Will endless aisles and better supply chain management negate Amazon’s edge?

Discussion
Photo: Getty Images
Jan 10, 2020
Andrew Blatherwick

The 2019 holiday shopping period has come and gone and we in the retail trade are left to figure out what went right and what didn’t. On the plus side, sales for the season increased by 3.4 percent. Ecommerce was the big winner, posting an 18.8 percent rise compared to the 2018 holiday season and capturing nearly 15 percent of all retail purchases, according to Mastercard’s research division, SpendingPulse. 

On the minus side — unless you’re Amazon.com — is that the ecommerce giant had its best holiday season ever, selling more than five million Prime memberships and “tens of millions” of Amazon devices like the Echo Dot. For every retailer other than Amazon, there are at least two very important lessons from the 2019 holiday season: 1) endless aisles can both remediate out-of-stocks and boost cross-selling, and 2) it’s still the supply chain, stupid.

Endless aisles and store staff’s ability to check the back room for stock and arrange for shipping to the customer if it’s not available has become table stakes for nearly every retail channel. Because of ecommerce competitors’ accessibility, there’s high potential to lose orders and customers within seconds of an out-of-stock.

These are intrinsically supply chain management challenges. The initial inclination is often to tackle the risk of out-of-stocks by maintaining high safety stock levels — either in-store or at a nearby fulfillment center. This may ultimately ensure shoppers receive the products they want, but it also fuels overstocks at the seasons end much of which can only be sold at serious discounts with a negative impact on profits and the additional stockholding is a major capital resource drain that hands leverage back to Amazon.

It is critical for retailers to optimize their store replenishment systems and the best way to do that is by leveraging technology. Technologies that make thoughtful use of artificial intelligence and machine learning are already helping to improve the accuracy and ease of demand forecasting — and we can expect similar improvements to retailers’ understanding of customer demand. Modern supply chain solutions are also able to optimize the supply chain planning and operation, adding to the bottom line and funds available to fight the dreaded competition. Without a clear plan for technology deployment, however, Amazon could very well win the 2020 holiday season too. 

DISCUSSION QUESTIONS: In terms of the technology deployed, what are the big lessons from the 2019 holiday season? How can retailers better prepare for the 2020 season?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"To boost efficiency and stay competitive, retailers need technology that consolidates traditionally disparate data."
"Another growing trend is drop shipping. Leveraging inventory at trading partners can enormously expand product portfolios and reduce inventory carrying costs."
"Endless aisle AND guaranteed in-stock on overly broad assortments is a guaranteed in-season AND end-of-season inventory problem. "

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14 Comments on "Will endless aisles and better supply chain management negate Amazon’s edge?"


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Cathy Hotka
BrainTrust

Ask store operators what they’re focused on these days and it’s all about the customer-facing aspect of the supply chain. Out-of-stocks are killers, as are perceived out-of-stocks. How to execute on BOPIS when the item that has been purchased is a 50-pound bag of seed, or a tiny lipstick? Details matter and every company must figure it out.

Lee Peterson
BrainTrust

It’s all about listening to the customer. Period. Which is
improving but if, as an example, retailers would’ve listened and executed a few years ago, BOPIS would be an ancient, profitable practice. Instead, by suffering through vertical organizations that don’t allow swift execution, Amazon has taken an almost insurmountable lead in terms of supply chain innovation and become a vertical organization that will be very hard to top across the board. It’s about what the customer wants vs. how you operate now more than ever before, and that’s why Amazon will easily be the #1 retailer by decade’s end.

Lisa Goller
BrainTrust

To boost efficiency and stay competitive, retailers need technology that consolidates traditionally disparate data.

Having a single source of up-to-date information (including all-channel consumer engagement and order management) boosts retail process efficiencies. These innovations smash functional silos and make retailers more agile and responsive to evolving consumer needs.

Now that Amazon is making one-day delivery the new standard for consumer expectations, retailers can’t afford to cling to insufficient legacy systems when consumers demand speed from innovation.

Jeff Sward
BrainTrust

As a retailer thinking ahead to the 2020 holiday season, I would not try to make endless aisle, or breadth of offering, a primary strategic weapon. I would opt instead for some kind of finite, or curated, aisle and absolutely be in stock on that more focused offering. Endless aisle AND guaranteed in-stock on overly broad assortments is a guaranteed in-season AND end-of-season inventory problem. It may take a holiday season or two to accumulate the data necessary to make the leap to endless aisle without experiencing the highly likely inventory problems. Better to perform brilliantly on what you do offer than risk poor performance on overly broad assortments.

Suresh Chaganti
BrainTrust
Suresh Chaganti
Co-Founder and Executive Partner, VectorScient
10 months 16 days ago

It is to Amazon’s credit that they continue their run uninterrupted, even after the sales tax advantage has disappeared. Price is no longer the differentiation for Amazon. They continue to execute superbly on product availability, customer service and supply chain. That price is not a source of differentiation is in part good news for retailers. They have to up the game in the other dimensions.

Ken Morris
BrainTrust

Retailers need to move to a real-time inventory platform, eliminate safety stock and remove their data silos to create one system of record for all inventory. That will go a long way to eliminating the Amazon edge because everything they do is in real time.

Retailers also need to improve their store level processes to be able to truly leverage endless aisle. Knowledgeable associates make or break the success of endless aisle.

