Archive for the 'Supply chain management' Category

Target’s brand position: We’re easy

Target is focused on “ease of shopping” as it refines its brand equity. My question (from RetailWire)…is it a credible claim, and can Target really sustain a competitive advantage here? Here’s my comment:

What makes Target “easier” than Walmart or Amazon? It’s a good tagline but is it supported by the facts? Target has a reputation for stockouts and other supply chain issues that a slogan by itself won’t cure. The company has a lot to prove, especially in light of Walmart’s laser focus on the same issue. Case in point: The new Walmart ad where the dad drives through in his PJ’s to pick up breakfast-in-bed fixings.

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Inventory management? It depends on the inventory

I commented recently (on RetailWire) about the skill set needed to manage different kinds of inventory. There is no hard and fast rule, because it depends on whether the store in question is in the “staple” or “fashion” business:

Any store needs to hit the right balance between staple, fashion and fad merchandise. (The difference being that “fads” have a much shorter life span unless they evolve into fashion trends with more staying power.) The question of “the right balance” really depends on the nature of the retailer’s brand image and target customer. Clearly Forever 21 needs to play in a completely different world than (say) Chicos — which is not devoid of fashion but is more dependent on staple inventory.

It’s a key question because the product life cycle of each type of merchandise — and the inventory management needed to get into and out of trends profitably — may be totally different for fads, fashion and “basics.” Retailers don’t want to be stuck with too much of a fast-moving fad; on the other hand, they don’t want to erode their in-stock levels on basics by fixating on chasing trends.

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.

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.

Reflecting on the impact of IKEA

Most of the obituaries of IKEA’s recently deceased founder focused on his background, but RetailWire panelists reflected instead on what the store’s operating model has meant to the world of retail. Here are my thoughts on IKEA’s impact and the store experience:

IKEA revolutionized furniture and home furnishings retailing in several ways. It developed a low-cost operating and sourcing culture that passed along savings to its customers, developing an almost cult-like global reputation in the process. For all the jokes about the difficulty of assembling IKEA furniture, there is no doubt that millions of customers own home furnishings of decent quality that would once have been out of reach.

As to the in-store experience, I shopped the IKEA at the Mall of America last summer and it seemed noticeably easier to navigate than I remembered. (And yet I worked my way through the entire store.) Maybe IKEA has taken seriously the critique that its shoppers are like lab mice lost in a maze.

And yes to the meatballs…but don’t miss the lingonberry preserves near the checkout lanes!

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.


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