Holiday Inventory Levels: Conservative

Forecasting holiday inventory needs is like predicting the weather: Technology can help to some degree, but it’s a far-from-exact science. As of late September, many catalogers told CATALOG AGE that the outlook for this holiday season was conservative, with a chance of overstocks.

Given the choice of losing sales due to backorders or ending the season with a warehouse full of inventory to liquidate, J&R Music and Computer World “wouldn’t want either scenario, of course,” says advertising marketing director Abe Brown. But because J&R opened a liquidation store earlier this year to unload excess product, Brown says he’d be more comfortable with “a little more overstock — but not too much.”

The New York-based cataloger/ retailer of consumer electronics has expanded into two additional merchandise categories this year: emergency equipment and upscale household appliances. And when it comes to the former, stocking excess supply can be handy.

“We learned right after the August blackout that people were coming to us all of a sudden for any sort of emergency equipment for blackouts — like portable radios, portable ovens — so we promoted them on our Website,” Brown says. “Then [Hurricane Isabel] came along in September, so we promoted emergency supplies in all three of our channels. We didn’t have enough emergency equipment in stock during the blackout, so now we’re gearing up for holiday.”

Demand has also been strong for higher-end vacuum cleaners, microwave ovens, and other household appliances, so J&R plans to stock 20%-30% more of them for holiday than it did last year, Brown says.

Linens cataloger Domestications, part of Edgewater, NJ-based Hanover Direct, has an initial fill rate of 80%, “so we’re able to deliver better customer service” by filling more orders completely, says vice president of inventory control Gina Pulzello. Last year the initial fill rate for Domestications was 73%; in previous years it was even lower.

The higher fill rates have “significantly reduced backorders,” Pulzello says. And for the merchandise that doesn’t sell, Domestications introduced a clearance catalog this past April to help it unload overstocks. “Our philosophy is, ‘Mark it down, down and dirty, and get rid of it,’” she says. The company already plans to mail a clearance book in November to move holiday items that aren’t selling.

For the direct division of Hollywood, CA-based women’s apparel cataloger/ retailer Frederick’s of Hollywood, having ample inventory is paramount. Direct planning manager Debbie Parker reports that Frederick’s has improved its initial fill rate from 89% last year to 92% this year, largely by encouraging vendors to improve their in-stock percentages by Frederick’s catalog mail dates.

The company’s final fill rate for its fiscal year ended July 31 was 94.3%, up from 86.4% the previous year, and Parker hopes it will rise to 94.6% for the holiday season. All told, the fill rate improvements “added millions of dollars to our company,” she says.

Playing it safe

But for the most part, “I don’t see anybody being overly aggressive with inventory,” observes fulfillment consultant Curt Barry, president/CEO of Richmond, VA-based F. Curtis Barry & Co. “Inventory planning is just in line with what the sales plans are — which is basically conservative and even with holiday 2002.”

And with the economy still shaky and the memory of overstocks last holiday due to sales shortfalls still fresh in their minds, some mailers would rather risk back-orders than overstocks.

Manchester, VT-based outdoor gear, apparel, and home goods cataloger/ retailer Orvis Co. will heavily stock “signature” items such as twill pants and travel jackets, says Garrett Larson, vice president, inventory and sourcing. But Orvis is planning to reduce holiday overstocks by tightening its inventory strategy and maximizing multichannel seling tools, he adds.

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