Can you believe there’s actually a downside to good inventory management? It’s not on the business side, though. The fact is that as companies get better at managing their inventory, they don’t have as many excess products that they have to mark down to get off their shelves.
So outlet stores could become an endangered species if companies get too good at inventory management!
Take J.C. Penney, for example. In the article “J.C. Penney leaving the outlet business” Tim Lyons, a spokesman for the clothing retailer, said, “We’ve run our outlet business mainly for the purpose of liquidating excess inventory from our catalog business, and more recently our online business… The better inventory control that we have in place now has reduced the inventory that’s available to sell through the outlet stores.”
It seems that J.C. Penney has outgrown its outlet stores. Lyons added, “The outlet stores served a purpose, but with changes in the way we operate, they’re not seen as being as essential as they once were.” In other words, they’re running too efficiently to need a place to put products they discovered they didn’t need in the first place.
That’s great news for businesses. But it seems like consumers won’t be able to get as many deals on clothes if retailers like J.C. Penney keep using inventory management software to boost efficiency.
But wait! Maybe consumers do benefit from companies using inventory management software. Because J.C. Penney is able to focus on its core business and it’s not losing as much money on discount products, it can afford to lower prices to better compete with other clothing retailers, like Dillard’s and Macy’s.
When these companies compete with each other on who can cut the most costs with inventory management software, their customers win.
So if you see a local outlet store closing, don’t be too worried. It could be that the company running that outlet store started using inventory management software, and it didn’t have any extra products to mark down. In the long term, that’s great news!