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Leading Inventory Innovations Within Multi-Channel Retail


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Merchandise availability continues to be one of the most important challenges within retailers today. As the customer is demanding retailers provide a consistent experience across all channels, retailers are forced to innovate and redefine how merchandise is distributed to customers in an omni-channel or digitally converging world. This presentation explores specific areas of inventory management, including planning, visibility, and how the lines are blurring between e-commerce and brick & mortar. Within are tenets that outline best practices, and a group of retailers that stand out as harbingers of the future of inventory management.

Published in: Retail, Business, Technology
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Leading Inventory Innovations Within Multi-Channel Retail

  1. 1. Leading Inventory Innovations Within Multi-Channel Retail Dwight D. Hill The Retail Advisory, LLC May 2014
  2. 2. Today’s Agenda & Takeaways • Statistics • Terminology • The New Paradigm of Inventory: Leading Retailers • Three Dimensions to Consider for the Future • Key Success Factors
  3. 3. Recent Statistics 0 0.005 0.01 0.015 0.02 0.025 0.03 0.035 0.04 0.045 Retail Sales M o M Y o Y • Lean inventory management is job #1 in this economic environment • Q4 2013: – 50% off was the new 25% off, leading to near disastrous profit declines for many retailers – Compressed shopping season Source: NRF
  4. 4. Terminology Omni-channel = An often overused term in today’s retail environment, meant to define the merging of retail channels. Successful retailers are focusing not on the channels as an end to themselves, but on their desired Customer Experience.
  5. 5. “Customers don’t care about multi-channel. Whatever channel they use must be world class.” - Jamie Nordstrom, President of Nordstrom Direct, at the Shop.Org summit 2012
  7. 7. Zulily • Top brands • 72-hour to one day sales • Extremely limited inventory • Merchandise ordered only AFTER all customer orders are in • Some merchandise isn’t even produced until orders are placed • Scalable to large retailers?
  8. 8. ModCloth • “Be the Buyer” feature • Allows customers to vote and provide feedback on new merchandise they would like to see • Notifies customers when merchandise is available • For a fast fashion retailer, a customer-centered way to stay on trend and keep up with customer preferences • A refresh of the Zara model?
  9. 9. • Men’s apparel startup in its first year • Highly edited or “curated” assortment – one outfit is presented each month • Merchandise is presented with a story – lifestyle orientation • Most items sell out within the first week • Scalable? At what point is this personal touch lost?
  10. 10. Macy’s • Centralized, yet decentralized inventory model • “My Macy’s”: 69 District teams consisting of seasoned buying and planning executives, with buying authority over 8-15 stores • Be careful! Hard to recover if you miss, and buying power is minimized!
  11. 11. The Container Store • View all channels within the same context – channel agnostic, with an intense focus on the customer • Early leader of full visibility of inventory throughout the supply chain • Merchandising works across channels with the same team – ensures consistency • Key inventory coordinator roles elevate inventory awareness for “Click & Pick Up” Orders Source - 2013 Case Study: Organization Design Supports Superior Cross Channel Customer Experience
  12. 12. The Gap • Creating a singular view of inventory • Algorithm allows customers to buy merchandise from store inventory • Only select stores are set up to ship from store • Customers can also see which store has the merchandise in stock
  13. 13. Marks & Spencer • E-boutique concept store in Amsterdam, single location • Primary focus: cross- channel customer • Early stage market entry, combining the e- commerce and brick & mortar experience, minimizing inventory investment – small store, large (online) selection • Unique combination of food and fashion, a growing trend in The Netherlands
  14. 14. Hointer • Retailer, or retail technology innovator? BOTH! • Every customer has access to every item in every store • Micro-warehouses in stores account for only 10% of space • Dynamic inventory pricing, matching Amazon • Learn more…
  15. 15. In development of an inventory model that will support your brand’s customer experience, consider three dimensions…
  16. 16. 1. Plan = Strategy = Plan 2. The Inventory Sharing Model 3. The New Paradigm: e- Commerce = Brick & Mortar = e-Commerce
  17. 17. 1. PLAN=STRATEGY=PLAN Inventory Flow Innovations
