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Multichannel report: Tackling multichannel

Fashion businesses are making strides towards a single view of inventory to more efficiently supply stock across channels.

It seems simple in principle for a retailer to know what inventory it has and to move it where it’s needed.

But in the real world of fast-moving fashion retail across multiple sales channels, there are a number of obstacles to achieving this elusive Holy Grail.

Omnichannel Fulfilment, a white paper published earlier this year by analyst Javelin, indicates that the rewards for getting it right are considerable. Debenhams has achieved an 8.5% increase in online sales by knowing where all its products are - at stores as well as distribution and fulfilment centres - and making this full inventory available to those shopping via a tablet or mobile.

Hans Elmegaard, global head of retail vertical at third-party logistics provider Damco, says integrated information management (a management system that integrates all components of the supply chain into one coherent system) is the key to providing complete visibility, but admits it’s been difficult for third-party logistics providers to meet
the multichannel challenge.

Peter Sillitoe, customer solutions director for northwest Europe at freight forwarder and third-party logistics provider Kuehne + Nagel, is discussing improved back-office solutions with several high-end retailers.

He says: “Fashion has been slow to move towards clear supply chain visibility. Some clients don’t have an order management service [which provides up-to-date information for each order placed] with their 3PL [third-party logistics provider], so orders coming in are not necessarily visible. If there’s a production delay or a shortage of stock, the ability to analyse and respond is missing.”

Sillitoe adds that off-the-shelf solutions that integrate into retailers’ internal systems have been around for more than 20 years, but the future is connecting this all the way to the warehouse for end-to-end supply chain management.

Subsequently, more than half the respondents to our survey believe lack of systems and integrated processes is an obstacle to attaining a single view of inventory, while 39% cite lack of real-time information.

Alan Braithwaite, visiting professor at the Cranfield School of Management’s Centre for Supply Chain Research, says a single stock pool, avoiding duplication and the need for double handling, can be a useful start.

Fashion and homewares retailer Cath Kidston, where fashion now accounts for 10% of its sales, did not at first appreciate the benefits of inventory consolidation when it moved into a centralised distribution centre in 2009. Supply chain director Geert Peeters explains that the facility in St Neots, Cambridgeshire initially retained three discrete stock pools for retail, wholesale and ecommerce. It then rapidly filled up to the point where outside storage was needed.

The company called in outsourced logistics service provider iForce, whose sales director, Neil Weightman, recalls: “There was a high level of stock redundancy. The cost per item fulfilled was high. Systemic control and consolidation into one physical stock pool for all sales channels increased warehouse capacity by 39%, and 25% of the cost has been taken out.”

Peeters comments: “We now have one physical inventory, but different groups of pickers and packers dedicated to each channel. They carry out value-added work such as gift packaging, whatever is required to make the experience good. There are a lot of opinions about outsourcing, but it makes sense when you can go to specialists in systems capability. The iForce system can talk to ours, giving us one view of store and warehouse inventory.”

Cath Kidston’s success in integrating inventory has enabled it to launch a click-and-collect service to which customers are “responding well”. Click-and-collect makes up 6% of online sales. “Logistically, it’s great to have, though there’s still good reason to continue with home delivery,” Peeters says.

Young fashion brand Superdry is also set to launch click-and-collect in July, as it prepares to move to a single, central distribution centre from separate store and online fulfilment facilities. “We weren’t in a position to do it before,” says Susanne Given, chief operating officer at parent company SuperGroup. “We have 2,100 options per season, and by the time you’ve added in colours and sizes it’s expensive to duplicate your stockholding.”

Given explains that carrying identical stock pools in multiple warehouses makes it more difficult to respond to accelerated levels of sales: “To get a product packed, delivered to the fulfilment centre and listed online can take 48 hours. The new system will be more dynamic and we can trade inventory [between the channels].”

There will still be two separate pick locations in the distribution centre, but it will be much easier to divert product where required, she adds. “We’re using an in-house IT system to give us a short-term solution, but a new, fully integrated merchandise management system will be implemented in the next 12 months, giving us live inventory positions throughout the business.”

Some retailers are growing their ecommerce business by offering a wider range of products online than in store. For example, New Look’s online shoppers can choose from 150 brands, while at Superdry, just one flagship store carries the full portfolio that customers see online.

Perhaps a more critical question for multichannel retailers, however, is whether shoppers behave differently when they’re online. “[Bricks-and-mortar] customers shop more often, while online customers have a higher average transaction value,” Peeters comments.

Opinions vary on whether these higher transactions simply result in more returns. Discussing a brand that sells value fashion to a young clientele, Damco’s Elmegaard says: “Customers are spoilt. Some retailers deliver for free. If a customer sees something and can’t decide, but knows there’s no risk, they may order five items, but there is a high return rate.

It puts a lot of pressure on freight forwarders and logistics providers.”

According to virtual fitting room technology provider, the average rate of returns for online clothing orders is about 25%. Of those items returned, 27% are exchanged for another size, so retailers face making 132 deliveries and collections to successfully sell just 82 garments.

Given says returns are lower at Superdry than in other retail businesses she has worked in.

“We benefit from unusually high brand loyalty. Customers have tried our clothes before and have a good sense of what they’re buying.”

Gary Copping, account executive at software provider Quantum Retail Technology, says stores traditionally offer a mix of small, medium, large and extra large outfits depending on past sales history. Copping observes that online sales tend to migrate more to the two ends of the curve, the smaller and larger sizes, though customers will often order multiple sizes if they are unsure how it will fit. “That drives a bigger order, but only one will stay with the customer,” he says.

Depending on whether they have one distribution centre or several, Copping says retailers may hold back 10% to 30%of inventory centrally, which they will use to fill the gaps as stores begin to sell down. Most will offer a wider range of sizes online than in store, and retain this extra inventory at the distribution centre.

It is true that no one size fits all when it comes to how retailers deliver their multichannel offer to meet customers’ demands, but single view of inventory is the one common staple for efficient and cost-effective supply chain management across the channels.

Read more from the Multichannel report

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