In today’s retail landscape, rapid shifts in customer behavior and frequent supply chain disruptions require an unprecedented level of agility to manage. Retailers can no longer make decisions based on static historical data and must instead adopt dynamic methods to allocate inventory in real time.  

Modern, unified operating systems enable them to shift inventory mid-season and improve assortment planning with data-driven decisions. These capabilities are further strengthened by AI tools that anticipate demand and identify patterns to proactively respond to shopper needs. In this piece, we break down how retailers are reimagining inventory allocation to boost customer satisfaction, streamline supply chains, and improve adaptability to shifting demand.  

Real-Time Inventory Allocation: Understanding the Shifts 

To accelerate supply chain responsiveness, retailers are implementing platforms that aim to provide real-time stock visibility across all locations. These systems improve resilience by tracking end-to-end movement without manual data entry. This flexibility allows retailers to shift inventory mid-season based on trends in regional buying habits or external factors like weather events. Integrating analytics platforms with inventory systems helps businesses continuously refine allocation models during peak periods. 

Having access to accurate information also plays a role in supporting associate interactions with shoppers. Previous gaps in data between actual and recorded inventory levels created inefficiencies and theft risks.  

With updated product locations, associates can spend less time searching for inventory in storage areas and more time providing immediate assistance to ensure a frictionless customer experience. From stores to distribution centers to partner sites, the evolving omnichannel environment necessitates unified systems to customize inventory stock and preserve margins. 

A leading example of this approach is Foot Locker, which seeks to use real-time inventory visibility to become a “best-in-class omnichannel retailer” as part of its Lace Up strategy. Because sneaker trends fluctuate at a high rate, Foot Locker prioritizes inventory accuracy to fulfill digital orders with products in-store. It also focuses on strengthening data cross-sharing with vendors to improve buying practices. 

Smarter Assortment Planning 

In addition to improving adaptability, retailers are leveraging data for advanced assortment planning. This strategy is key for boosting relevance and sales because it takes factors like competitor promotions into consideration. Assortment planning has wide-reaching impacts when it’s connected with ERP, CRM, and marketing platforms ahead of time. Integration across software enables companies to adjust product mixes based on future sales campaigns. 

With the Assortment and Space Organization expected to grow from $2.06 billion in 2024 to $4.92 billion by 2033, the time is now for retailers to leave traditional methods behind in favor of predictive analytics. By assessing a broad range of influences, businesses can more accurately forecast assortments that will increase profitability. Avoiding outdated inventory and stockouts is critical for cultivating an authentic brand with products that appeal directly to customer needs. 

Personal styling service Stitch Fix is utilizing data to take its recommendations to the next level, developing a personalized product assortment based on continuous incremental feedback. Incorporating specific client trends, larger industry shifts, and even microtrends enables the brand to combine predictive analytics and human guidance to produce an ideal mix. By paying attention to nuances in style, fabric, fit, and price point, Stitch Fix is learning how to curate for diverse client segments and drive growth. 

AI-Optimized Merchandising 

The next step for retailers is utilizing AI tools to optimize planning, markdowns, and product mix. AI capabilities are transforming the retail industry, from enterprise search to personalized products, and its applications to merchandise planning and allocation (MP&A) are crucial to explore.  

When it comes to MP&A, predictive analytics allow companies to manage inventory at scale, including both brick-and-mortar stores and eCommerce platforms. AI also uses demand forecasts to create pricing strategies that maximize returns. Many implementations still rely on external data inputs, but newer ML approaches are beginning to reduce dependency on item histories. 

Along with planning, AI powers computer vision systems that continuously monitor shelf inventory and natural language processing (NLP) tools that analyze unstructured customer data. With countless applications to implement, AI tools are becoming crucial for efficient, data-driven decision-making, and retailers are taking advantage of these insights, with companies like Target and Walmart seeking balance in inventory management.  

Target’s algorithms use numerous factors, including supply lead times and transportation costs, to make decisions about frequently purchased products and clearance items. In a retail landscape that faces constant supply chain uncertainty, Target’s expansion of AI-driven inventory management to 40% of its product assortment is key for maintaining agility.  

Walmart is also paving the way by using AI to assess the needs of different markets, ensuring that stores in warmer states have pool toys and colder states stock enough sweaters. Its AI algorithms flag unanticipated patterns to signal the retailer to reposition inventory as efficiently as possible. 

Looking Ahead 

Rigid inventory systems are no longer sufficient, and retailers are now seeking integrated tools for MP&A that update in real time. From inventory management to assortment planning, platforms must incorporate a diverse array of potential risk factors to accurately inform decisions.  

AI is at the forefront of these innovations, as new capabilities enable retailers to differentiate themselves from competitors. Retailers must ultimately embrace intelligent systems that not only react to change but prepare for it. 

If your retail business is interested in getting started, contact Clarkston today. 

Contributions from Hannah Yang