WHAT ARE THE CHALLENGES FACING RETAILERS IN THE MISSION TO HAVE THE RIGHT PRODUCT AVAILABLE TO CUSTOMERS AT THE RIGHT PRICE – AND HOW CAN RETAILERS BEST OVERCOME THESE CHALLENGES? CHLOE RIGBY FINDS OUT.
In today’s want-it-now world, shoppers don’t come back if the item they want to buy is out of stock on a website or in a store. Rather, they’ll hightail it to a competitor where the product is available. The recognition that availability is a crucial point of differentiation between retailers is driving fast change in the industry and, increasingly, merchandisers have a role to play in communicating stock levels to the customer. “People make a purchase decision and want it immediately,” says Denise Oakley, international marketing director of supply-chain integration specialists GXS. “Brand loyalty in general is not as high as it was – people will go to the merchant they want at the time they want. The only exception is the real high-end luxury market, where people want to be on the waiting list for the designer handbag.”THIRD-PARTY SUPPLIERS
Offering wider availability of products is most easily made possible by harnessing the power of drop shipping, where retailers sell an item on their website that is ultimately supplied by a third party.
Traders with unfeasibly large product ranges include Argos, the general merchandiser, offering, at the time of writing, more than 45,000 products to online shoppers, and set to drop another 6,000 into the product range during the Christmas period.
Amazon, by contrast, uses an army of marketplace sellers to help it bridge out-of-stock gaps – and in its quest to fulfil its mission statement of being the earth’s most customer-centric company, offering “anything that anyone might want to buy online”.
Carolyne Turnbull, head of marketing at VirtualStock, whose order management systems enable retailers to offer services from drop shipping to marketplace fulfilment to click and collect, emphasises the importance of the single view of the product in supporting these. “It makes the all-important difference,” she says. “Retailers have complete control and that control allows them to maximise their sales.”
Integrating data from across the order process, she says, “enables retailers to have an end-to-end view of what’s there, what’s available to sell. They know what their drop ship partners are fulfilling and when, and how that order process is proceeding.”SELLING AVAILABILITY
Simply having a product available to buy can be a powerful selling tool in its own right. But there’s plenty of room to refine this tool further. By harnessing the single view of the product in order to understand where all stock is located, retailers can show availability of any given product – both on the search results page, in answer to search enquiries, and next to the product details on the retailer’s own site page. Some retailers go further and show where that stock is, using geolocation data to show the searcher’s nearest store. A detail as seemingly mundane as how many of an item a retailer has in stock, and where they are, can provide a powerful incentive to act for shoppers who are either undecided or inclined to wait before making the purchase.
“Adding the stock status and showing an item is low in stock encourages the user to go and buy it because it won’t be there for ever,” says Allyson Tremblay, UK sales director, at Fredhopper. “This also patches some of the customer service issues that could come when you get to checkout and find it’s actually no longer available.”MANAGE MARGINS
Stock visibility also enables retailers to manage profit margins. Merchandisers can promote and discount items that need to be cleared, while also crossselling complementary, but perhaps full price, items that complete the look – enabling the retailer to achieve a better margin on the basket as a whole.
The earlier in the sales cycle a retailer can sell an item, the higher the margin is likely to be. That’s particularly true for sectors such as fashion where individual items may only be on sale for a few weeks. Pooling inventory, and enabling it to be sold from any location, whether that’s a store or the website, can help maintain profits. Such an approach relies on the single view of the product, and can have a profound effect on sales.
Shoe retailer Schuh’s single view of its products enables it to offer such features as one-hour buy and collect, and to fulfil online orders from store stock. “About five per cent of our store sales are generated every day from product that is somewhere in the business but not in the store at that moment,” says Sean McKee, head of ecommerce at the company. Meanwhile, he says, “about 25 per cent of the orders that we fulfil for our online business are fulfilled in our stores”. The single view of the product, he says, has been important in helping it to sell at full price. “It really has made a difference to us,” he says. “We’re selling right down to the last SKU (stock-keeping unit).” The retailer is now working on enabling customers to check stock levels, something flagged up by customer research as a major priority. “We haven’t worked out how to deliver that yet,” says McKee, “but we will deliver that on the customer’s own technology.”
