Following is Part 1 of the Retail TouchPoints feature focused on inventory best practices. This article will share insights around the current state of omnichannel inventory fulfillment, as well as key challenges retailers face in ensuring inventory visibility across all touch points. Part 2 of the feature will publish in the Sept. 17 newsletter.
Shoppers today are hopping from their smartphones and tablets, to brick-and-mortar stores and online pure plays such as Amazon.com throughout the day to research items and complete purchases.
As customers make purchases across channels, they expect retailers to keep pace by offering more flexible delivery and return options, according to the 2013 UPS Pulse Of The Online Shopper survey.
Almost two thirds (62%) of consumers want to be able to buy items online and complete returns in a store, while 44% want the option of buying items online and picking them up in a store. These factors drive consumers’ likelihood to shop with a specific retailer across channels.
With the advent and continual evolution of the omnichannel consumer, retailers across verticals are revising their inventory management and delivery processes to align with new demands.
A vast majority of retailers, in fact, are working toward providing consumers with more options for ordering and receiving items, according to the annual Store Operations Survey from Retail TouchPoints.
Retailers currently offer, or plan to offer, the following services:
- Buy in-store, return to another store (72%);
- Buy online, pick up in-store (60%);
- Buy via mobile or web site in-store, ship to home (59%);
- Buy via mobile or web site in-store, pick up in-store (58%); and
- Buy online, return to store (57%).
Target, for example, recently announced plans to allow consumers to buy online and pick up in-store. This option will be available in 1,800 stores across the U.S. in time for the 2013 holiday season.
“We continue to invest to further integrate the shopping experience across channels based on successful results from our team member test of buy online and pick up in-store, and we’re moving quickly to begin offering this option for guests in this third quarter,” said Kathy Tesija, EVP of Merchandising for Target, during the retailer’s Q2 earnings call. She added that Target will test other flexible inventory strategies, such as the ability to pay in one store and pick up in another.
However, the overall satisfaction rates for retailers’ current processes are somewhat low, the UPS survey asserted. Respondents gave a 55% satisfaction rating when asked to share retailers’ ability to offer pick-up at a nearby location. Shoppers also gave low satisfaction ratings when asked about flexibility of delivery date (49%) and time (44%).
Ensuring Real-Time Inventory Visibility Across All Channels
To create more seamless and enjoyable brand experiences, retailers must break down organizational silos and ensure inventory levels, pricing, offers and overall demand are available and accessible across all channels.
“From a high level, retailers face several challenges when customers come at them from multiple sides of the business, whether it’s online, in stores or through mobile devices,” said Nick D’Alessio, Global Practice Leader for the retail division of Zebra Technologies. “Retailers are trying to blend these channels and the true nirvana is understanding customers, what they buy and from which channels.”
Overall, retailers are challenged to integrate their merchandising, inventory and marketing systems, because they are “still split between the online and brick-and-mortar world,” D’Alessio added. “Tying these two channels together has created challenges for retailers with legacy systems.”
In fact, 42% of retailers say a top inhibitor of “omnichannel excellence” is that inventory and order management are not integrated and accessible across all channels, according to Retail Systems Research (RSR). The Omni-Channel 2013: The Long Road To Adoption report, however, indicated that 75% of retailers find omnichannel fulfillment to be very important.
“Brick-and-mortar retailers must embrace new browsing and buying behaviors, especially showrooming, as an opportunity to engage in-store shoppers, and in turn, grow revenue and loyalty both online and in physical channels,” said Scott Welty, Global VP of Retail Industry Strategy at JDA Software. However, this will require “better trained and equipped store associates with assisted-selling tools, new service-based store layouts with curated assortments, and greater store autonomy to leverage local events, negotiate prices, and cater to local demographics.”
Combating The Integration Challenge
Retailers can address organizational challenges and integrate all commerce channels by “taking a larger focus on managing inventory holistically across the enterprise,” according to Welty. Moreover, retailers must “create pools of cross-channel inventory, and reorganize teams that were once segregated into a cohesive business unit for all channels.”
Once barriers are eliminated across the enterprise, retailers can better track and understand demand across all brick-and-mortar stores, as well as online. From there, retailers can create a unified forecast and ensure visibility across all channels, something only best-in-class organizations have achieved.
Through a comparison of retail “winners” and “laggards,” RSR uncovered that enterprise-wide inventory visibility is a key differentiator in omnichannel execution. Approximately 63% of “winners” said they have access to inventory across the entire enterprise, while only 25% of “laggards” are in the same position, according to the study. Poor visibility “prevents ‘laggards’ from fulfilling non-store customer orders from store inventory,” the report revealed, “a key capability to a successful omnichannel offering.”
In addition to facing technological challenges, retailers that want to implement more flexible buying and delivery strategies also must reconsider how to attribute sales.
Currently, more than half of retailers (59.8%) only assign credit to the store for items purchased in a physical store, according to the RTP StoreOps Survey. One third of retailers (33.3%) assign credit to the store for sales completed online or via mobile and picked up in a store.
“Fulfilling online orders from stores raises new issues such as not cannibalizing inventory at the expense of foot traffic,” Welty explained. “In addition, retailers must know how to measure and compensate store associates and managers for sales made online, but fulfilled in the store. They have to know where to assign revenue.”
Macy’s is one retailer investing in blending inventory information in stores, online and via mobile. During a presentation at the Global Retailing Conference, Macy’s CEO Terry Lundgren noted that although omnichannel excellence is a long-standing goal, it is something the retailer has “not been successful yet,” RetailWire reported in a recent article.
However, Macy’s is in the process of pinpointing the location of every SKU across 840 stores and distribution centers, according to the article.
“By the end of this year, 500 stores will be ready to pick online orders, and 90% of our inventory will be visible to our associates on hand-held devices,” Lundgren said. As a result, store employees will be equipped to instantly check the availability of products across channels, complete orders and ensure seamless delivery for shoppers.
Part 2 of the Inventory Best Practices feature will publish in the Sept. 17 newsletter.