For some retailers, a huge chunk of their annual revenue can be taken in December. However, focusing only on this period would be naive from an inventory management perspective. Back to school, Halloween, Easter, Eid and ad hoc heatwaves should also be at the forefront of your thinking across the year.

Naturally, consumers expect convenience all year round, but they are also challenged on price. This requires a fundamental transformation of most supply chains, which are not built today to appease the tricky precision required for the 2024 consumer. Throw in increasing Environmental, Social and Governance (ESG) scrutiny, the decline of "shop locally" leaving almost 2,000 independent British stores empty in the first half of 2023, and the mostly unseen damage of poor allocation to a customer’s loyalty, and retailers are facing a growing wave of challenges.

From a brand perspective, if you’ve built up a reputation throughout the year for delivering on convenience, as well as price, you will stand a much stronger chance of winning in the upcoming "golden quarter" (the period from Black Friday through to the post-Christmas sales). But how do retailers cater to a customer’s needs throughout the year and navigate increased ESG regulation? AI can play a big part in your all year round success.

Poor allocation is a secret brand killer

When you consider what may negatively impact your business, poor allocation may not be the first thing that comes to mind. Bad customer service, misguided marketing campaigns and failing to nail down your unique selling point may appear more fatal. While they are certainly important factors to consider, it’s often best to pinpoint the shortcomings that are harming your organization covertly, too.

Without question, this can be applied to poor allocation. It’s easy to see how it can occur; traditional allocation can often feel like balancing the most delicate of scales, with insufficient stock to meet demand or excess inventory tipping them into disastrous territory and potentially losing customers for good. This is particularly critical as we see the decline of "shop locally," which boomed post-lockdown and has lost popularity due to the cost-of-living crisis.

Similarly, a retailer must be targeting improved inventory turnover rates to introduce new products, or react rapidly to shifting trends. If stock is not budging and clearing shelf space, it can lead to stale offerings and lost sales. This is compounded by increased costs overall, due to excess inventory and the impact of markdowns to clear it out. In 2022, high profile brands such as Burberry felt the sting of costly markdowns and that continues to this day.

To minimize these risks, retailers must invest in AI to prioritize data-driven allocation. Without it, retailers should be likened to driving a car without any headlights on; you may make it to your destination without crashing, but it’ll be by blind luck rather than knowing what’s on the road in front of you. Full visibility of your stock is essential, as it allows you to plan more efficiently and react quickly to customer needs and market trends. AI delivers these comprehensive insights, allowing you to perfect your inventory management plan throughout the year, not just for the "golden quarter."

The return of "E" in ESG and how AI can help

After much early attention, the economic downturn has been the perfect excuse for businesses to dismiss anything related to ESG. But the "E" is firmly sneaking back up people’s agendas. With certain pension funds starting to challenge the investments their Private Equity borrowers make and the U.K. government set to unveil regulation for ESG reporting companies, scrutiny on organizations will grow. Pair that with consumers becoming more and more socially conscious, and the "E" can become a real body-blow if it's not understood and addressed.

AI’s strength for curbing poor allocation also has a big sustainability win that can be achieved at the same time. By having full visibility of your inventory, less movement across the supply chain is required — this means reduced packaging and shipping of unneeded stock between locations. Retailers will receive only exactly what they need, when they need it. For too long, retailers have felt stuck between the profit vs. planet conundrum, but AI shows both can work in tandem moving forward. Not only will it save retailers considerable sums of money, but it will also, by extension, reduce their much-scrutinized carbon footprint.

Sustainable inventories all year round

As we edge ever closer to December, many eyes are fixated on the golden quarter. But the truth is that there’s plenty of work to put in before this crucial period, and the "right" to bring in your customers must be earned.

A good starting point is to invest in AI; its capabilities will allow retailers to cater to every customer’s needs and, crucially, keep them coming back with less impact to the planet. By accepting that inventory management isn’t just for Christmas, retailers can build a strategy to outperform competitors consistently, and ensure consumers continue to spend their money with them throughout the year.

Tom Summerfield is the Customer Development Director at Peak.