The single view of the product can also rely on setting safety stock to ensure that traders aren’t selling stock in the store that an online shopper has in their website. “Part of the art of getting this set up right is really understanding how many products could be in someone’s basket at any given time in the store,” says Craig Sears-Black, UK managing director of Manhattan Associates. “It’s essential you’re able to manage that. If you say it’s available somewhere it has to be – that’s the whole point.”CONTROL COSTS
Retailers can also put a cost on availability. An item that’s immediately available can be shipped quickly, for a premium price through next-day or even same-day services. Conversely, sellers can manage costs by making items available through slower shipping services. Drop-shipped items, for example, can take two or three weeks to arrive with the final buyer. Customers who want a specific item and are shopping early may well be prepared to wait. But communicating the message of the long wait with customers early will help manage expectations.
This is an approach honed by flash sales sites such as Vente Privée. Its co-founder, Ilan Benhaim, speaking at the Internet Retailing Conference 2013 (IRC 2013), said the company’s strategy was to avoid stocking goods that don’t sell. It places its order for the goods it sells at the end of its sales, and delivers to customers two weeks after they have bought – but at a profit. Its customers know in advance that they will not receive the items they’ve bought for at least two weeks after they’ve made the purchase. That’s an inconvenience they’re prepared to accept because they perceive that they have got a bargain and because Vente Privée works on a model of scarcity.
Craig Sears-Black of Manhattan Associates points to other examples where retailers “minimise stock holding and maximise the ability to supply the orders”. But, he adds, “The only way of really
doing that in a multichannel environment is to have a single view of the stock, wherever it happens to be held.”MANAGING THE WIDER RANGE
Insights into sales and stock levels can help retailers to manage wide ranges. Dixons Retail analyses its data to balance its core range, which it stocks in its Currys and PC World stores and in its warehouses, and its extended range, which it sells through third-party drop ship suppliers. Some 80 per cent of sales are from the core range, but the extended range offers a wider choice to those that want it. High sales of an item in the extended range can signal the need to bring that item in to the core, stocked, range. Conversely, low sales of a product in the core range can mean that the electricals retailer takes the decision not to keep it in stock. “This is happening on an evolving basis – we’re not just using data to say this is what’s happening on the website or in stores, but actively embedding it in the commercial process, so that we can make informed ranging decisions based on what the customer is looking for or what the customer tells us in the site,” said Jeremy Fennell, ecommerce director at Dixons Retail, speaking at IRC 2013.
Extended range items, he says, are merchandised just as core range items are, but labeled as delivered directly from the manufacturer. “The majority of the traffic that goes to them will be from search,” he says, “either from long-tail search or from search within the site to the product.”
Meanwhile, the retailer also takes stock decisions based on merchandising features such as search. By examining which searches made by shoppers on its sites returned no items, Fennell has taken the decision that Currys should stock sewing machines by Christmas. “This kind of stuff would pass us by in the past,” said Fennell. Customer insight has also helped the retailer to reduce its range in store in order to make more space for customers to move around the store, while also stocking the items that are of most interest.
Sales data can also enable retailers to make decisions not only on whether they stock an item, but where they stock it. Paul Bolton, director of product and corporate strategy at multichannel consultancy the Ivis Group, relates how one retailer decided not to stock swimwear and related holiday items near or in seaside town stores, as it had previously, but to take the bulk of this stock into city centre stores, after learning from sales data that shoppers were buying before departure, rather than on arrival. “However good your supply chain, I think there’s always going to be a need to reanalyse stock and have a way to move it between locations in order to be effective,” he says. “Having visibility of where stock is, and having the process to move it between locations is, I think, critical.”
The role of stock levels in multichannel merchandising has perhaps been less considered in the past. But this is an area set to come to the fore in the months and years to come.
SPEAKING FROM EXPERIENCE
“As we move into the era of recommendations and personalisation there are a lot of decisions being made by merchandisers to push stock they really need to shift – and they do it in a really nice ‘complete the look’ way, or consider this alternative item. Those items are being promoted and they can get rid of inventory that otherwise would go to waste.”
Allyson Tremblay, UK sales director, Fredhopper
“Retailers have been great at looking at their own supply chains, and now they they’re going to look to their partners and third parties as well to have that same improvement.”
Paul Bolton, director of product and corporate strategy, Ivis Group
LEARN FROM DATA
“I’m not interested in extending a huge long tail of goods into a warehouse that sit there and go dusty until one person comes and buys something one day. We’ve used drop ship to offer an extended range online, extend the amount of goods that are available from 11,000 to more like 20,000 lines, then we can sell those lines to customers when and where they want them, and then ship them through the third party to the customer. And we learn so much from that.”
Jeremy Fennell, ecommerce director, Dixons Retail