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08/03/2009

Innovative Practices to "Save the Sale"

All too often retailers drop the ball in converting customer demand to revenue by not having the desired goods and services available in the store. In my retail experience, at least 25 percent of the time customers leave the store without what they wanted to buy. In addition to this one lost sale, retailers risk losing the customers, in the long run, who are frustrated by making a special trip only to find items out of stock. These lost sales and damaged customer relationships are the death knell of retailers, and the situation seems to be getting worse every day.

There are ways to "save the sale." Retailers can implement tools to satisfy customers who suffer from the dreaded "Out-of-stockitus" disease. Yes, there always will be the human factor caused by shelving errors, but leveraging integration and the automation of key cross-channel processes can all but cure this disease.

At the physical location, automated processes can be put in place to provide the same visibility and inventory promise as the internet to help save-the-sale. As a first step, a kiosk or POS register can provide visibility into the backroom, other stores, in-transit, or on-order inventory. A view into inventory availability can drive revenue significantly. Once available inventory is located, the sales associate can offer to save the sale through several options:

1. Inventory is located within the store.
2. The sales associate volunteers to ship the merchandise to the customer's home at no cost.
3. The sales associate reserves inventory from another store and the customer can pick it up at his or her convenience.

We did an informal survey of sales associates at a retail company and found that 57 percent of them felt option two would satisfy customers most of the time and 17 percent felt it would satisfy customers always. The sales associates believe that the customer would have chosen this option to save the sale 98 percent of the time.

Multiple sources of demand and limited sources of supply often lead to a stock out. The "On Backorder" or "Sold Out" message can "walk a customer" and destroy customer loyalty. Unfortunately, having to deliver these messages will increase as inventory levels are tightened due to credit restrictions. Although shipping product to the customer or offering substitutions can be expensive, the alternative of a lost sale is even more costly. As an example, a retailer with 1,000 stores averaging just 3 additional sales through these programs could generate an additional $27.3 million a year (based on an average $25 item and not including any accessories that might be attached to the sale).

The keys to these save-the-sale efforts are integration and automation. Integrating the store to the distribution center (DC), other stores, merchandising systems, and potentially manufacturers, provides greater visibility and communication to complete the transaction.

One way to think about this process is to consider what retailers do for special orders today. Many of the integration touchpoints are similar, but these processes, in general, have not been automated.

A seamless transaction is necessary, and that requires complete inventory visibility. To achieve this visibility, internal and external systems must communicate near real time to provide the most current inventory availability. A best-practice solution designed to execute this process is a sophisticated sourcing engine that finds the most optimal way to fulfill a store order by searching the complete supply network. Customers then have the choice of various fulfillment options. The engine can seamlessly source products from a store in a given radius, have products transferred from a DC, or have them drop-shipped from a manufacturer. The engine also can leverage the benefits of an endless aisle to fulfill orders through the retailer's vendor network.

Retailers have an opportunity to connect with their customers and prove their customer comes first, regardless of the issue. By offering flexibility and options at critical touch points, retailers can continue to build customer loyalty, revenue, and profits. Leveraging automated processes and integration to fulfill the promise wins the customer over. Customers remember good service and will continue their brand loyalty based on the retailer's execution. Is your organization ready to satisfy a disgruntled customer by being ready and able to save-the-sale?

Jim Bengier is Global Retail Industry Executive at Sterling Commerce.