To display the new goods, retailers need to free up space. Some address this by increasing floor space or by innovating their technologies, but attempts to get rid of the unsold goods via clearance sales and extensive special offers remains the standard solution. In extreme cases, the goods can even be liquidated if not sold at a discount.
“Nowadays it’s common for stores to free up their shelves for new goods by including the old ones in special offers where they’re greatly undersold, or even sold at a loss. This practice is, for one, extremely disadvantageous for the stores, which lose huge amounts in sales by engaging in these special offers, and secondly it contradicts the idea of sustainability because enormous discounts encourage customers to make unnecessary purchases,” Roland Džogan, a specialist in storage and ordering systems and the CEO of Ydistri, a start-up specialising in the smart redistribution of goods, said about the issue.
It’s estimated that on average retailers offer somewhere between 40 to 60 percent discounts on clearance items they want to get rid of in order to free up their shelves. This results in losses for the retailers, destroys brand reputation, and damages the sale of similar, undiscounted items, which cannot compete with the disproportionally discounted goods.
But special offers aren’t the only way to address the issue. The sole reason why goods don’t sell well and take up space in brick-and-mortar shops is usually that their sales potential at that particular location is low, while there may be a shortage of them elsewhere where they’re in demand. This can be helped by the smart redistribution of goods between the chain’s individual outlets, a service provided by the start-up Ydistri and its app, which operates a unique algorithm.
“With our algorithm we can pinpoint all possible combinations of goods and routes for redistribution, and only pick those where we’re able to create sufficiently large product packages, which are cheaper to move then to sell at a discount. Ultimately, we can make it so that as many goods as possible reach customers who are interested in them and willing to purchase them at the full price. This is much better both economically and environmentally. Smart distribution eliminates the negative effects of significant discounts, and in our experience increases retailers’ profits by at least 20%,” added Roland Džogan.
In this manner, smart redistribution of goods can help retailers better handle this year’s Christmas season which, due to the strong competition in the form of ever more popular online shopping, might be even more difficult than before. On a similar note, a well-designed redistribution system can help save costs throughout the year or assist brick-and-mortar shops with overcoming the obstacles posed by coronavirus measures, and thus with retaining their good reputation and customer satisfaction. Moreover, because of the collapse of supply chains, this year’s Christmas will be characterised by extensive shortages of goods. Smart redistribution within outlet chains can significantly improve the availability of goods at individual locations, reducing unnecessary retail losses.