Ronen Lazar is co-founder and CEO of Inturn, a B2B software platform that helps retailers deal with excess inventory.
Q: What’s the biggest problem for retail?
Inventory is the largest expense for every retailer. For one, it’s an unpredictable demand. There’s changes in consumer-spending habits, weather. There’s always inventory that no retailer can project what they may or may not be able to sell. You have to monetize in the best way, the most efficient way possible.
The global apparel and footwear sector is $1.2 trillion. Twenty percent of units are sold at a discount but only yielding 7 percent of total revenue. The value of the 20 percent ends up dropping in value by two-thirds. Solving this problem could have the biggest impact on companies’ P&L. That’s the foundation of why we created Inturn. We enable retailers to be proactive about inventory. Most retailers are reactive.
Q: What’s the attraction of off-price apparel?
Private equity has gotten into the off-price sector. Bain has bought Burlington; Warburg has acquired Gabes (Gabriel Brothers). What [PE] looks for is good margins, not too much risk, additional licensing opportunities and international expansion.
When anyone looks at a retail brand, in addition to looking at the upside, they need to look at what the process is in place for inventory. They need to look at whether they have real-time inventory, what inventory they are sitting on and what is the value [of the inventory] through the season, especially as it declines in value. They should also evaluate their liquidity strategy and see if additional value can be found, if the opportunity to sell earlier in the season is better. When [the stores] sell off excess inventory, [they typically] do it as an afterthought and usually later in the season. There may be an opportunity to sell earlier in the season.
Q: What is the biggest error PE firms make with retailers?
I don’t think there is any one thing that can apply. Clearly, real-time inventory is the biggest challenge to the retail industry. This acts as a foundation for what the omnichannel business should look like. Having a clear channel what is sitting where, what [has been] delivered from e-commerce sales and returns, and having visibility of inventory will allow [retailers] to have a clear picture.
Today, inventory typically sits in different systems and there are different teams. Wholesale can be one system, e-commerce can be on a different system, international will have a different system, and they often have different teams managing the systems. Understanding the sum of all parts, understanding what the status is, all of these are constantly changing at the same time. This is the biggest challenge for retailers.
Q: How is the retail climate today?
Lots of people are doing good jobs. The climate is quite troubling today from a number of standpoints. … Some brands are closing brick and mortar, some are going bankrupt, some are curtailing areas of expansion. We’re seeing lots of marquee names hosting losses into these double digits. These are really challenging times from a retail perspective.
Q: How is fast fashion affecting things?
Markdowns are becoming more of a challenge. Full-price goods were originally shown four months ahead of time. Now that is picking up pace and more brands are moving into fast-fashion clubs. Compound that with instant shopping. Brands are showing goods at fashion shows and immediately selling it. Brands need to have real-time understanding.
Action Item: Contact Ronen Lazar: Ronen@inturn.co
Ronen Lazar, co-founder and CEO, Inturn. Photo courtesy of the firm.