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Inventory obsolescence remains a significant challenge to profitability and poses a considerable hurdle for retailers, according to a report by Nuvama.
The report highlights that a single year of poor performance can wipe out profits accumulated over several years, especially for retailers managing rapidly depreciating inventory, such as fashion and other fast-moving goods. Industry experts echoed these concerns, noting that measures are being adopted to mitigate the impact of inventory obsolescence on overall profitability. "High rates of obsolete inventory affect profitability, the long-term viability of a business, and the financial health of an organisation. It also damages the brand image and the ability to attract investors," said Salloni Ghodawat, COO and Director of Ghodawat Consumer Ltd. Ravi Saxena, CEO and Founder of Wonderchef, emphasised the importance of inventory management, particularly in industries like cosmetics and food, where products have a limited shelf life. "If not handled well, unsold stock can lead to significant losses. While kitchen appliances and cookware don't expire, they come with their own challenges," Saxena explained. Market players in these sectors are closely monitoring trends to minimise losses. Pooja Nagdev, founder of Inatur, pointed out that a combination of online and offline channels is emerging, where physical stores also serve as hubs for order dispatch and delivery. "To cut costs, retailers have implemented LED lighting and energy management technologies with high efficiency rates," she noted. She added that many retailers are now adopting Just-In-Time (JIT) systems to reduce stockholding costs while ensuring a steady flow of supplies. Abhishek Gupta, Chief Customer Officer at Coca-Cola India, remarked, "Together with our partners, we're adapting our supply model in real-time and reimagining how consumers interact with the brand." On strategies to reduce inventory, Vikram Marwaha, Joint Managing Director of DRRK Foods, highlighted the use of innovative procurement strategies to lower operational costs without compromising quality or availability. "One key approach is the 'milk run' model, where companies increase delivery frequencies to restock daily, minimising excess inventory. Automating these processes and ensuring frequent service helps optimise inventory, reduce stockouts, and enhance operational efficiency, cutting costs while maintaining product availability," Marwaha added. Nuvama's report concludes that retailers across various sectors demonstrate consistent discipline in capital expenditure (capex) and working capital per store. This indicates that, despite diverse challenges, efficient procurement and cost control remain critical hurdles for retailers aiming to succeed in today's competitive market landscape. (ANI)
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