Written by Hannah Prevett
The quality of customer service afforded by pureplays has led to the situation whereby multi-channel retailers are playing catch-up on inventory control, says Hannah Prevett
Any retailer will tell you that keeping track of stock has never been easy. But they will also acknowledge that inventory control is more challenging than ever because of the
evolution of customers into multi-channel shoppers. This change in the retail environment means that consumers will now research, purchase and return merchandise through multiple mediums - ranging from traditional bricks and mortar stores, to e-commerce websites, and catalogues or call centres. And while this new breadth of choice is good news for the consumer - not to mention for the retailer, as research has shown that multi-channel customers spend more - the inventory control and replenishment issues can be a headache.
“Pureplay retailers have completely changed the way that inventory management is handled, leaving aspiring multi-channels playing catch-up,” explains Hosein Moghaddas, managing director at GSI Commerce. “With their one channel system, pureplay retailers do not need to worry about the complications that come with the product making its way through various stakeholders. Instead a broad range of stock can be easily and inexpensively stored, exclusively for the choice, prices and speed that customers have come to expect of buying online.”
And the cost of not meeting customers’ growing expectations can be monumental. “Faced with an out-of-stock product, consumers behave in a number of ways,” explains Melissa Cupis, UK marketing manager at AGR Inventory. None of these actions spell good news for the retailer. More than a third will buy a different brand and over a fifth will go to a different store. What’s more, nine per cent won’t buy anything at all.
Finding a product is out-of-stock isn’t the only problem retailers face: on the flipside, overstocking is the other major pitfall of poor inventory management. “Simply ordering excessive amounts of inventory in order to guarantee no out-of-stock is sure to have massive implications throughout your business,” says Cupis. Indeed, ordering too much stock comes with its own problems - and not just the initial outlay for the inventory itself. “Excess stock is a core business expense that also takes up time and space in the warehouse,” Cupis continues.
Simon Clarke, who is now the IT director at French high-end fashion retailer Faconnable, has battled problems with inventory visibility at many of his other roles at British retailers including the likes of Tesco, Mothercare, and, most recently, Asprey. He agrees that the advent of the internet has brought added pressures. “It’s made it more important that the inventory is accurate,” he says. He also says that because people have such a high expectation of e-tailing, this is then replicated throughout the business, creating what he calls a ‘halo effect.’ “Customers can get very cross if you can’t tell them whether or not an item’s in stock before they go to the store.”
So how are retailers, like Faconnable, tackling the problem? One of the options Clarke is currently considering is RFID technology, which, he says, will save time and money. It may come as a surprise to some that the initial cost isn’t prohibitive. He expects the in-store systems to cost around £1,000 and then the tags will come in at about 10p each. “That may sound quite expensive, but then you have to look at the impact of not having the right stock in-store - all of a sudden it sounds quite cheap.”
The ROI is attractive too, he says. And you lose all of the costs associated with annual or seasonal stocktakes. “A small retailer will probably close the store one day a year to count all of the stock,’” he argues.
This isn’t to say that RFID isn’t without its problems. Some customers do not like the idea of products being tagged - and not being deactivated when they leave the store. “If you walk into a store and you are a size XXXL, do you really want people to know that?” asks Clarke. But retailers are finding their own ways to get around these privacy concerns. “Decathlon, for example, has gone down the route of deactivating the RFID chips when people leave the store,” he explains.
Inventory-wise, RFID isn’t entirely foolproof either. As some of the chips are quite low-powered, this means that some of them struggle to accurately count stock which is still packed in boxes. The answer? “The only way you can get round it is by unpacking the box, and that way you lose some of the productivity gains,” says Clarke.
But RFID isn’t the only option. Companies such as SAF have devised software which uses data about past consumer buying behaviour to help retailers forecast their stock requirements. Such companies will promise that replenishment software can assure proper inventory levels and increase cash flow by enabling retailers, wholesalers, and their trading partners to manage inventory replenishment. It also lifts some of the burdens from shop staff. This isn’t to totally eliminate staff intervention, but just to keep it to a minimum, says Udo Meyzis, CEO at SAF. “The object is not to eliminate human input - that would be catastrophic - but to allow staff to handle replenishment with an emphasis on quality rather than quantity and broaden their scope of duties.” Needless to say, this all bodes pretty well for customer service too, not to mention the bottom line.
But conventional replenishment software hasn’t been without its problems. Critics have worried about the accuracy of the forecasting systems. Yet Meyzis says that it all hinges on the quality and depth of the data. “If we have access to the store-level detail, then the forecasting accuracy can be very high,” he explains.
And retailers do not need to worry about long and complicated implementations of new systems either. According to Meyzis, ‘there is little to fear’ in terms of disruption to the business during roll-out. He sites the case of client Deutsche Woolworth where all 360 stores were activated overnight. Other retailers prefer to instate the processes on a store-by-store basis, but “almost all scenarios are possible.”