Sustainability in the Retail Industry

Stock wastage and the question of sustainability in the retail industry continues to be a hot-topic issue as more and more retailers commit to more sustainable practices. Recent examples in the news include high-street names, like Zara, committing to using more sustainable fabrics and H&M calling for customers to bring in their unwanted clothes in exchange for in-store vouchers, to encourage recycling.

Importantly, a 2017 study by Cone Communications highlights the impact of sustainability in our purchasing decisions. The study found that 76% of consumers would boycott businesses that behaved in ways contradictory to their own ethics and environmental concerns.

As consumers express concern around ethical and sustainable retail practices – and increasingly use their wallets as a means of expressing that concern – retailers must continue to create initiatives to tackle the environmental impact of creating waste during the manufacturing cycle.

The war on waste is therefore not only beneficial to a company’s image, but also the company’s bottom line.

The financial implication of overstocking

The problem of overstocking is not only environmental, but financial as well, as analysis shows that the true cost will not be sustainable based on the current trend. According to a 2018 study by IHL Group, overstocking directly contributed to $471 billion in lost revenue globally last year, up 30% from a similar study conducted in 2015.

The challenge for retailers will be to create a sustainable position that meets the ethical needs of their customers, whilst maintaining profitability for shareholders.

Solving overstocking with eye on sustainability and profitability

Overstocking has historically been seen as a necessary evil: the only way to meet consumer needs with styles and sizes that cater to all and to prevent poor customer experiences from out-of-stock messages.

Overstocking challenges include:

1.) Data siloes. When product, stock and manufacturing data isn’t consolidated in one system, it can be difficult for retailers to operate in an efficient, lean manner. This inevitably leads to situations where the retailer can’t fulfil a customer’s expectations.

2.) Stock not being visible across all channels. If e-commerce customers can only access “online inventory” they will more often experience out of stock notices. Truly sustainable and innovating retailers are able to meet consumer expectations, regardless of channel.

3.) Customers expect retailers won’t run out of stock. Ensuring stock is available in sizes relevant to your audience is essential to avoid consumer disappointment. Consumers have almost unlimited options when it comes to purchasing decisions and disappointed customers don’t have to look far to find product alternatives, and they’re doing so more than ever.

To tackle the overstock issue, the most valuable asset a company has is data. A single version of all product, stock and manufacturing data that is always available and automatically updated enables retailers to understand what to make, what sizes to make and in what quantities to meet concerns about sustainability and doing so profitably.

The value of data for retailers

A single true source of data from every part of the manufacturing process enables retailers to better plan and forecast future stock needs based on their actual customer needs.

With the insights gained from a fully harmonising data process, retailers are able to predict, with greater accuracy, the profile of their customers and tailor their manufacturing to meet the needs of their customers without too much excess stock.

By utilising every valuable piece of data available, retailers can maximise the value of held stock to meet consumer needs, cut waste and improve sustainability. Most overstock issues detected and addressed quickly with a real-time global view of the entire inventory. For retailers, this means that every sale can be fulfilled while significantly reducing the need to carry excessive stock that would either be marked down or sent to a landfill.

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