The need to localize retail assortments while reducing inventory is a key challenge for retailers, particularly in the current economy. To see how well retailers are responding to this challenge, Retail Systems Research (RSR), in partnership with the Retail Industry Leaders Association (RILA), surveyed 80 retailers between May and July.

The resulting report, Precision Inventory Management in the Age of Localization, reveals that leading retailers recognize the value of stocking their shelves with the local and regional products that consumers want. The key is to integrate and communicate these inventory management strategies in a way that ensures that they are adopted across the entire operation.

According to the report, leading retailers that successfully have implemented this strategy have seen marginal increases in inventory, primarily due to localization, but they have been able to sell more merchandise faster, and at a better margin than their peers. Among the respondents, 29 percent of retail "winners" reported that over the last two years they have seen an increase in inventory, but 64 percent also reported a gross margin increase as well. Lagging retailers, on the other hand, who have not made similar investments in inventory management, are being hit by inventory stagflation and battling the challenge of out-of-stocks on fast-moving inventory and overstocks on slow-moving items.

"Winning retailers understand that the days of 'one size fits all' retailing are gone and are taking steps to address 21st Century challenges," says Brian Kilcourse, a managing partner at RSR. "Winners associate better inventory management with the ability to localize the value offering for consumers and to support emerging cross-channel shopping. These are customer-focused motivations that underline the premium that winners place on a customer focus," he says.

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