US department stores cut back on stocking

CHICAGO (Reuters) – This holiday season, retailers are making a list, checking it twice and then ordering less for US shoppers.

With foot traffic at their stores in decline, department stores that would have stocked up for the biggest shopping season of the year months ago are still in the process of placing new orders, according to nearly a dozen sources, including company officials, vendors who work with the retailers and consultants who advise such chains.

The strategy is aimed to keep their inventory costs down and avoid the experience of previous holiday seasons, when large piles of unsold stock led to deep markdowns that eroded profits. But these retailers risk losing sales if supplies run out at a time when many are struggling to keep up with Amazon.com Inc. and a steady shift toward online shopping.

Macy’s Inc., J.C. Penney Co. Inc., Kohl’s Corp., Nordstrom Inc., Dillard’s Inc. and Hudson Bay Co.’s Lord & Taylor are among the retailers buying in smaller batches with shorter lead times this year and relying on a more dynamic demand forecasting process than in the past, according to sources familiar with these companies’ practices.

Keeping inventory levels low helps manage costs and may also instill urgency in consumers to spend now rather than hold off on purchases in search of a better deal, according to the sources. But it also risks alienating customers who may end up having less choice, and it is also putting strain on vendors to deliver on shorter lead times, the sources added.

The high-stakes strategy takes a page from the playbook of Inditex SA-owned Zara, Hennes & Mauritz AB (H&M) and other so-called “fast fashion” retailers that consistently keep low inventories of trendy clothes and try to win customers with cheap prices.

“I think in some sections the choice is limited this year, like cashmere sweaters and sweaters in general,” Dakota Whitlow, a 46-yearold marketing executive, said as she shopped for winter clothing at a Macy’s in Chicago. “But limiting choice is in many ways better than overcrowding the store with clothes, which makes it harder to shop,” she added.

Traditionally, retailers lock in most of their purchases nine months to a year in advance. This year, retailers started placing a large portion of their holiday orders three to four months before the holiday season, and they are refreshing fast-selling items within as little as six to eight weeks, vendors and consultants said.