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Inventory: Share and Share Alike
Dwight D. Hill, The Retail Advisory LLC


The customer has forced retailers to forever change the retail concept of "inventory." She is demanding information and wants to know if her selection is available and, if not, you'll probably get one chance before she's moving on. She has no patience if she can't get her hands on it and retailers must adapt. A quote I've always liked is "share and share alike" and this is quickly becoming the protocol among progressive retailers choosing to be prepared for this omni-channel customer by opening up and creating a "virtual stockroom."

Okay, You're Out, but Can You Find it for Me Somewhere Else?
I can point to daily examples of inventory or out of stock conditions at retailers that customers witness firsthand, forcing them to leave the store or website - and go straight to the competition. How many of us have walked into stores and found either an empty shelf or our size not available and you're met by a salesperson who has no way to see what is in stock through the website, or worse, within the store base? It's the age old problem - having the right merchandise at the right place at the right time - such a cliché, but true. As a retailer, if you don't have what your customer is looking for then you've probably lost her! But remember, today she doesn't have to walk out of your store to go to your competitor; now she has their stores in the palm of her hand, readily available through her mobile device. By the time the associate is starting to call other stores to find the merchandise, it's already ordered from a competitor and shipping to her home. Another satisfied customer - but by someone else.

The average rate of out of stock among retailers is usually in the 8-10% range. That literally means 10% of the time a customer will come up empty when on a shopping mission. But, if customers and associates have visibility to all inventory across the enterprise, a retailer may have just saved a lost sale by finding the right item and shipping the merchandise to the store or her home, resulting in a satisfied customer.

The issue is inventory has often been thought of in silos - buyers buy merchandise for the stores, then for the e-commerce site, then the print catalog (if still produced), and then the outlet stores. In many cases inventory is held and reported on within these silos. There is limited visibility across the sales channels, virtually no visibility to the stores (outside of their own store), and absolutely no visibility to the customer. Thus, when one channel runs out, a decision has to be made to physically transfer and move this merchandise around, resulting in increased transportation and labor costs.

 
 

The Latest Trends
There are trends afoot in this arena and some progressive retailers are driving innovations that are resulting in not only increased sales and profits, but also happy customers.

Some retailers are now moving toward a model in which inventory is considered a "shared asset." To this end, I believe the following fundamental equation to be true in most any retail environment: inventory - (organizational + technical barriers) = singular view of inventory, and definitely better customer service. Pretty simple, but it comes down to a few questions a retailer should be asking:

  1. What is the best way to consolidate inventory data into one place?
    I've seen countless retailers with inventory data spread among several repositories and/or channels - likely the result of decisions made decades ago. A foundational effort should be one of consolidation, in terms of data cleansing, movement into a single repository, and consistent and common reporting. Get down to ONE version of the truth for the merchants!
  2. How can we create a way for our associates to easily and quickly view inventory levels in store via POS or other mobile device?
    POS technology has come a long way, quickly allowing access and visibility to the internet, e-commerce channel, and inventory within the chain. With customers that are more knowledgeable about products than even sales associates, retailers must place some of this power back in your associates' hands. They are the brand ambassadors - empower them!
  3. What is the best way to improve and ensure a high degree of inventory accuracy?
    If it's going to be visible, it has to be accurate. Retailers must ensure that processes are in place to ensure inventory accuracy from the POS to cycle counts. Don't lose a sale because the data is wrong!
  4. Who gets credit for the sale?
    This is an issue that plagues many retailers building out their ship to and/or from store capability - who gets credit for the sale? No simple answer here, but generally the entity that "owns" the inventory should get credit for the sale, as well as the sales associate, if one was involved in the transaction. This challenge can become more complex in environments where the associates are on commission, but this is generally the case.

There are some great examples of retailers in the department store and specialty store categories that are working to create this singular view of inventory to better serve their customers across all touch points and channels - especially in store.

Macy's
Macy's emerged as one of the leading innovators among retailers in driving toward an omni-channel business future. According to a recent article on Cincinnati.com, they have replaced some 40,000 outdated cash registers with web-enabled POS machines.1 Sales associates can now look up items online and ship from either warehouses or other stores, either to the store or to the customer's address. According to the article, 10% of Macy's business is e-commerce, but many of the orders are shipped from stores and their e-commerce business is best in regions where there are physical stores.

Nordstrom
Nordstrom has adopted the same approach but with a twist - sales associates also have mobile devices through which they can search for items and conduct transactions with the customers on the spot, taking their already exemplary service to a new level.

The Gap
The Gap is also creating their own singular view of inventory - across e-commerce and U.S. and Global stores. According to a recent InformationWeek article, The Gap has created an algorithm that allows e-commerce shoppers to buy merchandise from the store inventory - but only select stores are set up to handle the shipments. For customers that wish to still touch and feel the item prior to purchase, they can select a "Find in Store" function, allowing them to see what store near them has the item.

The Bottom Line
The bottom line? Creating a "virtual stockroom" by sharing inventory across channels is another step innovative retailers are tackling in the effort to provide a great experience for the customer, regardless of channel in which she chooses to interact. That's real service.


[1] http://news.cincinnati.com/article/20130922/BIZ/309220018/
[2] http://www.informationweek.com/it-leadership/how-gap-connects-store-and-online-channels/d/d-id/1111425?


Dwight Hill is the Founder and Managing Director of The Retail Advisory LLC, a management consultancy serving the retail industry. Dwight is a recognized industry expert with over 20 years of executive level experience with Deloitte, Neiman Marcus, Michaels, and Zales. Dwight serves retailers of all types including luxury, department stores, food/drug/mass, specialty and convenience. He has led the implementation of continuous improvements for dozens of retailers that streamline operations, improve customer experience, and drive profitable results.

 
 
 
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