Retail TouchPoints: Transforming Inventory Strategies For Omni-Channel Success
Through a special arrangement, presented here for discussion is a summary of a current article from the Retail TouchPoints website.
The growing focus on online and offline data integration — as well as enabling flexible, multichannel purchasing and delivery options — all are part of a single goal: To understand and deliver upon consumers’ more complex paths to purchase.
The key to receiving these detailed insights relies on the ability to obtain real-time vision into product availability and item movement across channels, Deena Amato-McCoy, research analyst for the retail and banking practice at Aberdeen Group, told Retail TouchPoints. Inventory consistency and flexible purchasing and delivery options allow retailers to make the sale even if items are unavailable in stores and ensure top-notch customer experiences.
"If shoppers can’t purchase an item in-store because it’s out of stock, they always have the option to hit ‘buy’ on their personal smart device, at a store-level kiosk or proprietary handheld device," Ms. Amato-McCoy said. "However, the only way this can happen is with an open, flexible platform that integrates every channel so that all files, from inventory to CRM, loyalty and pricing, can all operate seamlessly and harmoniously."
As merchants embrace omni-channel retail, there are numerous execution challenges. According to the RSR report, Executing on the Promise: Retail Fulfillment 2012, the top supply chain execution challenges are:
- Consumers expect retailers to provide a more seamless omni-channel experience (64 percent);
- Consumer demand is erratic and difficult to predict (50 percent);
- Digital channel growth outpaces store growth, putting new pressures on the supply chain (50 percent); and,
- Competitive pressures drive retailers to create shorter customer order-to-delivery cycles (46 percent).
"The primary issue behind omni-channel retail is that a shopper doesn’t see a retailer as an online store or brick-and-mortar location; they see only one company," said Frank Riso, senior director of retail and hospitality lead, Motorola Solutions. "The challenge for retailers is to ensure that wherever customers buy a product, the price is the same, the service is the same, and if it needs to be returned, the process isn’t long and convoluted."
Nikki Baird, managing partner of RSR, added that while disconnected inventory is a daunting hurdle for retailers, obtaining a single and comprehensive view of customers is more vital to understanding preferences, wants and needs. Once retailers tackle this area, supply chain remodeling and execution can follow shortly.
"The store is still a black hole when it comes to customer behavior, with new sources of data being created every day — from Pinterest to retailers’ own social communities," Ms. Baird said. "All of that has to come together if retailers truly want to develop an understanding of their customers’ paths to purchase. Without that understanding, any effort on supply chain or any other area of the business is a stab in the dark."
Discussion Questions
How should retailers be rethinking their inventory processes in light of the demands of omni-channel retailing? How does a consumer having mobile access to inventory availability across retailers alter inventory requirements?
Before a retailer embarks on offering commerce of their products across multiple customer touch points, they would be well advised to build a database architecture that embraces “one view of the customer” and of course, a comprehensive and connected view of inventory.
From my experiences, over the years, many retailers have built their databases in silos, never anticipating the need for connectivity. Accordingly, now that they are realizing the opportunities to connect with customers beyond the bricks and mortar cash register, they are scrambling to figure out how best to compete for a multi-customer touchpoint customer. Offering something that is “out of stock” is tantamount to allowing replacement NFL referees handle your customer service. (Sorry, couldn’t resist the topical analogy). Shoppers will lose patience quickly.
For retailers that plan to or are currently engaging with shoppers across multiple touch points, they quickly need to develop or acquire a system that links inventory data to shopper data. Not easily done, but there are systems and solutions in the marketplace that are focused on doing just that!
Retailers must focus on their customers — where they are, what they want, how they communicate with your brand, and through which channel. Creating customer portfolios based upon their behavior is the first critical step. Knowing your customer/shopper is the first step in creating an omnichannel strategy. Unless you understand your customer/shopper you cannot implement a meaningful shopping experience, much less an omnichannel strategy.
Your inventory and delivery strategy is dependent upon your understanding of your customer. Retailers and brands alike have historically tried to use technology to try an outwit shoppers. Using technology to force your brand onto shoppers simply is not effective nor sustainable. Doing the right thing takes time an effort but your commitment to your shopper will be rewarded.
Thanks, Nikki, for “Pinterest.” It’s perhaps the farthest down-channel reach in terms of “omni-channel” retailing.
