Have you heard that commodity prices are rising? Cotton, oil and other resources are becoming more expensive, fueling fears that inflation could kill the economic recovery. The good news is that there is a way for retailers to fight rising prices: use inventory management software.
Let’s compare two examples of how retailers are dealing with rising commodity costs.
Kohl’s enjoyed a solid fourth quarter in 2010. Their revenue rose 6 percent from a year ago. However, the company is worried about the future. To keep higher prices from hurting consumer demand too much, they’re working on improving their supply chains and merchandising, and they’re raising prices throughout their stores, instead of only in certain departments.
The first two strategies are sound, but the third is risky. Even though they’re doing their best to keep prices down, Kohl’s is still planning on raising prices across the board at least a little. What’s to stop consumers from going to a competitor or simply staying home and saving their money?
Dillard’s is trying a different strategy. The company’s revenue increased 7 percent and their profit jumped 38 percent in the fourth quarter of 2010. What’s the secret of Dillard’s success? They focus on controlling costs by using inventory management software.
“We executed disciplined inventory management and controlled our expenses while seeking clear distinction in the mind of the fashion consumer,” says Dillard’s CEO William T. Dillard II.
This sounds like a smarter strategy. If consumers are price-sensitive, you better keep your costs down. What better way to decrease your costs than by cutting unnecessary products from your biggest investment – your inventory? If commodity prices rise and your profit margins drop, you can compensate by running your business more lean.
Inventory management software is the best way to do this. You can use it to keep just the right amount of inventory on hand to meet demand and avoid overstock. This can save a lot of money. Learn more about how Fishbowl can help your business by scheduling an interactive inventory software demo.