For Jack Ma, executive chairman of Alibaba Group Holdings, today is an extremely busy and lucrative day because the company he founded 15 years ...
Retailers too often don't have the inventory systems to deliver what they promise in merchandising images.
It’s too bad that retailers too often can’t deliver what they put so much effort into merchandising because they don’t have effective systems for getting the right stuff into their warehouses and stores. It’s a problem that put one of my favorite retailers in the doghouse.
Weakness on the fulfillment side of things came to light in a report we recently covered from London-based research firm FreshMinds, which indicates that retailers in the U.K. place a low priority on investing in better inventory systems, figuring that accurate delivery is at the low end of consumers’ concerns. The report was sponsored by DHL Supply Chain and, of course, supports the sponsor’s line of business.
But the report’s findings sound all too familiar to what I’ve heard, and experienced, on this side of the Atlantic. Another study, by research and advisory firm RSR Research LLC (and sponsored by supply chain technology companies RedPrairie and Manhattan Associates) found that the No. 1 operational challenge facing multichannel retailers is matching local store assortments to local consumer demand. That report also notes that out-of-stock merchandise is a persistent problem among 39% of stores—and 60% among stores RSR determines to be laggards, with annual sales growth of less than 3%.
Meantime, the need to better manage inventory across channels has increased in recent years along with the healthy competition between web sites and stores over which can best engage consumers. Web sites serve up interactive merchandising displays designed to be informative, entertaining, soothing and compelling, and many stores seek to have the same effect with a heavy dose of visual and audio props.
But all I really want to know is: Can you deliver what you’re promoting in these displays?
As someone who walks several miles a day year-round in a northern city, I visited a favorite retailer’s store early last December in search of a pair of cold-weather walking shoes. The retailer’s web site and catalog showed what I was looking for, but I wanted to try them so I visited a trendy new store the merchant had opened about a year earlier. With great props and engaging product displays, it’s the kind of store that just makes you feel good walking into. It makes you want to buy some of their cool stuff.
I found the walking shoes featured in an attractive wall display, but the clerk gave me the bad news: “Sorry, we’re out of stock in your size.” When I asked if I could order the same pair online (in a rather common size, by the way) she checked with a manager, then informed me the company was no longer re-stocking the shoe for the season to make way for spring merchandise.
Really? But winter doesn’t actually start until next week, and it’s going to be around for awhile, I noted. After all, this is Chicago.
Instead, she offered me a pair with Velcro straps. I hate Velcro straps.
Leaving the store empty-handed, I looked down at my old shoes and decided I didn’t really need new ones after all.
RSR managing director Nikki Baird notes that U.S. retailers tend to be further behind their U.K. counterparts in investing in better systems for managing and planning inventory, largely because, until recently, U.S. merchants have found it relatively easy to replenish merchandise thanks to a larger and more effective network of warehouses and stores accessible via a more modern transportation system. Now, with transportation costs rising and fluctuating, and with retailers needing to satisfy cross-channel web and store shoppers, they’re starting to give effective inventory systems stronger consideration, she says.
But they’ve got a ways to go, Baird contends. “Retailers generally think they do a good job managing inventory against demand, but feel they have a hard time keeping up with fast-moving items and managing slow-moving items. That doesn’t leave much to be good at.”
Making shopping easier for customers, RSR says, requires dealing with more complicated inventory and supply chain management systems. Rather than pushing merchandise to stores based on what a retailer wants to sell, merchants need to think more in terms of starting with accurate demand forecasts on a local store level as well as across an entire chain. With web-enabled technology that can compile demand forecasts from store point-of-sale systems as well as from shopping behavior recorded across web sites and customer contact centers, retailers can get a more accurate feel for what customers want in individual stores as well as across their entire chain and on their e-commerce sites.
In my urban environment, for example, where pedestrians trudge through ice- and snow-covered sidewalks for months every year, surely there must be lots of people providing such demand data about cold-weather gear.
With more accurate demand data on hand, merchants can also use web-enabled inventory management systems to view and pull the right merchandise from throughout their networks of distribution centers as well as from other stores and drop-shippers to ensure that the right products are in stock in stores as well as in warehouses that support e-commerce sites.
Retailers that invest in the right mix of technology systems backed by effective cross-channel merchandising and inventory management policies, Baird says, will continue to emerge as the ones that deliver what shoppers want.
Sounds promising to me. Winter trekking will be back in Chicago before I know it, and with any luck my old shoes and I will find a retailer that has what I need and can deliver it when I’m still in a buying mood.