In its second-largest acquisition, Amazon buys the company for $970 million.
The web gives a boost to store retailers that can manage inventory across channels.
Madawaska, Maine, is as far northeast as you can get in the U.S. before entering New Brunswick on Canada's east coast. It's beautiful, rural and remote—not the kind of location that provides much casual walk-in traffic to a retail shop. "It's hard to have a business up here," says Jacque Pelletier, owner and manager of local apparel store Fashion Connection. "Most people in this area of the world drive south, not north to where we are. We get a few Canadians, but not enough to support a big store."
And yet Fashion Connection dazzles customers that do come to its 8,0000-square-foot store with a broad selection, about 15,000 SKUs, of popular products. "Everyone is impressed that we have more Skechers than others, and we're planning to add more in the coming year," he says of the trendy footwear brand.
What's his secret? It's that Fashion Connection also sells on the web, which provides about 80% of the company's total revenue and enables the retailer to keep a broad selection on hand in its single bricks-and-mortar store.
It's a formula more store retailers may turn to in order to compete with the lower-overhead business model of web-only merchants. To succeed, they'll have to master the complex process of managing inventory across multiple channels—including across the wide variety of web marketplaces and comparison shopping sites that can be major contributors to a retailer's online sales.
At Fashion Connection, the Maine store's pleasant ambience and personal service have a lot to do with its success, Pelletier says. But he knows the remotely located store couldn't offer the same product depth if it didn't take advantage of many web venues to sell its goods. "The web gives us a chance to have deep inventory for our customers here in a rural area," he says.
The retailer maintains a single stock of inventory that it sells in its bricks-and-mortar store, on its own web site FashionConnection.com and through such other web outlets as Google Product Search and Amazon.com. It plans to extend that reach through other e-marketplaces and social media sites. "We don't plan more retail stores," Pelletier says. "But online is where we want to push out more, and where we see us growing tremendously."
Indeed, pushing out products through multiple online channels is becoming crucial to success, adds John Vilsack, director of information technology for Active Sports Inc., which operates a retail showroom and clearance outlet, several e-commerce web sites and also sells through Google, Amazon.com, Buy.com and Overstock.com.
"Today, just being retail with bricks-and-mortar and one way to purchase online just isn't enough anymore," he says. "With all the different ways people are using the Internet, if you're not analyzing and embracing all those different ways, you're doing yourself and your customers a disservice."
Doing all that successfully, Vilsack, Pelletier and other retailers have found, requires an effective way to manage inventory across selling channels, so that when a customer clicks on a Google search listing, a product listing on FashionConnection.com or any other site on which the retailer loads product information, she won't be disappointed to learn that the product isn't actually available. The same goes for shoppers who place an online order while in the Fashion Connection bricks-and-mortar store.
Until recently, selling through multiple online channels as well as through its own store had stressed Fashion Connection's ability to quickly and accurately update inventory availability. "I've been frustrated in the last couple of years trying to manage inventory," Pelletier says, adding that he had to drop some online channels. "Having a web site and sharing inventory with other online channels is very hard to do, and I didn't want to have to keep separate inventory stocks for every channel."
Fashion Connection isn't alone. According to a recent study by Retail Systems Research, 48% of retailers that were rated as above average in financial performance (with 2011 sales above the industry average of 4% over 2010) considered real-time inventory management to be among their top three e-commerce challenges. The only e-commerce challenge cited more often, by 65% of respondents, was understanding and accommodating how various segments of customers engage with retailers.
There's no shortage of companies offering retailers the capability of managing inventory across multiple channels, however. A recent report by research and advisory firm IDC Retail Insights, "Business Strategy: How to Win and Keep More Customers by Excelling in Omnichannel-Driven Order Management and Fulfilment," highlighted several vendors specializing in this area: Epicor, IBM Corp., JDA Software Group Inc., Manhattan Associates Inc., Oracle Corp., RedPrairie and SAP AG.
Other vendors include 6th Street Commerce, Dydacomp, Jagged Peak, OrderMotion and Mach Software.
The Nordstrom example
The IDC report cited upscale retail chain Nordstrom Inc. as an example of a retailer that has invested wisely in inventory management and other capabilities so that it can present inventory accurately to consumers, online and off. In its annual 10K financial statement for the year ended Dec. 31, 2010, Nordstrom noted that its 13% growth in sales that year (compared to a slight decline the prior year) was "due in large part to the success of our merchandising, inventory management and multichannel initiatives."
Seeking the same kind of success, home furnishings retailer Pier 1 Imports Inc. recently decided to deploy the Edge e-commerce platform from Jagged Peak Inc., which supports visibility of updated inventory across its physical stores and online retail channels.
At Fashion Connection, Pelletier and a staff technology specialist spent more than a year looking for a system to help manage inventory across multiple online channels as well as its store. It was a difficult process trying to match system features within a budget, he says.
The retailer chose Dyadacomp, which provides Fashion Connection's SiteLink e-commerce platform as well as its Multichannel Order Manager system, commonly known as M.O.M, for managing orders and inventory across its selling channels. (M.O.M. originally stood for Mail Order Manager, reflecting the system's roots in serving catalogers before it evolved into a multichannel system.)