The retail industry is at a crossroad. We've discussed omnichannel behavior for some time now -- both from a consumer and organizational perspective -- but we need to turn that discussion into strategy and action. Retailers are now challenged to use insight from data created across these channels to drive better business performance and meet customer expectations. Technology is they key to enabling this.
Nowhere has the explosion of omnichannel been felt more deeply than retail inventory. Monitoring, moving and replenishing stock was relatively simple when the only end point was the physical store network. But consumers now discover, browse and buy from retailers through a variety of channels -- physical, mobile, online -- through marketplaces and from Drop Ship Vendors (DSVs), which is creating more range, storage and fulfillment options than ever before.
The Retailer's Headache
Finding the optimum product selection and quantity to offer customers online and in-store is a trial in itself. Once you add in the ability for customers to place orders and return items across different channels, it becomes infinitely harder to know where there is surplus stock and insufficient supply.
Determining how much should be made available and where is a major challenge. Too much and it doesn't sell and has to be marked down. Too little and you’re out of stock with lost sales and lost customers. Too much in one place and too little in another just compounds the problem. It is this headache -- and its associated costs -- that means optimizing inventory and achieving flexible fulfillment in the omnichannel world is the next major imperative for retailers.
Creating Hurdles for Customers
Traditionally, businesses have used Point of Sale (PoS) systems to manage in-store transactions and local product inventory. However, when those businesses embraced online shopping, they added a separate solution to control e-commerce and warehouse inventory, and these two systems were rarely integrated.
The problem with this approach is that retailers are running parallel channels, not an omnichannel solution, which leads to frustrating situations for the consumer. For instance, they attempt to make a store-based purchase but leave empty handed as the item is out of stock, even though it is available at a nearby outlet or could be ordered online for collection in-store. This event is more disheartening if they attempted to look up the product’s availability online before making the trip, but were unable to access the information they required. Then there are customers who bring back an item to the store but are told they must return it online because that’s where they purchased it. The story goes on -- and is hardly likely create new ambassadors for your brand.
Delivering a satisfactory customer experience in the above scenarios is made harder still because products don’t stay still. Omnichannel retail has created a scenario in which items can be stored, delivered and returned to multiple locations, which generates increased complexity, labour and delivery costs within the fulfilment process.
Create a Unified View of Inventory
These are the challenges, but how do you tackle them and integrate inventory information in every channel and across the length of the supply chain? Even the most innovative tracking solutions such as inserting Radio Frequency Identification (RFID) tags into labels cannot capture the journey of stock between manufacturers and warehouses, stores and shop floors without the data collection systems behind each channel being integrated across each product’s complete journey. While the option exists to try extending the existing PoS or Enterprise Resource Planning (ERP) system, many of those in place are too complex or fragile to risk being disturbed. The timescales for replacing them are too glacial to meet the imperative of a scalable answer to today’s inventory dilemma; and too inflexible to adapt to further developments in the future.
As a result, many retailers are looking towards an Order Management System (OMS) to create a unified view of their inventory data, an omnichannel platform from which they can make strategic decisions. Furthermore they are looking to Software-as-a-Service (SaaS) and a managed solution to harness their data streams and deliver results in a rapid timescale. With this in place, omnichannel retailers can use holistic, real time information to make insight-driven decisions and accurately optimize their return on inventory.
Whether you choose an OMS or not, retailers cannot underestimate the importance of integrated channel data. The consumer is driving retail in new and unknown directions, but using technology to generate complete visibility through a single solution enables you to respond dynamically to this unpredictable behavior, wherever it happens. By doing this you can improve customer satisfaction, reduce mark downs or wasted stock and create an inventory model with the potential to embrace future consumer behavior, whatever form it will take.