The Time for Retailers to Take Stock Is Now

6/26/2017
Stock management often comes up in conversations about retail, but it's never really been a headline-grabber. You could categorize it as a low-level, guilt-invoking irritant because there is always something more pressing that gets in the way. In other words:
  
1. It's boring
2. It's really difficult
3. There's always something higher up the priority list
    
The priority point seems to hold true at all levels of an organization. It's a recognized issue for CEOs, but not as high up as "our store sales are dropping 5 percent YoY" or "our main supplier in China has gone bust so we can't manufacture half of next season's stock." So there is rarely substantial budgetary or resource allocation made available to tackle the issue from the upper echelons. The same sentiment then seems to trickle down through the organizational layers. 
     
Whether retailers want to anticipate buying patterns, maximize secondary spend or create long-term loyalties that will revolutionize priorities for location and marketing spend, the fundamental technology choices they make in the next few months can create ripples, then waves, with dramatic (but positive) consequences for all of the retailer's aisles. Every revolution is a move between the future and the past, so it's important to learn from existing systems to create change.
     
Historically, retail data has been produced to inform two primary areas of the head office: the finance director, to inform profitability and the important bottom line, and, separately, the operations teams, to ensure delivery of the right product, in the right place, at the right time.
     
That approach has served a purpose, but change is coming and it's being driven by the customer. Retailers unwilling to embrace that change risk losing sales on an unprecedented scale to competitors who are willing to try something different, to step into the unknown where they're willing to learn.
     
Our experience shows that many retailers continue to use historical data. This is sometimes six months out of date, due to ageing or inefficient data capture and processing. They then use systems that don't communicate fast enough to make vital forward-looking decisions, but rather only ever useful as an indicator of past behaviors.

Essentially, intelligence that started out as "real time and ready to roll" has turned into "aged and ready to rot." It can't help you decide what stock to put on the shelves in the morning to maximize sales that day. In fact, the figures probably won't reveal with any degree of certainty what stock there is on those shelves in the first place. That delayed process, in itself, won't lead to an all-out failure of the business. But it will lead to a gradual degradation of customer experience.
    
The challenge now is for retailers to harness relevance for the benefits of the customers they serve.
         
First, just to reiterate, the data has to be real-time. And second, it has to be integrated across channels. The dream is to be able to offer the customer an item-level stock look-up for any store they want, via any channel, with 100 percent confidence that the data is accurate and up-to-date. Going further would be the ability to pinpoint exactly where an item is, in real time: no more searching through the stock room for that last pair of size fives. And then, retailers can use the data being gathered to build forecasts and propensity models: for example, to predict how many of each item will be sold in a particular location or channel; and to look at what type of customer behavior indicates that a purchase is likely, and to what level of confidence.
   
In the premium and luxury spaces, it could also mean the ability for customers to request specific items to be put aside for them to try in-store, and then for these items to be removed from the available stock for a defined period. It could also mean using digitally-enabled mirrors in fitting rooms to suggest complementary items that are in-stock in the customer's size.
    
For retail organizations themselves, the vision is to remove the need for manual stock counts, reconciliations and ordering as well as having to contact different stores manually to track down specific items.
   
So who's doing it right?     
An example of a retailer doing it right in a way more immediately clear to the customer is Marks & Spencer. It is possible to search for a specific item on the M&S website down to SKU level at any given store: customers can search on whether an exact garment is in stock, in their size, in a range of stores around a postcode or location. Over a decade, M&S has gradually implemented radio frequency identification (RFID) throughout its supply chain, and they now state that they have "100-percent RFID adoption across their apparel and general merchandise supply chain."  M&S claims that this has helped to improve inventory accuracy by up to 50 percent and to cut out-of-stock items by 30 percent to 40 percent.
    
On a smaller scale, the fashion retailer AllSaints has implemented a stock look-up tool for staff. Whilst the brand has not shouted about this publicly, the understanding is that it's a home-grown, app-based tool that cuts out the unnecessary administrative overheads linked to phoning around different stores to locate one item.
    
Achieving the vision for stock optimization is intrinsically linked with merchandising, allocation, planning, the supply chain as a whole – and even other elements such as design. The key is to understand that optimizing stock needs to take both the organization's and the customers' needs into account. It is about having the right infrastructure, design and mathematical models in place to predict and be responsive to customers' behaviour; and meet their needs and desires accordingly. To go further, a really successful retail business will have the power to understand what a customer might be tempted to buy, and to ensure that item is in stock and in front of the right customer, before the customer even realizes it her/himself.  
    
The retail sector is no longer about the means of production – it's all about the means of consumption. And the more we know about the way our products are consumed, the more we can sell.
    
CMOs and CIOs, usually positions with very different mindsets, must come together to squeeze traditional data sets, align them with future communications and make information available for retailers to use to build services fit for the future.
    
When the right people in the business have up-to-the second data, everyone's response times and decision-making are better. We live in an age where we're reverse-engineering our companies to meet consumer demand. And we're seeing retail sector early birds catch the worms with style.
    
The future for retail is dazzling, and one thing is sure: that a dazzling future belongs to retailers that design and develop data capture to create success rather than to measure it.
   
  
Kirstin Howard leads the fashion and retail sector at Valtech, the global digital transformation agency.


 

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