{"id":19058,"date":"2018-07-19T09:00:20","date_gmt":"2018-07-19T14:00:20","guid":{"rendered":"https:\/\/www.shipstation.com\/?p=19058"},"modified":"2022-08-10T10:09:48","modified_gmt":"2022-08-10T15:09:48","slug":"create-agile-retail-allocation-strategy","status":"publish","type":"post","link":"https:\/\/www.shipstation.com\/blog\/create-agile-retail-allocation-strategy\/","title":{"rendered":"How to Create an Agile Retail Allocation Strategy"},"content":{"rendered":"\n

On one hand, technology has been a godsend for retailers. It\u2019s easier to manage inventory, fulfill orders<\/a>, and generally improve the customer experience.<\/p>\n\n\n\n

On the other hand, technology has made consumers impatient. And every year, the average shopper\u2019s threshold for waiting grows shorter<\/a>.<\/p>\n\n\n\n

Consumers are needy. And they\u2019re not super keen on having to wait to get what they want. And if a shopper visits a retailer who\u2019s supposed to have his or her desired merchandise and doesn\u2019t? Chances are good the shopper won\u2019t be giving that retailer another chance.<\/p>\n\n\n\n

This is why a good retail allocation strategy is so important. The right strategy ensures you have the right inventory on hand to meet customer needs. And it also ensure you aren\u2019t wasting space with merchandise shoppers won\u2019t ever buy.<\/p>\n\n\n\n

If you want to be confident about your allocation strategy, we can help. Take a look at two old-school approaches to avoid and two modern approaches to embrace.<\/p>\n\n\n\n

Bad Idea #1: Distributing merchandise equally across every location<\/h2>\n\n\n\n
\"Man<\/figure>\n\n\n\n

<\/p>\n\n\n\n

A retailer that uses this technique sends the exact same quantities of the exact same products to each store and\/or warehouse. They don\u2019t take into account any historical data, customer behavior<\/a>, or market trends. Instead, they treat every location as if the shoppers it serves are identical.<\/p>\n\n\n\n

As a result, some locations are overflowing with inventory and others don\u2019t have the most popular merchandise on hand. Stockouts lead to dissatisfied customers and lost sales. Overstocks mean the retailer must substantially mark down merchandise in order to get it out the door and make room for new products.<\/p>\n\n\n\n

Both hurt profits. And both are totally avoidable.<\/p>\n\n\n\n

Bad Idea #2: Relying entirely on historical data<\/h2>\n\n\n\n
\"Woman<\/figure>\n\n\n\n

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The other previously-popular retail allocation strategy is a smidgen better than the first. But it\u2019s still very much a bad idea. In this approach, a retailer uses historical data \u2014 and only<\/em> historical data \u2014 to build their strategy.<\/p>\n\n\n\n

The brand doesn\u2019t think about how their target customers have changed since the previous season or year. They don\u2019t consider whether competing retailers have updated their tactics. They rely solely on how they have managed allocation in the past. The result is the same: stockouts, overstocks, and unhappy shoppers.<\/p>\n\n\n\n

Now let\u2019s break down the basics of a smart retail allocation strategy.<\/p>\n\n\n\n

Good Idea #1: Embracing consistency and flexibility<\/h2>\n\n\n\n
\"Sailboats<\/figure>\n\n\n\n

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Think about your strategy as if it were a boat. (Stay with me on this one; I promise it\u2019ll make sense.) The hull, tiller, rudder, and sails are made from data. Your building materials are historical information, current trends, and intelligent forecasting models. If conditions stay as you predicted, your \u201cboat\u201d can get you through the selling season without issue.<\/p>\n\n\n\n

But what if a product is more popular with a certain audience segment than you anticipated? Or what happens if last year\u2019s best seller is a flop this time around? Then it\u2019s time for course correction.<\/p>\n\n\n\n

A good retail allocation strategy is one you can quickly and easily adjust in response to real-life performance. It\u2019s one that allows you to steer clear of unexpected storms or choppy water \u2014 i.e., stockouts and overstocks<\/a>.<\/p>\n\n\n\n

Good Idea #2: Supporting customer satisfaction without neglecting business goals<\/h2>\n\n\n\n
\"Employees<\/figure>\n\n\n\n

<\/p>\n\n\n\n

A smart retail allocation strategy abides by the rule of PAT:<\/p>\n\n\n\n