  18. 18. Merchandise Planning: There is no one size fits all approach, but challenges managing multiple channels call for a back to basics framework and a new level of integration.
  19. 19. The Strain of Multiple Channels • Extensions of inventory across channels can strain planning teams and fragment inventory budgets • Inventory teams may not have the bandwidth to understand dynamics of each channel – Seasonal differences – Customer variance – Promotional cadence
  20. 20. 1. Establish Consistency. INPUTS: Customer, Industry, Hist ory OUTPUTS: Assortment Plan, Pricin g, OTB, Flo w Timing ENABLERS: Clear KPI’s, Participation from All Stakeholders Thoughtful Analysis
  21. 21. 2. Iterate with All Stakeholders. Planning Review / Finalize Merchants (e-Commerce and Stores) Demand Planning Financial Planning
  22. 22. 3. Review Trends and Adjust Seasonal Quarterly MONTHLY Monthly reforecasting of key metrics; ensure inventory levels are within expectations
  23. 23. 4. Establish a Planning Organization E-Commerce Leader E-Commerce Planning SVP Planning Stores Planning Option 1: Resides in E- Commerce Option 2: Integrated with Select Dedicated Resources E-Commerce Leader E-Commerce Planning SVP Planning Stores Planning
  24. 24. 5. Remember the Exit Strategy • Plan for each item • Slow turn and discontinued merchandise is an unnecessary drag on working capital and open to buy • Price and position for rapid movement • New merchandise front and center
  25. 25. 6. Use the Proper Tools Data Warehouse Reporting Clean Data Planning SingleSource Clustering Analytics Forecasting Inventory Visibility Integration
  26. 26. Polling Question 1. • We have a planning process, and… • Possible answers: – …it works great for our business. – …the process needs some work as we service our customers in a new way. – …the process works, but new technology is a must for us to service our customers.
  27. 27. 2. INVENTORY: IT’S A SHARED ASSET! Inventory Flow Innovations
  28. 28. Questions and Decisions • To begin the journey of a shared inventory model, first consider how inventory should be held between Stores and e-Commerce: – In a SINGLE repository? – Is it DIVIDED among channels? – …or is it HYBRID of the two? • Decision factors for this strategy will include service promise, technology capabilities, and organization structure
  29. 29. Once the Inventory Repository Strategy is Developed, Get to “Brass Tacks” 1. How do you establish the governance model (organization, KPI’s, inc entive structure)? 2. How will accuracy be maintained? 3. Are the processes and tools aligned with the chosen strategy?
  30. 30. Retailers Implementing a Singular View of Inventory • Recently announced single-silo inventory strategy across channels • Nordstrom increased turns from 4.84 to 5.41 by sharing inventory across channels according to a recent Kurt Salmon study
  31. 31. Polling Question 2. • My company’s inventory model is... • Possible answers: – …shared and visible across all channels – …not shared yet across channels, but we’re working on it – …under definition, as we decide the best path to service our customer – …just fine as is!
  32. 32. 3. THE NEW PARADIGM: BRICK & MORTAR = E-COMMERCE = BRICK & MORTAR Inventory Flow Innovations
  34. 34. BONOBOS • Merging brick & mortar and e-commerce • “Guideshops” allow customers to try on in store, confirm fit, then instantly order through a touch screen device • Efficient use of limited real estate!
  35. 35. Warby Parker
  36. 36. The e-Commerce / Brick & Mortar Mash up Can be Problematic However Retailers transitioning stores to distribution “hubs” must take on a great deal of process and training to prepare their store associates! Laura Stevens / The Wall Street Journal
  37. 37. Polling Question 3. • The trend to merge the e-commerce and store experiences is… – …a strategic direction for my company – …a strategy my company is only considering now for new or existing stores – …not a strategic direction for my company
  38. 38. Key Success Factors 1. Develop a flexible planning process that is responsive to multiple channels. 2. Create an inventory model that supports your brand promise. 3. Consider integration of your e-commerce and brick & mortar experiences. 4. Gain an understanding of and maintain the Customer’s point of view.
  39. 39. “Shoppers may be interacting with brands on new platforms, but they still expect the same positive browsing and buying journeys from brands that they always have demanded. As marketers, we need to make sure we remain focused on putting the customer experience first, whether or not we use the word ‘Omni channel.’” - Daniel Sakrowitz, VP e-Commerce - Loehmann’s in an interview with Retail TouchPoints – “Analyzing the Omnichannel Consumer”
  40. 40. Dwight D. Hill Founder, Managing Director The Retail Advisory, LLC 214.755.6654