Retailers are changing the way they manage stock to offer a truly multichannel experience.
The fast-evolving, multichannel landscape is creating new growth opportunities for retailers, so long as margins are being retained by tight stock control. But are British fashion retailers ready for the massive overhaul of inventory management to become truly multichannel?
It’s not just the digital natives that want choice and convenience when shopping. Today everyone expects to receive and return their products in different ways, which requires a rethink of how inventory is managed. Do you know where product is across all the channels and where it’s needed? Are you and your third-party suppliers agile enough to launch new fulfilment routes? Is duplication of stock across channels eroding margin? The danger is that retailers in the UK prioritise investment in customer-facing, front-end services, but neglect the importance of optimising back-end processes.
“Managing stock in a way that brings online and offline together is a massive issue today,” says Ish Patel, group omnichannel director at Aurora Fashions. “There are some really good executions of reserve-and-collect, and click-and-collect coming through, which shows retailers have more visibility and control of stock across channels. But the challenge to overcome is having a real-time view of stock so you don’t risk reneging on a promise of availability.”
Aurora fascias Coast, Warehouse and Oasis each have stores, a website, an app and mobile-optimised sites, and two of the chains have transactional Facebook sites. There are also sales in department stores to take account of, and sales through the department stores’ websites. “We have around 15 different digital selling channels as well as hundreds of stores across which to manage stock, so it’s a complex business,” says Patel.
Much work has gone into updating inventory management systems and “opening up stock availability” to customers, as part of the Anywhere Everywhere supply chain programme. This now enables online shoppers to reserve online and buy in-store, and Aurora can use stock in stores to fulfil online orders of best-sellers that might have sold out in the fulfilment centre. Its iPad point-of-sale service provides an ‘extended aisle’ and the 90-minute delivery option, which can be instigated from the stores as well as home, also makes use of this decentralised stock management system, giving customers the chance to benefit from stock held beyond their local branch.
“This took a lot of work on the technology side, but just as much work on implementing new processes in stores,” says Patel. “Integrating online and offline stock management means store staff are interacting directly with the digital channels – taking web orders in store so that goods are delivered to people’s home. It’s required a big training effort across stores.”
Aurora found that online product availability rose 28% when it introduced the Anywhere Everywhere system for a six-week trial in selected stores. It resulted in £2.5m of extra sales, while online conversion rates doubled.
By optimising inventory deployment retailers can also improve margins, as there’ll be less stock duplication, and less selling at discount. “Having end-to-end inventory visibility and the ability to fulfil customer orders from anywhere, no matter which channel the consumer makes the purchase through, lets retailers minimise product markdowns by connecting available products with customers willing to pay full price for an item,” explains Craig Sears-Black, UK managing director at supply chain provider Manhattan Associates.
The company has just published its trend predictions for retail shopping in 2012, and puts optimisation of inventory high on the list. This means investment is needed in tighter integration of systems across all sales channels, implementing cross-channel order management systems and replacing traditional ‘batch processing’ with real-time solutions.
Retailers think such system integration projects are worthwhile, and will deliver return on investment. At lifestyle retailer White Stuff an IT overhaul is underway to change the company’s merchandising and supply chain management. “We have the model in place now for customer-centric retailing,” says Lee Cooper, creative director at White Stuff. “Whereas we have been buying product to fill stores, and focusing on the product rather than customer demand, we now aim to have behaviour-based customer insight, driving all marketing, merchandising and operational functions.”
A single solution
White Stuff wants a single view of the customer, so it can pick for all four sales channels from single bins in its warehouse, offering customers the chance to return goods to all stores, no matter where they were purchased. White Stuff’s overhaul will lead to an integrated distribution centre where stock for all channels is picked from a pool, and one new Enterprise Resource Planning system (an integrated software solution used to manage a company’s resource) replacing three legacy IT systems.
Integration helps retailers know where stock is physically held, allowing for faster distribution across the various channels. Rather than viewing stock in silos – warehouse-held, out in stores, kept aside for ecommerce – the new model required is the ‘pool of stock’, or possibly a hybrid of pooled and siloed. “Retailers want to be able to say to customers, yes we have that in stock and it is here,” says Andy Cairns, UK country manager for retail systems supplier Cegid. “If you’re offering click-and-collect, or order in store, you need the full picture of stock from the EPoS, and have the systems in place to redistribute items across channels with ease, rather than lose sales, and disappoint the customer.”
This poses massive challenges because for retailers such as Topshop and Zara ranges change every few weeks. There are also the complications of sizing and colours to consider. “Managing a pool of stock will work relatively easily for luxury-end fashion retailers, who might have two collections a year, and it will be a great way to secure sales and reduce the need for discounting, but it’s going to be tough to make it work in fast fashion,” says Cairns.
Tony Bryant, head of business development at software provider K3 Retail, agrees that the customer journey is no longer purely transactional, but needs to be viewed as an engagement model, working across multiple channels. “Engaging with the customer through different touchpoints means completely changing the way the organisation is set up,” says Bryant. “The role of buyers, merchandisers and supply chain managers will evolve. Buyers will buy for many channels, merchandisers are now doing different jobs because they’re not just merchandising stores, they are fulfilling across many channels and getting more involved in the logistics of that. Equally, supply chain teams are taking on more of a fulfilment role than straightforward store replenishment.”
Working with a pool of stock also has a different rhythm in supply chain terms, because it’s about anytime, anywhere, says Bryant, not weekly fulfilment deliveries to the same addresses. “As store estates are scaled down, because less physical space is needed, stock distribution will become a different discipline.”
Bryant says currently retailers are disappointing customers and missing sales because stock is stuck in silos, and the systems and operational skills aren’t yet in place to get hold of product for customers willing to buy: “If you are fulfilling web orders from a central warehouse, and run out of best-sellers in that warehouse, it would make sense to fulfil from the stores when needed.”
He notes that even when the technology is implemented to make these cross-channel fulfilment options available, there is still a massive job to do around change management, before new systems can deliver results. “The whole organisation needs to understand the new model, with commitment from the top and training at store level so that sales assistants know how to play their part in the multichannel fulfilment model.”
While it’s relatively easy to invest in multichannel solutions that can handle inventory management across the various sales points, the big step for most fashion retailers will be operational change.