Why Retailers Are Trying to Escape Inventory Risk
Episode Description
ABOUT THE EPISODE Retailers are taking a huge gamble every time they buy inventory. If consumers do not want the products, the retailer is left holding the loss.
John Zhang, Professor of Marketing at the Wharton School, explains why the traditional merchant model puts so much risk on retailers and why forecasting demand has become increasingly difficult. Zhang explores the store-in-store model, where manufacturers own the inventory while retailers focus on attracting customers and creating a strong shopping platform. He also explains how companies such as Amazon and Alibaba use similar approaches.
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Brief Summary
John Zhang discusses retail risk management and the store in store model for reducing inventory costs.
Key points
- The Merchant Model's Risks. Retailers face significant risks with the traditional merchant model, often incurring losses from unsold inventory.
- Introducing the Store in Store Model. A new approach where retailers invite manufacturers to sell their products, reducing risk for retailers.
- E-commerce and Retail Evolution. E-commerce platforms like Amazon are adopting a hybrid model similar to the store in store concept.
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Episode highlights
- The Merchant Model's RisksRetailers face significant risks with the traditional merchant model, often incurring losses from unsold inventory.“The problem with the merchant model is that the retailers are taking most of the risk.”2:30Sep 23, 2026
- Introducing the Store in Store ModelA new approach where retailers invite manufacturers to sell their products, reducing risk for retailers.“Store in store model essentially would help retailers to bypass owning the inventory.”4:37Sep 23, 2026
- E-commerce and Retail EvolutionE-commerce platforms like Amazon are adopting a hybrid model similar to the store in store concept.“If you look at the Amazon marketplace, in fact, that's what they do.”7:06Sep 23, 2026
