Retailing can be like gambling: retailers place bets on inventory investments long before the customer sees the product. As retailers gain new perspectives on consumers’ increasingly changing tastes, they adjust their inventory commitments to manage their risks and maximize revenue.
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This adjustment process is often called “cancel and chase:” cancel orders for bad bets while chasing more inventory of goods ones. Retailers put a lot of chips on the table with their inventory investments; inventory is a large share of working capital and typically equivalent to 10-15% of Annual Sales(1), and managing this investment prudently is key to maintaining profitability and ensuring solvency.