In its second-largest acquisition, Amazon buys the company for $970 million.
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One trend emerging among multi-channel apparel retailers is reducing the number of in-store items that sell at a slower pace. Rather than stocking shelves with a full array of sizes and colors, retailers can shift much of the inventory to a distribution center that can ship it to the customer on demand, thus clearing shelf space for more popular items.
For example, a female shopper might see a dress that she likes in the store of a multi-channel retailer, but which is not available in her size. The customer can ask the store associate to check availability of the item. The clerk accesses the full inventory of the item across all sales channels, finds the desired item and arranges to have the item shipped to the customer. The same process can work in reverse-retailers can direct online shoppers to a local store to expedite pickup.
“By giving sales representatives full access to inventory across all sales channels, retailers are less apt to lose sales on items that may not be in stock in one channel, but which are available in another,” explains Jane Cannon, COO of Datavantage Corp.’s CommercialWare division. “Full visibility of inventory lets retailers save on stocking costs by consolidating inventory in locations where it costs less to ship to the customer.”
CommercialWare, which provides order management systems, was recently acquired by Datavantage, a store technology developer and subsidiary of MICROS Systems Inc., for $13.2 million in cash. The deal is expected to provide CommercialWare’s and Datavantage’s retailer clients a 360-degree view of their customers. As part of the acquisition, CommercialWare spun out its OrderMotion division, which offers order management systems on a web-services basis.
The new direction
Using order management systems to broaden the retailer’s view of the customer is the direction in which many order management vendors are heading. Russell Athletic, for example, plans to create marketing promotions around the types of items a customer has purchased so it can quickly sell related items as they are moved out of the current product line.
“Someone who bought a fleece sweatshirt is going to be interested in other types of fleece wear,” says Russell Athletic’s Iannuzzi. “The same is true for customers buying shirts that are embroidered with a corporate logo. It also creates the opportunity for us to rotate in new products and see what kind of interest they generate, since there are going to be direct ties between what is bought through the site and through our other channels.”
Cognizant of creating a potential conflict with its retailers, Russell is confining its site primarily to corporate customers, such as restaurants, financial institutions, and companies that want the apparel to distribute to employees or consumers as promotional items. Eventually, Iannuzzi envisions Russell expanding the offerings on the site to include sports equipment, such as basketballs and shoes. The company says it will even consider expanding direct sales to consumers in the future, but has no timetable for doing so. Russell Athletic currently offers a limited inventory on its consumer site.
“Retailers and manufacturers that sell direct are using order management to create more ways to make their full inventory available to shoppers, while carrying less of it in their stores,” explains Bob LaGarde, CEO of LaGarde Inc., an Olathe, Kan.-based supplier of e-commerce solutions. The company provides an order management system to Russell Athletic. “Order management is having a big impact on operating efficiencies and creates a more dynamic, flexible, and extensible shopping environment. It helps retailers and direct sellers better define their business objectives across multiple sales channels.”
The operating efficiencies gained from order management systems also extend to sub sales channels such as eBay.com and Yahoo Shopping, that do not necessarily utilize the retailer’s primary brand. Managing inventory across these channels can be difficult since each sub channel has its own data formats and business rules. Amazon.com, for example, allows retailers to communicate directly with its operating platform, while eBay requires retailers to send data through a subsidiary system within its main operating platform, according to order management experts.
As a result, retailers venturing into sub channel sales need an order management system that can manage communication of real-time transaction data and inventory in the format designated by the sub channel partner, then convert that information back into the format used internally across its other sales channels in real time.
“Retailers that sell through sub channels not only need real-time communications with those channels and their other channels to ensure customer satisfaction, but a single application that can follow the business rules of each sub channel,” says Robert Coon, president of DydaComp Development Corp., a Totowa N.J.-based provider of order management systems. “It is costly to have a single order management system for each channel.”
It also requires a system that is easily integrated across the retailer’s operating platform and that is user friendly. Order management vendors are responding with systems that allow retailers to break down the technology silos between sales channels.
“Retailers that want order management systems with long-term viability need fully integrated systems,” says Larry A. Maher, vice president of sales and marketing for Data Management Associates Inc., a Cincinnati-based supplier of order management systems.
The first step to fully integrating order management systems is to link the system to the retailer’s database and set the business rules for each sales channel. As data flows through the order management application to the database, the database follows the designated business rules, such as not to lower inventory counts until the actual sale is completed rather than when an item is placed in the shopping cart.
Once a decrement is made, the database immediately updates inventory across all sales channels. Customers purchasing more items than available can be asked if they will accept the available amount, want to back order the item or start over. The latter is a perfect time to send a marketing message based on the shopper’s purchasing behavior to encourage the purchase of another item.