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Start with Customer

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Start with Customer
Start with Customer
HOW DO RETAILERS BEST ADAPT SUPPLY CHAINS TO MEET CUSTOMER DEMAND? CHLOE RIGBY CONSIDERS THE OPTIONS.

Showrooming. It’s a modern-day retail plague. That pesky customer using their smartphone to scan the barcode of an item in-store, checking out the product before, no doubt, buying it cheaper online from a rival that doesn’t have the costs of running a store. So a store-first retailer might think, and with reason. A recent study from retail technology provider Omnico found that one in 10 shoppers had, while standing in one retailer’s store, bought a product from another retailer’s website, using a mobile device.

But consider the scenario from the customer’s point of view, and things might look a little different. Maybe the shopper is checking out reviews, or alternative prices before finally deciding to buy. Maybe it’s out of stock in the store, and the shopper is finding somewhere else to buy an item they need or want to get hold of quickly. Maybe, just maybe, the customer is using their mobile phone to buy the item from the same retailer whose store they’re standing in, in order to get it delivered to their home, rather than carrying it around with them.

Forward-thinking retailers, rather than berating the consumer for shopping differently, outside the model the retail industry developed over many decades, are instead working out how to respond to customer demand in a consumer-driven retail environment – and how to be the retailer that wins the final order. They are following the example of retailers such as Amazon , which has an app enabling shoppers to check stock levels by scanning a product barcode, or Apple , whose sales assistants can check availability in-store and tell shoppers not only whether an item is in stock, but, if not, where it is and how soon it could be with them.

CUSTOMER-POWERED

Such approaches are ultimately in retailers’ own interests, says Paul Bolton, director of products and strategy at multichannel consultancy the Ivis Group.

“These days the supply chain is driven by the customer,” he says. “The reason click and collect is becoming so popular is because it’s adding the convenience of knowing the item is there, reserved or have visibility that it’s there, and I can get it at a time that’s convenient to me.”

That convenience can have an important effect in boosting a retailer’s reputation. Having a reputation for being likely to have items in stock is a great way to bring customers to visit, and to return. “It builds reputation and gives you differentiation in a very crowded market if you are able to make that commitment to the customer in terms of your fulfilment process,” says Bolton.

One key thing that those showrooming shoppers are likely to be checking on their smartphones is stock levels. Craig Sears-Black, UK managing director of Manhattan Associates , says that shoppers can access more information about retail stock levels from their smartphones than many retailers can about their own.

“If every retailer had the same tools at their finger tips that their consumers have they’d be far better placed than they are today,” he says. “We as consumers already have better visibility of supply chain and availability of product than most retailers, though Amazon, eBay and the more advanced online retailers. It will become increasingly important that people are on top of their supply chains.”

If today’s retailers are to be the one the smartphone-wielding browser buys with, the secret may well lie in welcoming showrooming shoppers with open arms – or at least, open wi-fi access – rather than trying to stop them engaging in the kind of behaviours that modern technology makes so easy, and so convenient. Retailers can help them to do that by giving them insights into their supply chains through stock checks from mobile, or from in-store digital screens and displays.

Shoe retailer Schuh reports finding, through customer research, that one of the priorities for its shoppers is for them to be able to ascertain stock levels in the store they’re standing in for themselves. Schuh’s ecommerce head Sean McKee explained more in an Internet Retailing interview ahead of the Internet Retailing Conference 2013. He says: “We asked customers what we could do to enhance their experience, and one message came through. ‘Let me check stock levels for myself in real time. I like your friendly staff and interacting with them but I also get uncomfortable if I have to keep them going to the stock room. Let me do my own checking before I interact with them.’” That’s something the retailer is currently working out how to deliver, and McKee says when it has a solution it will likely be on the customer’s own technology – so that shoppers can use the phone or tablet that they’ve chosen for themselves to accomplish the task.

Other ways in which retailers are bringing technology into stores include enabling shop assistants to check stock levels both in that store and elsewhere in the retail estate. iPad-wielding sales assistants can now offer clientelling solutions that show where an item is available and can order it into store or for home delivery.

This, says Craig Sears-Black, UK managing director at Manhattan Associates, is “the sort of consumer engagement that’s going to set expectations about the supply chain”. He adds: “If you asked the question ‘is this in stock?’ a few years ago you may simply have got the answer ‘yes’ or ‘no’. Today, if the answer is no, a sales assistant can say, ‘I see the store five miles up the road has the product and I can reserve it for you’. That’s true customer value-add and that’s going to increase your sales. That’s using the supply chain to your advantage. The techniques are all about delivery and being able to live up to the promise you made.”

