Abstract
Our paper describes inventory trends in both public and private U.S. retailing firms between 1993 and 2005 and examines the role of inventory as it relates to inventory productivity in current retail operating and market context. We find that the end of the month inventory significantly increased in the six retail segments studied between 1993-2005. However, with respect to time, the inventory to sales ratio revealed a downward trend for all segments except for motor vehicle and parts segment. In each of the segments, our models with macroeconomic factors explained between 72-96% of the within segment variation in inventory to sales. Furthermore, after controlling for macro-economic variables, we find that five to seven macroeconomic factors significantly impacted inventory to sales
ratio trends in each retail segment and were responsible for the temporal trends observed. We also explore the inventory productivity by investigating the relationship between inventory turns, inventory, annual purchases and gross profit dollars using data from the period 1993-2004. We find that inventory turnover is negatively correlated to gross profit dollars and inventory and positively correlated to annual purchases. These results suggest that the retailers possess generally efficient procurement processes but that current retail strategies and the increasing inventory levels are associated with declining inventory turns but increasing gross profit dollars. We draw general implications from these results for retail operating and business strategy.