Inventory availability is important for basic foodstuffs — for the purpose of survival — but not for much else. We can all wait a bit for the satisfaction of obtaining something new. Acquisitiveness must be measured and managed (except for pizza).
In my experiences with Amazon, for instance, delivery time has never been a concern. Instead, I’m all about availability and price. Get it to me when you can. “Instant gratification” does not live here. If I were a new father changing diapers and needing baby-wipes RIGHT NOW, perhaps I’d be a little frantic. Or, if a high school girl needing a prom dress for this weekend, I’d be a little stressed.
B-b-but, seller inventory seldom (i.e., never) concerns me. And if we’re honest with ourselves, purchase/possession immediacy is overblown. What’s the rush?
Inventory availability is not a major deal.
I am not sure the supply channel is even important to cross channel retailing. Now that I have your attention, let me explain. I remember installing an automated warehouse system in a grocery warehouse. The warehouse manager reminded me of Blimpy in the old Popeye cartoons, always heating a frozen hamburger for lunch in the microwave. I happened to be trying to explain an issue with the automated system one day as he was going through his lunch routine. His analogy was “I used to always just put my burger in and push the button to get my lunch. Now you’re telling me I have to understand how the microwave works.” Customers don’t really care whether a retailer has a fully integrated supply channel, they just want the product they are trying to purchase.
Managing a multi-channel supply chain must be done from the demand side. The goal should be to offer each customer a unique experience targeted to their needs. This means everything from local assortment at their brick and mortar location to simple return procedures no matter where the product was purchased. It means the customer may use the brick mortar location as a showroom and order odd colors or features for home delivery using their phone. It means targeted coupons will deliver a unique pricing experience, encouraging customers to shape demand to match inventory positions, even change models or colors.
Can all this be done without an integrated supply chain, of course not but the consumer doesn’t care what it takes to make it possible they just want to “eat their hamburger.”
Blame Amazon and Amazon-owned Zappos for turning inventory management into a seemingly magical process (and raising the bar for everyone else in the process). The other day, I placed an order on Amazon late in the afternoon from the aisles of a Best Buy store after receiving abysmal service and no help tracking down an out-of-stock item from another Best Buy store. Amazon told me I had an hour to place the order if I wanted it the next day and of course, there it was. This isn’t just an example of “showrooming,” it illustrates how cumbersome physical retail processes seem by comparison. Checking the back room, going to the computer screen, calling another store… At the push of a button, I got on with my life and checked a gift item off of my list. That isn’t delayed gratification, it is the epitome of convenience.
Retailers go to market in many ways, but in the round their strategies tend to revolve around either an efficiency play or one of differentiation in the assortment and shopping experience. The former requires absolute and accurate data on all cost drivers, including the largest one in their inventory investment and the more refined that information (down to SKU by store), the better they can execute on a lower cost structure. For the latter strategy, it starts with the customer and ends with the customer. If you don’t know who she is, what she wants and value, then you can’t begin to execute on that.
Enter the omnichannel world in this discussion. The label and definition immediately restricts the discussion to one revolving around the customer and distant second on doing so efficiently. The primary design parameters are on “obtaining a single and comprehensive view of customers, to understanding preferences, wants, and needs” exactly as Nikki mentioned. It is about the evolving paths to purchase, the technology influenced experience and mobility-infused convenience. With that in mind, a central and harmonized customer data repository becomes mandatory for a retailer. They can then take it to the next level by addressing and aligning the existing channel-based supply chain and inventory silos.
The problem is bigger than just inventory processes. Unfortunately some retailers still manage online and bricks and mortar as very separate businesses. They have different organizations, different marketing and in some cases business objectives and incentives that drive conflicting behaviors and choices.
For instance, at more than one retailer I have seen the online or bricks and mortar business unit cease marketing activity that grows strong sales in the other channel because they weren’t getting credit for the sales; and instead replace them with far less effective activity that impacted their own channel.
When the organizations are divided, it is not surprising this kind of disfunctionality occurs and can be seen across the whole organization.
Mobile is impacting all aspects of retail. The first big step for a retailer is to stop looking at the customer through the business lens and to look at their business through the customer lens.
Supply chain visibility is a very big challenge, and as the leaders in both retail and CPG overcome this obstacle, inventory optimization becomes reality. There need not be any angst over how to achieve this capability. There are now tools available for retailers and CPGs of all sizes to capture consumer shopping and purchase insights and develop actions to respond to demand signals from literally the raw materials suppliers to the final point of purchase… online or offline.