From markdown to margin: Rebalancing inventory after January sales

By Abdelkader Keddari, VP Strategic Solutions at Fluent Commerce

Even though the January sales have come and gone, many retailers are still wrestling with significant volumes of unsold inventory. Despite heavy discounting, excess inventory is lingering well beyond the clearance window, tying up cash and putting pressure on already-thin margins.

Consider this scenario: A retailer enters January with strong seasonal inventory across its store network. Discounting drives volume, but sales figures vary by location: some stores clear key lines quickly, while others are left with high residual stock.

By early February, certain stores are carrying excess units of slow-moving seasonal SKUs, tying up cash and occupying valuable floor or storage space. Head office can see total inventory levels, but doesn’t necessarily have the insight required to rebalance efficiently. Meanwhile, online demand continues, but orders are often fulfilled from the closest location rather than the most overstocked one

As a result, high-risk inventory remains stranded in low-demand locations, leaving further markdowns as the only realistic short-term strategy, even though they erode margins and condition customers to wait for lower prices. From a business perspective, it can become a frustrating and expensive problem.

Rebalancing inventory through smarter fulfilment

But let’s be clear, this all-too-common problem isn’t just about poor buying and inventory strategy; it’s more directly related to the levels of control retailers have and how that stock is deployed across channels.

A big part of the problem is that most retailers route online orders based on factors such as proximity, speed and basic availability – a process that minimises delivery time but does not consider margin exposure. As a result, slow-moving inventory remains stranded while other locations continue to sell through, leading to growing inefficiency over time.

What’s needed instead are processes that apply tiered sourcing logic based on commercial priorities, such as routing fulfillment from locations with the highest inventory levels. The oldest stock should be provided first to reduce the risks associated with ageing inventory, with these and other efficiency rules integrated with operational logic, such as avoiding split shipments and managing store capacity.

The overall objective should be to turn online demand into a tool that rebalances inventory across the network and significantly reduces the current, widespread reliance on recurring phases of blanket discounting.

Revisiting the earlier scenario, the difference lies not in the volume of stock, but in the level of control applied to how it is deployed. So, in this version, the same retailer enters January with strong seasonal inventory across its network. Sales still vary by location during the clearance period, but in this case, head office has real-time visibility of inventory at the location level.

Instead of focusing on speed and basic availability indicators, online orders are routed using tiered sourcing rules aligned to inventory risk, so stores with the highest residual stock are prioritised for fulfilment.

As a result, excess stock is reduced through controlled redistribution of demand rather than deeper discounting, leading to fewer cancelled orders because availability reflects real-time stock levels. Moving into February, inventory levels are more balanced across the network, leading to stronger margins and a significantly reduced emphasis on clearance activity. The result is a win-win for retailers that want to fully commit to the January sales while also minimising the financial risks.