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dave@davewakeman.com
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Lessons From Target’s Inventory Glut

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Hi-

I’ve been reading a lot about Target having to reduce prices or discount items to clear their inventory backlog as consumer behaviors change during whatever phase of the pandemic we are in. 

This is also an issue with brands like Wal-Mart, Macy’s, and the Gap. 

What lessons can we learn from this and how can we use this in our own work? 

Here we go:

First, resetting your prices due to changes in market conditions is a wise move. If you see that your pricing is missing the mark, change it, no doubt. 

The challenge is that most businesses underprice their products. 

Second, is clearing the inventory quickly the right thing to do?

That’s a larger question because we’ve seen that much of the “supply chain issues” we’ve heard so much about during the pandemic are driven by the American obsession with managing your business based on an obsession with goosing your numbers for Wall Street. 

Roger Martin has talked about this a lot and studied it. He wrote a great book called When More Is Not BetterHe talks about this obsession and how much it challenges stability in the economy and our daily lives. 

Another place to look for possible answers is a new book that I’ve heard really great things about and have on my list: The Man Who Broke Capitalism about Jack Welch

I’m no fan of Jack Welch because many of his practices might have been called fraudulent, but were definitely unethical. 

Third, you have to manage your brand. 

Discounts destroy your brand. No doubt. 

Discounts are also for dummies. I’ve said it. It has taken me around the world. If anything, I’m a stronger opponent of discounting now than I was when I originally wrote the article years ago. 

Also, I talk about it here with Simon Severino

Discounts destroy your price integrity, your customer loyalty, and demand. 

Why?

Because your customer thinks there will be a better deal. They feel like you are a commodity. And, they don’t feel any pressure to purchase. 

How can we use this in our day-to-day? 

  1. Do some price experimentation. You might try different prices for different products or services. You can A/B offers on the internet. Whatever it is, test your prices. 
  2. Strategy before tactics. Know what you are hoping to achieve and create a plan that will help you get there. In this example, clear the inventory if it is the right thing to do, but don’t clear the inventory just because Wall Street wants you to or “everyone” is telling you that you must. Do what works for you. 
  3. Don’t discount. There are tons of ways to avoid discounting like resetting your prices. You can bundle or unbundle your products or services. You can change the terms of the sale, stretch out payments or accelerate payments. Whatever it is, realize that discounting undermines your brand. 

Capiche?! 

Dave

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