91% of Indian Retail Stores Lose Money Due to Poor Shelf Management

The report titled 'The Ticking Shelf: The Overlooked Economics of Store Performance' states that 91 per cent of retailers experience revenue leakage at the shelf.

The study, which surveyed leaders from 100 major retail chains, reveals that between 28 per cent and 40 per cent of stores across various formats continue to operate below profitability despite overall market growth.

The report suggests that these financial losses are driven by a failure to treat shelf space as a high-value asset. While the speed at which products move off the shelf is the most critical factor for success, the study found that only 9 per cent of retailers actually use shelf throughput to guide their daily decisions regarding buying, replenishment, and display. This lack of data-driven management leads to structural issues in store economics that persist even as categories grow.

A major contributor to this revenue leakage is the accumulation of ageing inventory that clogs up valuable floor space. The report identifies that 48 per cent of inventory in mobile and consumer electronics is sitting on shelves past its optimal selling window, while the apparel and footwear sector sees 24 per cent of its stock ageing out.

This buildup of old products prevents new launches from being displayed and sold at full price. As the report notes, "This erodes shelf productivity and shortens the full-price selling window for new launches."

The Vector Consulting Group report points that many retailers prioritise bulk buying and long lead times to protect their margins, which ironically leads to a surplus of stagnant stock.

P Senthilkumar, Senior Partner at Vector Consulting Group, explained that when retailers realise they have too much inventory, they often hesitate to take action because the potential loss seems too high. "Actions such as markdowns, transfers, or pullbacks are perceived as margin erosion or additional cost, which discourages timely intervention."

The study also noticed that most retailers currently lack the formal processes needed to keep their inventory fresh, often reacting only when a situation becomes an emergency. Kumar Rajagopalan, CEO of the Retailers Association of India, emphasised the importance of finding new ways to measure success. He stated, "This report helps develop better methods to ascertain the various levers that improve profitability, including improving shelf productivity and asset efficiency."

To fix these issues, the report recommends that retailers strictly limit their product portfolios and optimise their supply chains for speed rather than just bulk volume.

- ANI