As shoppers rein in their spending, making sure the product they want is on the shelves is more crucial than ever. The solution is to invest in a stock control system
In a recession, cash is king. No one wants to spend money on stock that will not shift but neither does anyone want to miss out on potential sales because they are out of a particular garment, style, size or colour. There are plenty of technology companies offering systems to make your stock control more agile, but selecting the right one can be a minefield.
Too many retailers have been burned in the past by the promise of untold technological efficiencies, only to find the IT systems they have purchased do not do what they want or are so costly to implement and manage that the prospect of gaining a palpable return on the investment seems very distant.
In tough times like these, few are willing to make any outlays that don’t provide rapid, guaranteed returns.And outlays on IT can be very big. Brian Hume, chief executive of retail consultancy Martec International, says: “I was with one company in the US recently which has about 900 stores.
To implement an ERP system [a single, company-wide IT system which does pretty much everything] was going to cost it about US$40 million (£26.5m). The retailer believes it’s a good investment overall, but in this market it simply can’t justify spending that amount, so the project has been put on hold.”
Yet there are ways to improve the handling of stock without breaking the bank. The first is to make better use of current systems. Says Hume: “For example, clients might tell me they need a new merchandise planning system, but in many cases they already own one. They usually say it doesn’t work, but at least half the time that’s because the original implementation wasn’t done properly. When we go back and set it up correctly it works fine.”
But if a business really does not have the systems it needs, the answer for most right now is not to go for a big-bang, big-bucks IT system. “Today is about evolution, not revolution,” says Hume. “Generally, customers aren’t buying enterprise resource planning (ERP) software or new EPoS systems. They’re looking instead at very specific solutions to address particular priorities.”
The area most companies are concentrating on is what is known as business intelligence or decision support. In fashion retail, more than in most sectors, the transitory nature of demand means ensuring the right levels of stock are in the right place at the right time. That takes in applications such as merchandise planning, assortment planning, demand forecasting, stock replenishment, allocation and space management. “It’s amazing how few retailers look at their lost sales,” says Hume.
“In fashion, retailers are typically losing 20% of potential sales because they’re out of stock of the appropriate size or colour. If you could get back even a quarter of those lost sales, that
would amount to 5% like-for-like growth, which most retailers would die for now.”
Doing that depends on the nature and size of the business, as well as the systems already in place. “If you have fewer than 10 stores, you could do this using a standard spreadsheet package like Microsoft Excel, which nearly everyone owns already,” says Hume.
“These are not difficult calculations. What makes them tricky for larger retailers is the fact they have hundreds of stores and thousands of products. So as you move up the scale, you’d use products like JDA’s Arthur Planning product or Torex’s Allocation. If you are already an ERP user running something like SAP, Oracle or Aldata, then your supplier will already have add-on modules you can use to do this stuff. The important thing is to ensure your planning is realistic in the current climate, that you have a good process in place and that any product you select supports that process.”
How much it costs in terms of upfront investment will vary, but it will certainly be less than opting for a big-bang approach. “I’m working with one fashion retailer at the moment which has about 450 stores. It is about to spend around €1.5 million (£1.33m) on a merchandise and assortment planning system,” says Hume.
“A smaller retailer wanting to achieve the same ends could spend anywhere from £60,000 upwards. The largest might spend as much as £4 million - although that figure includes not only software but process consulting (which can represent more than half of the cost).”
A business may also need to factor in the cost of integrating any new applications with its existing systems. Despite a decade-long push for interoperability standards by the Association for Retail Technology Standards, progress has been slow. Hume says: “Most people today, when they buy an application, have to spend another slice of money to integrate it into everything else they own. For example, I’m currently working on a project with a retailer in Holland [a €300 million (£267m) business] that is putting in a point solution. It’s costing roughly ¤120,000 (£107,000) to integrate that application.”
One emerging area that may help those daunted by the levels of investment required is software as a service (SaaS), where instead of making big upfront investments in technology, companies can buy access to the applications they need, which are managed and run on the supplier’s own systems and accessed by retailers through standard web browsers.
Fashion retail systems specialist Prologic is among the companies already offering applications on this basis. Retailers simply buy licences to use the software over the internet.
Hume says: “Today your choice isn’t great, but more companies are moving in on this space. It’s not cheaper in the long term, but it saves you finding the cash in the beginning, which is good for your cash flow. For those who don’t have the resources to invest in a big system, SaaS is a much better option because users can pay monthly and rapidly start to see benefits.”
SaaS and managed services are also a good option for those without in-house technological expertise. As Hume points out: “When you buy a package, the supplier will provide expertise during the first phase of implementation, but then you’re on your own. With SaaS, those guys are always there.”
But beware: not all services being touted as SaaS are yet being offered on a true pay-as-you-go basis. Some, such as online EPoS supplier Cybertill’s service, still require you to pay upfront as if you were buying a packaged solution. Online luxury womenswear etailer Organza Orchid (which also has a bricks-and-mortar boutique in Chislehurst, Kent) is using Cybertill’s service. Founder Charlotte Rush says the system is “fantastic” in terms of generating reports and managing stock, but concedes it wasn’t cheap for a small independent start-up.
“It required an upfront investment of around £10,000, plus training and a monthly support fee. That said, as a luxury retailer with limited stock, it was important for us to have a system that would enable the boutique and website to function in parallel. With Cybertill, if someone buys an item in the store, it is immediately removed from sale on the website,” says Rush.
A stock control system that fits
High-tech internet start-ups are leading the way when it comes to intelligent global stock control. Online bespoke tailor A Suit That Fits (www.asuitthatfits.com) uses a combination
of its own website, Google’s free application suite Google Apps and the T-Mobile G1 smartphone to keep in constant contact with its suppliers and tailors out in Nepal.
When the company started in 2006 it claimed it was the world’s first online bespoke tailor. Three years on, it also runs three stores in London and another eight across the UK.
Co-founder Warren Bennett says: “Our website manages the stock as well as taking and managing orders. At any time we have about 700 suits in a part or completely made state. We know where every order is at all times - whether it’s being stitched, cut, pressed, shipped to us or awaiting shipping to customers.”
But the system really comes into its own when managing stocks of material. “We used to buy everything upfront, which was very expensive and capital intensive. But as we’ve grown, our material suppliers have been very helpful, putting stock up on our website but holding it for us. That has expanded our range massively. We have a reliable stock of more than 200 fabrics now. And it allows us to react very quickly to changing trends. For example, if we see that a lot of people are clicking on a particular fabric, we’ll bring it on-stream from our supplier.
“As people buy their suits, the stock of material counts down accordingly (say, 3.5 metres off for a suit, 5 metres off for a suit with extra trousers).
“And by using Google Talk instant messaging on the G1 phone we can chat in real time with anyone in the company, wherever we are. So we keep one eye on the browser to monitor levels of stock closely. If something’s low, we can contact the office in Nepal and check we’re able to reorder and how long it will take.
It makes us a lot more reactive, even though we’re not actually holding any stock.”
ILLUSTRATION BY TOM GAULD
WRITTEN BY JIM MORTELMAN