I am often asked about clearance and closeout merchandising by my retail clients.  It is nearly a universal truth that merchants rarely have exit strategies for clearance items.  I like to chalk that up to buyer optimism.  They tend to believe that every SKU they buy will be a hit.  But with the exception of end-of-season product and merchandising requirements for apparel, most hardlines merchants do not have a plan for close out or clearance product merchandising.

    Target’s model is looked at with envy: regularly using back endcaps to merchandise close out products at 50% off or more has led to a noted change in their core customer shopping patterns.  A marketer I know referred to it as “back endcap trolling.”  They have trained deal-savvy shoppers to troll the back endcaps looking for big markdowns.  I have done it myself: candles with seasonal fragrances, “limited edition” breakfast cereals and out of favor hair conditioners have all ended up in my red cart.

    What do you think?  Is this a bad model?

    On the one hand, there are buyers who may have purchased candles, cereal or hair conditioners at full price – giving Target richer margins.

    On the other hand, Target is experiencing faster sell downs on discontinued SKU’s by making “back endcap trolling” a smart shopping strategy for price shoppers.  Which frees up open-to-buy dollars to purchase (possibly) more appealing SKU’s.

    One thing is for certain, store operators I talk to are envious of a retailer who has set aside real estate and created a close out strategy for stranded inventory.  I’d love to hear who else you think does this well.