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.
2. Today’s Agenda & Takeaways
• Statistics
• Terminology
• The New Paradigm of Inventory: Leading Retailers
• Three Dimensions to Consider for the Future
• Key Success Factors
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. “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
6. THE NEW INVENTORY PARADIGM, THE
“VIRTUAL STOCKROOM:” RETAILER
EXAMPLES
Inventory Flow Innovations
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. 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. Needlifestyle.com
• 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. 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. 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 Shop.org Case Study: Organization
Design Supports Superior Cross Channel Customer
Experience
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. 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. 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. In development of an inventory model that will support
your brand’s customer experience, consider three
dimensions…
16. 1. Plan = Strategy = Plan
2. The Inventory Sharing Model
3. The New Paradigm: e-
Commerce = Brick & Mortar =
e-Commerce
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. 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. 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. 2. Iterate with All Stakeholders.
Planning
Review /
Finalize
Merchants
(e-Commerce and
Stores)
Demand
Planning
Financial
Planning
22. 3. Review Trends and Adjust
Seasonal
Quarterly
MONTHLY
Monthly
reforecasting of key
metrics; ensure
inventory levels are
within expectations
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. 6. Use the Proper Tools
Data Warehouse
Reporting
Clean Data
Planning
SingleSource
Clustering
Analytics
Forecasting
Inventory Visibility
Integration
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.
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. 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. 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. 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. 3. THE NEW PARADIGM: BRICK &
MORTAR = E-COMMERCE = BRICK &
MORTAR
Inventory Flow Innovations
33. The e-Commerce and Brick & Mortar “Mash-Up”
SOCIAL GATHERING SPOT
PRODUCTSHOWROOM
TOUCH
&FEEL
PERSONAL EXPERTISE
BRANDBUILDER
MARKETENTRYSTRATEGY
DETAILED PRODUCT INFORMATION
IMMEDIACY OF
E-COMMERCE
CUSTOMER
ACQUISITION
SINGULAR
INVENTORY
EXPANDED
SELECTION
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!
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. 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. 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. “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. Dwight D. Hill
Founder, Managing Director
The Retail Advisory, LLC
214.755.6654
dhill@theretailadvisory.com
www.theretailadvisory.com