Don’t let Wal-Mart fool you. Retailing is and has always been an inefficient business. Retailers, particularly those that operate large chains, have to predict the desires of fickle customers, buy and allocate complex sets of merchandise, set the right prices, and offer the right promotions for each individual item. Inevitably, there are gaps, often wide ones, between supply and demand, which leave stores holding too much of what customers don’t want and too little of what they do.
A version of this article appeared in the November 2001 issue of Harvard Business Review.
