Optimizing allocation can improve GM return on investment by up to 20-30%
By Melissa Boone, Managing Partner, Columbus Consulting
In retail, the product lifecycle — from introduction to markdown or end-of-life — is a key framework for maximizing profitability. Each phase of a product’s lifecycle presents unique challenges and opportunities, and one of the most critical success factors throughout is allocation: getting the right product, in the right quantity, to the right place at the right time. And if sizes are involved, optimization at the lowest level (size!) is vital to minimizing markdowns.
The product lifecycle generally includes introduction, growth, maturity, and decline phases.
- At launch, allocation decisions must be based on forecasted demand, customer segmentation, and historical data on similar products and categories. Getting the initial allocation right ensures that stores start with enough stock to generate interest without overcommitting inventory to unproven demand. Retailers using localized allocation strategies — factoring in store size and volume, regional product and category trends and forecasts, and of course, past performance — see stronger sell-through and fewer stockouts during this critical phase.
- During the growth and maturity stages, the focus shifts to replenishment and managing inventory flow. Allocation here must be responsive and data-driven, reacting quickly to real-time sales trends. Best practices include utilizing automated replenishment tools, setting minimum stock or presentation levels when appropriate, and leveraging predictive analytics to direct inventory to high-performing stores or channels. Proper and timely allocation in this phase helps maintain momentum and extend the product’s profitability window. When sizes are involved, application of advanced size optimization across all stores during the allocation will ensure proper placement of valuable inventory and reduce what ends up on your clearance racks.
- In the decline or end-of-life phase, smart allocation prevents overstocking at slower stores and maximizes the effectiveness of clearance strategies. Transferring stock to high-volume locations or online channels, bundling products, or staging markdowns based on local demand can recover margin and reduce markdown liability. Best practices include avoiding replenishment to minimums during this phase, except for locations with strong sell-through potential, preferably at full price. Leveraging forecasting techniques that incorporate forward-looking demand helps ensure remaining inventory is directed to locations with the greatest opportunity for full-price or efficient clearance sales.
Best practices in allocation include aligning allocation strategies with assortment planning, using AI for demand forecasting, and adopting store clustering to group locations with similar performance characteristics. Additionally, and equally as important, integrating real-time data on sales, returns, and customer behavior helps refine future allocation models.
Retailers that invest in advanced allocation tools and analytics see clear returns: improved sell-through rates, reduced markdowns, and higher inventory turnover. According to industry benchmarks, optimizing allocation can improve gross margin return on investment (GMROI) by up to 20-30%, depending on category and strategy maturity.
In summary, strategic allocation is a powerful lever throughout the retail product lifecycle. By making smarter decisions at each stage, retailers can optimize inventory performance, enhance the customer experience, and significantly boost their bottom line. Even with the benefits of best-in-class allocation practices, many retailers overlook their allocation teams as key strategic partners. Traditionally, allocators have been called only to execute the product and inventory strategies. Yet, having the allocations team aligned with your business strategy upfront can help deliver stronger, more consistent results for the entire organization. With the proper training, development, and system knowledge in place, even a high-turnover allocation team can be equipped to make a meaningful impact on the organization’s success.
Partners like Columbus Consulting bring real retail experience to the table. Our experts have worked as assortment and allocation planners — we understand the daily challenges and know how to streamline processes, improve systems, and help your team perform at its best. We provide practical recommendations, hands-on training, and ongoing system guidance to help you maximize the value of your allocation tools and processes. Let’s talk about how we can strengthen your team and drive results.
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ABOUT MELISSA BOONE
Melissa is a Managing Partner with Columbus Consulting and a seasoned retail planning and inventory management consultant. She specializes in leading cross-functional business teams through all stages of the solution implementation. Melissa has a broad range of hands-on experience in various retail categories and sectors, including: luxury, fast-fashion, department stores, specialty retail, and ecommerce. She is an expert in inventory, assortment, and allocation planning. She has a unique ability to align stakeholders and deliver transformative, scalable solutions that drive scalable business results.
ABOUT COLUMBUS CONSULTING
Columbus Consulting delivers solutions that drive true value and have been transforming the retail, grocery, and CPG industries for over two decades. We are a retail consulting company of industry experts. Our approach is simple: if you do it, we do it. We are more than consultants; we are experienced practitioners who actually sat in our clients’ seats. We understand the challenges, know what questions to ask, and deliver the right solutions. Columbus offers a unique, consumer-centric approach with an end-to-end perspective that bridges functional & organization silos from strategy to execution. Our specialties include: unified commerce, merchandising & category management, planning & inventory management, sourcing & supply chain, data & analytics, accounting, finance & operations, people & organization, and information technology. Let us know how we can help you. To learn more, visit COLUMBUSCONSULTING.COM.