By Yan Krupnik, Retalon
The holiday season: It is either the most stressful and costly time of the year for retailers or a most exciting and profitable one. Really, it all depends on how prepared you are for the uniqueness of this season and how strategic you are in your approach to tackling it.
Leading up to the holidays — and after the holidays — there are generally a ton of promotional events (Thanksgiving sales to Black Friday and Cyber Week specials to Christmas, New Year and beyond). But, for far too long, retailers have been planning, analyzing, and running promotions and marketing separately from supply chain management.
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Because of this, they often don’t order the right amount of inventory to run successful promotions, ordering too much or too little, and they also don’t account for important factors such as product cannibalization — the idea that if I promote Product A it may boost sales for that product, but consequently sales for Product B will drop. In that scenario, retailers need to ask themselves if it’s profitable overall when accounting for any cannibalization taking place.
Also, stores can have very different attributes that make it tough to manage inventory across the board. Factors such as geo-demographic diversity, store size/capacity, different carrying costs, demand and online ordering from the store all impact how much inventory it’s necessary to have in stock.
On top of all this, consumers have changed the way they shop for holiday deals. They now review, compare, and shop online and through mobile. Retailers are scrambling to stay connected to shoppers through all their channels to make sure they fulfill sales in the most cost-effective and convenient way possible.
So, what is the solution for ensuring that inventory is managed across all retail locations during sweeping holiday promotions? More and more retailers are using predictive analytics to integrate marketing and promotions with supply chain and inventory management. These intelligent solutions plug right into their existing ERP systems.
Connecting The Dots With Predictive Analytics
Predictive analytics help retailers better manage inventory amid the holidays, by building an accurate demand forecast that accounts for all channels and their inter-relations within the business. In short, nothing is working independently or in a silo. Connecting promotions with replenishment, retailers can bring the right amount of inventory to the right stores to support promotions.
Also, by measuring media types and promotional uplifts, a predictive analytics-based system can suggest what kind of media type or promotion will actually boost sales for a particular product or store. It will automatically look at the effect on other products, among other things to ensure the promotion is actually a profitable one. Of course, a promotion that causes a retailer to lose money isn’t a very good one to run.
Finally, predictive analytics systems use machine learning and evolve on the go, creating increasingly more accurate algorithms and learning how customers and the business respond to certain promotions to make them more optimal in the future.
The Takeaway
Here’s a quick snapshot of why more retailers leverage predictive analytics:
- Higher and maintained in-stock percentage;
- Maximized ROI on promotions;
- Balance assortment and inventory levels in all stores;
- Run marketing and promotions through optimal media types; and
- Proactively have the right products at the right stores to support promotions.
If by January you’re one of those retailers scratching your head because you have a ton of inventory that needs to get out the door, that’s okay. It happens. Just ask Santa for a retail predictive analytics solution next year.
Yan Krupnik is the Business Development Manager at Retalon, a provider of predictive analytics for the retail industry. Since 2002, Retalon has optimized pricing, inventory management, merchandising, planning and marketing operations for retail organizations in a variety of industries. Retalon products range from task-oriented solutions to a common analytic platform, resulting in tangible optimization of the supply chain and significant measurable benefits for the entire organization.
