Target is currently testing a new product distribution strategy that will reduce its replenishment cycle time from days to hours and decrease overall inventory at retail stores, particularly small-format ones. Target’s senior vice-president of global supply chain operations and logistics field operations, Preston Mosier, made the announcement at last week’s Retail Supply Chain Summit in New York City. According to The Wall Street Journal . Target is currently testing the new strategy in a Perth Amboy warehouse, N.J. Target is now sending inventory shipments more often to stores in smaller batches that are more tailored to customer demand, rather than shipping large quantities of product. Mosier pointed out that Target is creating a new warehouse management software to integrate fulfillment and distribution operations. These systems are often used in separate buildings.
Total Retail’s Consideration: This exciting news is in the sometimes-strange world of supply chain logistics. Target’s new distribution strategy will mean that less inventory will be held in its stores. This is a significant cost center for the company. Target will have more space for digital fulfillment if there is less inventory in its stores. E-commerce’s explosive growth has placed a premium upon quick delivery to online shoppers and forced traditional retailers to make better use their store real estate. Target’s latest announcement is part its $7 billion investment in digital and store improvements.
Toys”R”Us will close all U.S. stores
Toys”R”Us is closing its doors in the United States. This iconic retail chain has sold toys and games for millions of children over the years. According to three people briefed, the company made the decision to close all remaining stores or file for bankruptcy protection after suffering through the holiday season. The company’s demise could put at risk more than 30,000 American jobs. As the company closes its 880 Toys”R”Us or Babies”R”Us stores across the country, liquidation sales will be conducted over the next few weeks.
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Total Retail’s View: After a poor holiday season, which presented an ideal opportunity to jump-start Toys”R”Us return — an improving economy and rising consumer confidence — executives from the 70-year old company decided it was now time to fly the white flag. Toys”R”Us was hit with $5 billion of debt in 2005 from a leveraged purchaseout and has struggled to keep up with increased competition in the toy market. Research from Edison trends shows that Target, Amazon.com and Walmart have all taken market share from Toys”R”Us in the past year (see table below). It is sad to see Toys”R”Us go out of business. This is especially true for children who used to love to wander the aisles of Toys”R”Us looking at all the latest merchandise. However, this only reinforces the fact traditional brick-and mortar retail businesses must continue to evolve to meet today’s changing needs. They’re doomed to fail if they don’t.