Ananda Chakravarty
BrainTrust

Amazon will continue to have an edge. Why? Because they have deep vertical integration into the supply chain through FBA (Fulfillment by Amazon) and supplier vetting programs and a competitive supply chain where suppliers are competing for the business. That said, Amazon’s engagement and treatment of their supplier ecosystem is still taxing and even minor mistakes or circumstance can drive poor performance for suppliers for short periods of time. Retailers need to think about their own houses and not worry about Amazon. Despite growth, it’s not overwhelmingly eating into retailers’ businesses – that shakeout has come and gone. Retailers have the advantage of optimizing their own, typically smaller supply chains. The endless aisle scenario and better supply chain management are table stakes and need to work, but will give little advantage over Amazon’s business model. Retailers can use some innovation in application and strong supply chain management tools as a push – but the first step is collecting and understanding data about what and to whom they are selling.

Harley Feldman
BrainTrust

Shoppers expect to purchase items online and have them delivered or go to the store to pick them up in addition to shopping for other items. These are table stakes in today’s retail environment. I agree with the comments on artificial intelligence and machine learning. However, there are still challenges to collecting accurate store inventory which is inaccurate if only using POS data. RFID is the technology that will create much better inventory accuracy once adopted. Lululemon, for example, is RFID tagging all items from the warehouse to the stores allowing them to meet customer demand much better.

Retailers in 2020 can be better prepared by understanding their customer demand better. This includes understanding orders, returns and inventories by using technology to collect and analyze this important data.

Brandon Rael
BrainTrust

Retailers and brands should fully concentrate on driving an outstanding customer experience and making certain that their supply chains, infrastructure and resources are all aligned to ensure that no customer leaves the store empty-handed. Competing with Amazon head-to-head is a losing game, as it’s virtually impossible to challenge the Seattle giant’s assortment, supply chain, and overall capabilities.

However, it’s high time that retailers fully capitalize on their brand equity and their physical shopping presence, via the powerful BOPIS offering. This will tip the scales and help drive significant value for their consumers while driving supply chain efficiencies, mitigating risks, and increasing profitability. We are living in a channel-less world and if retailers can offer the same day pickup option, then like at Target, Best Buy, Home Depot and Nordstrom, BOPIS could become a game-changer in 2020.

Shep Hyken
BrainTrust

Online sales did well for a reason. The experience is getting better. Customers are getting used to buying online and the process has been streamlined. The checkout systems are easy. The delivery is all about convenience. The big lesson is that this is not a fad. It’s reality and if you’re a brick-and-mortar retailer who wants to stay in business, you’ll probably have to have a digital presence. It’s becoming table-stakes. Otherwise, you’ll not be competing with Amazon, Target, Walmart, etc., you’ll be lagging behind them. All things being equal, the company that is easier to buy from wins.

David Naumann
BrainTrust
David Naumann
CEO and President, Cogent Creative Consulting
10 months 16 days ago

Endless aisle has become an imperative to reduce out-of-stocks and satisfy customer expectations. Another growing trend is drop shipping. Leveraging inventory at trading partners can enormously expand product portfolios and reduce inventory carrying costs. According to a recent survey by enVista, 50% of retailers are planning to pilot or increase dropship in 2020. It is a smart strategy!

Peter Charness
BrainTrust

There are various strategies for retailers to leverage their physical presence and create great customer experiences, and BOPIS is just one of many. The challenge for most retailers is ability to execute on these strategies. Saddled with IT infrastructure that is inflexible, many retailers just can’t get from here to there. Look how long it’s taken to get BOPIS in place … and for many that functionality was enabled with glue and baling wire.

Retailers need to be able to execute on strategy with greater agility, and much much faster speed. Systems need to be put in place in the time frame that most Retailers take just to do the evaluation and cost justifications. A culture of experimentation and rapid deployment is as much the challenge as is keeping up with the customer.

Cate Trotter
BrainTrust

It’s hard to point at any one or two approaches and say that they’re the answer to helping retailers catch up to Amazon. It’s so unique to the specific retailer and their customers, what they sell and how they shop.

One thing to take onboard from Amazon’s figures is that it makes sense that it would sell a lot of Prime memberships during the holiday season when the advantages around delivery really benefit people buying gifts for a time-specific event. It will be interesting to see how many of those new members it holds onto now that the need to have something for Christmas has passed.

What retailers can learn from this though is that customers want security when they’re shopping. They want to know they’re going to be able to get what they want when they want it. BOPIS, endless aisles, bolstering your supply chains are all ways of helping achieve this, but customers need to have the perception that you can deliver the goods when it comes down to it.

Melanie Nuce
Guest

It takes more than just applying the right technology to solve problems like out-of-stocks, that are so deeply engrained into the retail supply chain. Inventory visibility remains weak and many retailers struggle make effective matches with consumer searches to make a sale. It’s going to take strong top-down leadership from retailers to prioritize their trading partner relationships and collaborate more efficiently using data standards and proven tools like RFID to catch up to consumer expectations for speed, product selection, and convenience. Retailers eyeing technology like AI or machine learning as a solution need to think, “how prepared is our product data to handle that kind of automation?” As the article states, it’s going to need “thoughtful” use and preparation, otherwise a company’s investment in emerging technology can backfire as issues like data quality have the potential to be magnified.

wpDiscuz
Braintrust
"To boost efficiency and stay competitive, retailers need technology that consolidates traditionally disparate data."
"Another growing trend is drop shipping. Leveraging inventory at trading partners can enormously expand product portfolios and reduce inventory carrying costs."
"Endless aisle AND guaranteed in-stock on overly broad assortments is a guaranteed in-season AND end-of-season inventory problem. "

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