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Target is Betting Big On Retail Analytics

target-carts_730x280.jpgEarlier this week, Target announced that they are continuing to focus on assortment and supply chain issues this year in an effort to realign in-store merchandising, with the ultimate goal being to both reduce surplus inventory and prevent in-store merchandise from going out-of-stock.  

As you’re more than undoubtedly aware, surplus inventory can be a major issue for retailers large and small. We covered the implications last month in the Celect blog, but the short of it is that overstocked merchandise returns only a fraction of its original selling price, and an estimated 30% of all surplus goods wind up in landfills. Needless to say, it’s one of the biggest problems facing the bottom-line of the retail world today. Especially if shipping costs continue to soar.

But at the same time, Target can’t just solve their inventory issue by slashing allocations across the board, because the failure to provide customers with in-store products will more often than not force them to seek alternatives elsewhere. In Target’s case, either to other big-box competitors like WalMart or to online retailers like Amazon.

And so, according to CEO Brian Cornell, Target is taking a “very surgical, category by category” approach to reconciling the issue of overstocked inventory. Its solution, according to an article in Fortune, is a “matter of being more efficient in what are staples for the retailer so it can focus more on categories it has made a priority, like wellness, stylish home goods, apparel, and baby products.”

In other words, Target has to cut back on the sheer volume and variety of items that can be purchased anywhere –i.e., bottled water, ranch dressing, laundry detergent, etc.—and realign its merchandising priorities towards the categories in which it wants to differentiate. For Target, that means once-again cornering the “cheap chic” market.

At first glance, doing so seems daunting. Cutting back on overstocked goods while upping items that are often running out-of-stock for all 1800 stores worldwide is a gargantuan task—involving a whole hell of a lot of data. After all, if it was a relatively benign undertaking, Target’s announcement wouldn’t have been covered in publications ranging from the Wall Street Journal to The Sacramento Bee.

So how is the retail giant going to pull all of this off?

Think about it - this is not a simple feat. To determine which inventory needs to be reeled in and which needs to be extended, Target needs to pour over a host of disparate data stemming from consumer purchasing behavior from its many worldwide retail locations. As we know, a retail analytics solution takes data associated with custom preferences, aggregates it, and helps uncover customer preferences. By leveraging their amassed data, they would be able to improve their merchandise planning accuracy and cut down on excess inventory.

According to Fortune, “Target’s efforts have shown early signs of success. Out-of-stocks were down 40%.” 

Pretty good, don't you think?

Topics: markdown optimization, retail analytics, inventory, target

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