Retailers must draw up a strategy now if they are to meet demand throughout the 2012 Olympics sales peak
With additional footfall and spend during the London 2012 Olympic Games, the opportunity for boosting sales in the run-up to and during the event seems a foregone conclusion. However, making the most of a possible retail bonanza takes careful planning, the flexibility to adapt to rapidly changing events and a lot of research.
London could certainly learn from previous Olympic Games, with some analysts describing the retail supply chains in Athens in 2004 as “a disaster”. Tony Bryant, head of business development at retail systems supplier K3, explains: “Our colleagues in Greece described it as a missed opportunity. The logistics were chaotic.” In Beijing the problem was at the opposite extreme. Infrastructure and products were in place but demand was grossly overestimated and stores ended up with unsold goods and reduced margins.
“Our Shanghai office suggests about 95% of Olympic business was centred on Beijing and retailers were overexcited, over-bought and were stuck with a lot of stock,” says Tim Robinson, partner at consultancy Kurt Salmon.
So how do you find the right balance? The answer lies in plenty of forward planning. “You need to start with a series of scenarios on likely sales volumes and customer traffic,” says Richard Nicholas, sales and consulting director at Exceedra, a supplier of planning and forecasting systems. He adds: “And you need to think about what sort of merchandise will sell: will it be impulse buys or specific Olympic lines? Add in as much data as you can find from previous events, choose which scenarios seem best for your business and then test out and adapt those models as sales start to build. Scenarios need to factor in both the impact on the domestic market and likely tourist numbers, so if you’re not close to an Olympic venue you could even see a downturn in sales.”
Modern forecasting technology has long been used by CD and DVD retailers. Such systems can give accurate insights within hours of a product going on sale as to whether it is a winner or not, allowing for rapid re-ordering or early markdowns. Robinson says such technology could prove essential to maximise the Olympic opportunity. “By the first or second day retailers will have to know which products will sell and success is going to be very much about getting on top of that and managing throughput.”
While it is difficult for clothing to be replenished in the time it takes to press a few thousand DVDs, Robinson suggests that final finishing of some of the impulse purchases likely to sell well at the Olympics could be delayed until a clearer idea of sales potential emerges. “You can obviously delay printing T-shirts and probably also leave attaching Olympic logos until the last minute so you’re not left with too much branded merchandise after the event that could be difficult to sell.”
Keith Sherry, general manager for BT supply chain solutions, argues that if need be, products can be turned around very quickly to meet demand - but at a price. “Companies can use air freight, but they have to calculate if that is going to be worth doing or if it will damage profitability,” he says.
At John Lewis, which has been offering official Olympic merchandise at its Oxford Street store since spring 10, director of selling operations Nat Wakely has already started gathering sales data. Experience from previous Olympics, he says, suggests you make 6% of total sales two years before and 11% one year before, leaving 83% of Olympic sales for the last year. These statistics are already helping the planners. “We have a good idea of the likely build-up and the more data we have the better we know what’s likely to sell,” says Wakely. “Much depends on the flexibility of suppliers - they have made their own ‘guesstimates’ of orders and will need to turn up the tap if something surprising happens.”
Wakely quotes the official Olympic red mittens, which were the unexpected hot seller of the 2010 Winter Olympics, as an example of a surprise seller.
Delivering the goods
Having the right merchandise on offer is just part of the problem; getting the goods to stores could become even more of an issue for retailers close to Olympic venues. Details of the Olympic and Paralympic Route Networks, which will include some road closures, have yet to be announced.
For retailers at Westfield Stratford, which opens in September, deliveries during the Games must only be made in the early hours of the morning. “That will be new for us as we never do night-time replenishment,” says Wakely of John Lewis’s Westfield Stratford store. It also means retailers must make accurate sales forecasts for the entire day as, without top-up deliveries, if a line sells out by midday there will be no more available until the next day.
If another ‘red mitten’ scenario develops, then that would put added pressure on operations. Will retailers take orders for collection from shoppers returning to the stadium the following day or will they need to switch to home delivery for disappointed customers? There are similar questions over mobile commerce orders. Will overseas visitors want to have goods delivered to hotels or a collection point at a transport hub or stadium, or will they prefer to have things shipped directly to their homes?
City Link is one parcel carrier already planning for the London Olympics. “We’re working on the assumption that early morning will be OK with no problems from the Olympic Route Network and road closures,” says Duncan Faithfull, sales and marketing director.
City Link already has sophisticated software in place allowing load sharing between depots, so if any of the 13 depots in London become overloaded work can be shared with nearby sites. Others argue the case for temporary warehouse locations close to major venues and transport hubs so supplies can be rushed in as need be, no matter what the traffic congestion.
Robinson suggests etailers may have to modify any existing rapid delivery promises to cope with demand. “Retailers will have to be realistic - instead of next-day delivery they might have to offer three-day delivery at best,” he says. Roger Morris, head of product development at Royal Mail, believes home delivery would be the better option. “It’s an ideal opportunity for visitors from overseas to shop in London and get the items delivered to their homes rather than needing to carry them on the plane and use their limited baggage allowance,” he says.
Websites may need to be given an international flavour as many still limit sales to the UK and EU countries - but retailers need to weigh up the costs of doing this. If a retailer has ambitions to expand its website internationally, has researched the markets and believes there is a long-term sales opportunity, then accelerating development in time for the Olympics could make sense. But if the Olympics is a sufficient driver to initiate such a development, then retailers could be disappointed as sales in the short term may not cover the cost of development.
Equally, if new and more phone apps allow for click-and-collect from stores, would retailers be able to guarantee the stock would be available? Sherry believes radio frequency identification (RFID) could be the answer. The clothing sector is leading the field in RFID pilots and implementations and it is possibly the only way to achieve real-time visibility into actual inventory. “The Chinese used RFID for security and other applications at the Beijing Olympics and that has helped push prices down, so it is now a feasible option for real-time stock management,” he says.
Developing multilingual mobile apps, implementing RFID schemes, renting temporary warehouse space - and much more - could all be on the supply chain to-do list for retailers determined to maximise potential sales from London 2012. But before rushing ahead, do your research. Only then can you turn the Games into a profit maker.