cliff season.” It is strictly defined for fall of 2018; when you get to the end of the 2018 season, it’s over. Those same SKUs will not continue to sell during spring or summer of 2019. The next season will have a completely different set of SKUs. Then the goods for that season get allocated to the selling locations accordingly. Not much room for change mid-stream. It is what it is.

Specialty Replenishable retailers, on the other hand, carry longer-lifecycle goods that are sold repeatedly throughout the year across a longer period of time. Specialty Replenishable SKUs are not necessarily bound to a cliff-season, although they may sell at a higher volume during certain periods of the year.

A good example is in grocery retail. Canned soup sells all year, but certain types turn significantly better during cold weather. There is some degree of predictability, given the ability to track seasonality and make an intelligent adjustment accordingly.

Some retailers are completely Fashion, such as a mall kiosk chain selling only splat balls, or the latest craze in iPhone® accessories. With those items, you’ll typically see shoppers fighting over inventory in December and then those same items on clearance at a dollar store by the following June. Other retailers are completely Replenishment, such as a shop or ecommerce storefront that sells vitamins and supplements. Inventory turns like clockwork and there is a great deal of data on-hand about buying patterns. You could be a mix of Fashion and Specialty Replenishable. Which are you?

Which is better?


Both selling models meet a market demand, but in terms of how you plan and order inventory, each must be approached in a very different way. Not doing so is guaranteed to result in poor inventory optimization.

Traditional demand forecasting strategies might work fine if all you sell is Fashion inventory and your success is highly turn-focused. However, if you sell Replenishable items, you are in the best position to leverage data and emerging automation technologies to conquer the ‘great inventory balancing act’ between stockouts and overstock.

Tech-enabled inventory optimization wins

Successful retail brands are using data and inventory automation solutions to right-size buying and maximize profitability with their replenishable inventory.

Thanks to technology, we now know more than ever about what consumers buy, when, why and how. We have the data to track erratic demand patterns and respond faster to demand anomalies caused by mobile, AI and other disruptive forces. And we can do it all with a fraction of the tedious manual legwork.

Replenishable goods are an excellent fit for inventory optimization solutions because SKUs are relatively constant. If an item SKU remains the same for a longer lifecycle, and then something in the demand pattern changes, the anomaly becomes much more apparent, foreseeable and fixable. With very little intervention by humans, the system can detect these variances early on and automatically adjust for them, even week-by-week or store-by-store. The result is improved efficiency, cash flow, inventory accuracy and, ultimately, the best customer experience (CX).

Find the perfect fit

Ok so you have replenishable inventory; now what? Find a powerhouse inventory optimization solution that can automate demand forecasting activities for replenishable SKUs, predict and react daily to demand patterns, and then communicate those changes with extended supply chain partners. At the end of the day, the solution must deliver:

  • Agility and adaptability to rapid changes in the macro-economy
  • Daily forecasting analytics around trends unique to a particular store or region
  • Inventory optimization right down to the individual SKU for each replenishable item

Use these demand forecasting strategies and you’ll quickly find a refreshing shift in your focus. Rather than getting stuck on turns and markdowns, you will begin to make proactive, profit-driven decisions that will keep high-demand products available everywhere, and shoppers happy – online, offline, all the time.

In the next part of this series, we will discuss the never-ending balancing act between stockouts and overstock — the impact on your business, and how you can conquer it. Part 2 is coming next week!

Learn more about demand forecasting and optimization for your replenishable SKUs.