Archive for the 'Retail technology' Category

How omnichannel makes inventory management tougher

RetailWire panelists recently had plenty to say about the supply-chain challenges triggered by stores’ push into omnichannel programs. Here’s my brief comment:

One cause of volatility is the growth of “ship from store” fulfillment of e-commerce orders (rather than shipping from a dedicated distribution center). This makes it harder to track sales and inventories at the individual location level, and makes replenishment more unpredictable. If e-commerce order fulfillment is totally randomized from one brick-and-mortar location to another (depending on who has the goods in stock and the costs of shipping), the customer looking for something on an actual store visit is more likely to be disappointed.

And here’s an additional comment on the same topic, specific to Target’s challenges:

Given Target’s spotty history of in-stock rates in its brick and mortar stores, there is a risk involved in depending too heavily on “ship from store.” As the Braintrust discussed a week ago, using stores as mini-distribution centers makes it tougher to assess actual demand in a given location accurately — in turn making replenishment more unpredictable. So if the “flow center” concept helps Target address this problem…good idea and worth rolling out to other regions.

And, finally, a comment about how Best Buy is successfully addressing the same issues:

Demand planning has become more complicated with the onset of omnichannel initiatives like “Buy online – pickup in store” and “Ship from store.” It makes forecasting by location more difficult if physical stores are also being used as mini-warehouses. Retailers run the risk of alienating customers who have made the effort to shop at a physical store, if they can’t find what they want in stock.

Best Buy has long been a leader in helping customers use the website to identify in-stock levels at their nearest store. But the company obviously decided that this wasn’t enough, and only a boost in stock levels would drive more sales. Retailers often get rewarded by Wall Street for driving down their comp-store inventories, but perhaps Best Buy’s results will point in a smarter direction.

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Who’s next for cashier-less checkout?

RetailWire panelists speculated recently about how long it will take for the Amazon Go experiment to be adopted by other retailers. Here’s my brief take on the issue:

Some stores will never be suited for a cashier-less system (most obviously, retailers like Nordstrom) but it has application to plenty of other stores. It’s a question of scale and how long it will take for enough early adapters to drive the cost of these systems down for everybody else. Think about the evolution of RFID: It’s been hailed as the next big thing in inventory management but has taken seemingly forever for even big national chains to adopt the technology. I don’t expect this to be any different given the short-term capital expense involved.

Amazon Go…it’s a go!

After a long period of testing, Amazon Go is finally opening its doors to the public. Its first C-store location in Seattle has already received a lot of attention for its technological leap, where the shopper can walk out the door and pay for purchases without stopping at a register. Here’s my comment on RetailWire:

I assume the long gestation period was needed to test not only the technology but also the merchandise content. From the descriptions of Amazon Go, it is more focused on fresh and ready-to-eat food than a typical C-store and devotes less space to categories like candy, chips and so forth. It will be interesting to read some on-the-ground reporting about what the store actually looks and feels like.

I expect Amazon to be patient with the concept, because some customers simply won’t be comfortable right away with a cashier-less environment. At least for now, human interaction in any kind of store (including a C-store) is part of the equation unless you’re an early adapter of the Amazon Go tech experience.

Retailers can and must plan for the weather

An interesting discussion at RetailWire about whether retailers can plan for weather variations from year to year or from region to region. Despite several myths on the topic, there was strong consensus that it can and should be part of the planning process. My take:

You can and should plan for the weather, despite what “myth 1” says. It may not be possible to project exactly where or when above- or below-average temperatures will hit (even using long-range forecasting tools), However, it’s certainly possible to project total seasonal buys of categories like gloves, coats, etc. based on three-year or five-year averages. It’s a common mistake to base this year’s buy only on last year’s sales data — which may overstate or understate demand based on exceptionally strong or poor sales results.

It’s also critical for retailers operating nationally to be as flexible as possible about reordering and/or canceling goods, and using the tools at their disposal to make the smartest possible allocation decisions as close to need as possible.

Online shopping: Mobile or laptop?

Online shopping is migrating rapidly from desktops and laptops to mobile devices. On RetailWire, panelists recently discussed this trend:

The answer to the question depends on which retailer you’re talking about. Amazon (for example) makes the process of buying directly from your smartphone app as simple as possible, so it’s easy to buy without having to reach for your laptop. On the other hand, some transactions are more complex (for example, the dishwasher we bought after Thanksgiving) and really benefit from a bigger keyboard and screen to “close the deal” — even if the initial searches happen on the smartphone screen. (At least that’s true for this troglodyte.)

Lesson learned for all e-commerce and omnichannel retailers: Follow the Amazon model where possible, and make the transaction as easy as you can — from search to selection to checkout. If more retailers follow this example, the smartphone share of wallet will continue to grow at a rapid rate.

No, “Big Data” isn’t dead

A recent RetailWire discussion (with the premise that “Big Data” is dead as a retailing management tool) provoked a lot of response. My point of view is that data science combined with action is alive and well:

If you read the recent WSJ interview with the chairman of Fast Retailing (Uniqlo), you might have seen this perceptive comment: “Data would never substitute the merchant. How do you interpret the data? That’s the merchant’s skill set. You need to uncover the insight that is buried in the data and the merchants need to uncover it. Even if you employ artificial intelligence to help you, the numbers [don’t tell] the future.” His point is well taken: No matter how much importance a retail organization places on its ability to extract data from its transactions, the information means nothing if it can’t be turned into action — and some of that decision-making rests on instinct and experience.

That being said, declaring that “Big Data is dead” is an overreaction. The phrase itself may be overused, but data science is alive and well in the interest of smarter merchandising decisions, loyalty programs and so forth. Would Amazon be where it is today without groundbreaking use of data to develop its predictive technology? I don’t think so.

What’s the biggest obstacle to online grocery delivery?

My short answer (see RetailWire comment below): Execution!

If my experience (recounted on earlier posts) is any guide, too many shoppers have tried online grocery delivery with inconsistent results. It doesn’t inspire confidence when your delivery is two hours late and 33% short — and you’re on hold for 45 minutes trying to resolve the problem or cancel the order. (I’m talking about you, Safeway.)

There is no way for conventional grocers to grow their mature business without figuring out how to execute better. The customer has been trained to expect on-time delivery of complete orders in every other category, and Amazon is going to put pressure on its competitors as it expands the Whole Foods footprint.


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