May 14, 2009, 12:00 AM

Synchronize pricing and inventory plans for holiday success, analyst says

With e-retailers expected to buy less holiday season merchandise this year because of the economic downturn, they need to sharpen their strategies in coordinating pricing promotions with available inventory, retail analyst Paula Rosenblum says.

With e-retailers expected to buy less holiday season merchandise this year because of the economic downturn, they need to sharpen their strategies in coordinating pricing promotions with available inventory, says Paula Rosenblum, managing director at research and advisory firm Retail Systems Research LLC.

“Plan a pricing strategy, plan your inventory strategy, and make sure the two are in synch,” Rosenblum says.

She adds that retailers this year, worried about overbuying merchandise in an off economic year, may experience unusually high levels of inventory out-of-stock. If that turns out to be the case, it will be even more important for retailers to take several steps to increase gross margins on merchandise sales to help compensate for the loss of revenue, Rosenblum says.

Retailers working with lean inventory levels should take a harder at free-shipping offers and how they’ll affect product sales, for instance, and work with merchandise suppliers to apply the steepest promotional price discounts to products that will be available in the highest volume.

“Work with merchandise vendors to figure out what your sacrificial lambs will be and how you can work together to maximize order fill rates,” Rosenblum advises retailers. She adds that arranging for some suppliers to ship heavily promoted products directly to customers could be a good option for maximizing both order fill rates and gross margins.

“We know there’s a lot retailers cannot plan, and we don’t know what the economy is going to really look like,” Rosenblum says. “But we can plan for all kinds of contingencies. A retailer winner will do that now to have a better holiday season.”

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