THE MOBILE EFFECT

Retailers that do enable customers to check stock levels and to buy or reserve items over mobile devices are likely to enjoy higher levels of m-commerce sales, perhaps because they are more open to the use of devices in the company’s stores and, indeed, across their retail estate. Argos some years ago pioneered the use of mobile to enable smartphone owners to check stock levels in their nearest store and reserve an item for when they got there through its Check and Reserve app, enabling on-the-go shoppers to ensure a positive outcome to their store visit. Such openness to mobile seems to have paid off: Argos’ latest half-year figures showed that 16 per cent of its overall sales took place over mobile devices in the six months to 26 August 2013. M-commerce sales over the period grew by 124 per cent, compared to the previous year.

Elsewhere, John Lewis , which was the first UK department store to offer free wi-fi to customers visiting its shops, says that more than 40 per cent of its online sales now take place over a mobile device.

Such innovations are encouraging the owners of smartphones and tablets to use their devices to browse online and to complete transactions. Indeed, recent IMRG analysis of its monthly online shopping figures suggest that mobile is currently driving all growth in online shopping, and indeed, in UK retail overall.

All good reasons, then, for retailers to make sure they are engaging with their customers, from whatever device or touchpoint they choose to interact with their brand. As the range of tablet computers broadens, and lately retailers include Argos and Tesco have added own-brand, cheaper tablets to the range of models on offer, many customers are more likely to find these a cost-effective entry point into online shopping on their own terms.

ADAPT TO CUSTOMER BEHAVIOUR

In the future, we will most likely see the retail industry move further towards adapting to customer behaviour. Customers are likely to want to be able to shop online and get deliveries in a more spontaneous manner. Currently, the convenience of online shopping is not only for the connected. It’s also for the organised, who take the time to think ahead about the products they need to buy in order to take advantage of services that offer next-day collection or delivery for orders as late as 10pm. A few are now starting to offer same-day collection and 90-minute delivery for those willing to pay but, in most cases, the store remains the last resort for those who want something now, stock allowing.

“That sort of spontaneity in the supply chain and how you get that is the future that people are looking to,” says Paul Bolton of the Ivis Group. “The question is how can you provide that”. I don’t think anybody has necessarily cracked that yet.

This is all about the sheer unpredictability of the customer, and how retailers can best respond to that. It’s a question tackled by DHL in a recent report, Fashion Unleashed, The Agile Fashion Supply Chain. Report author Lisa Harrington, president of the lharrington group and associate director of the supply-chain management centre at the University of Maryland’s Robert H Smith School of Business, maps a two-tier supply chain that offers different models depending on the items that are being supplied. The efficient supply chain, featuring delivery of globally sourced items to distribution centres via slower more cost-effective transport methods such as road, rail and sea, can be used to keep stores in stock of basic items for which there’s constant demand. In this model inventory is mapped centrally. Meanwhile, a responsive supply chain uses air and express services, local sourcing, decentralised inventory and delivery direct to store to supply fast fashion or seasonal products. Decisions around which supply chain to use can be segmented to fit the characteristics of local consumers.

Taking that on a step, tailored sourcing is used to adapt the supply both to demand and product characteristics, and product postponement sees the final differentiation of products delayed until they are closer to the point of sale. For example, says Harrington, “Benetton was a pioneer in product postponement, producing sweaters in generic grey and dying them the final colour closer to the point of actual demand.” She adds: “Postponement can significantly reduce overall inventory levels and obsolescence, savings that far outweigh any incremental postponement activity costs.” Other innovations include shared deliveries that cut the costs of local store replenishment.

Harrington also points to ways that retailers can use social media and customer feedback to make their supply chains leaner. She cites the example of ModCloth , a US vintage online retailer which uses customer engagement across social media to monitor customer likes and dislikes, and adjusts planning, production and inventory accordingly. A Be the Buyer feature on its website enables visitors to vote on the styles they’d like to see made. The ModCloth analytics team also channels back to the supply chain team the insights it gains into actual customer behaviour and buying, in order to map trends and enable planning.

The retail industry is just at the start of harnessing the supply chain to power multichannel shopping. But as this develops, customers are likely to demand changes that today can only be speculated. When that happens, retailers that have already put customer-centric supply chains in place will start from a position of strength.

SPEAKING FROM EXPERIENCE

DIFFERENT STROKES

“We do see different activity on the mobile site relative to the desktop site. It does stand to reason that the more likely a customer is to be on the go, the more likely local store inventory is of interest to them.”

Sean McKee, head of ecommerce and customer services, Schuh

STAND AND DELIVER

“You really need to make sure you deliver on your promises or consumers will walk.”

Denise Oakley, international marketing director, GXS

CUSTOMER CONTROL

“The customer’s understanding of supply chain is increasing and their expectations of being able to use or control the supply chain is increasing as well. Apple pioneered the control and visibility of the supply chain from a retail point of sale – customers could ask someone in the shop about availability and they would tell them where it was, whether that was in stock, on a truck and in store tomorrow, or if someone else had it. It’s inevitable that the most successful multichannel retailers will follow suit.”

Craig Sears-Black, UK managing director, Manhattan Associates
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