The Retail Vortex is a strengthening yearly pattern where fewer new customers, higher marketing costs, increased returns and a rise in inventory create a spiraling force that drives costs up and profits down at the start of the new year.
In 2018, the vortex began at the end of the holiday shopping season and concluded mid-January. However, in 2019, returns were up a huge 13% beginning mid-November, revealing an earlier start to ‘The Retail Vortex’.
In addition to the vortex beginning earlier, the vortex gained strength since last year. While the increase in returns brought more products flooding back into store inventory earlier than last year, retailers were also left holding 11% more inventory, much of which was sold at deep discounts or couldn’t be put back on shelves at all. While marketing spend grew, acquisition of new customers fell. Marketing cost per order was up 15%, but despite the increased spend, retailers acquired 6% fewer new customers compared to 2018.
The retailers avoiding the full impact of the vortex are the ones that understand the key elements eroding their profit leading them to plan and take action differently.
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