Overcoming the Challenges of Omnichannel Alignment
By Branden Jenkins, General Manager Retail, NetSuite
A retailer’s inventory is typically its top expense, and managing the right range of merchandise across channels and locations is a delicate balancing act. That balancing act only becomes more difficult when faced with today’s consumers who shop across multiple channels and have little patience for retailers who cannot meet the challenges of managing inventory and delivering real-time visibility across those channels.
That’s why it is critical for retailers to become seamless organizations. However, delivering on the omni-channel experience requires a single, integrated platform that can provide global inventory visibility along with seamless order management and fulfillment processes. Nearly two decades after the emergence of e-commerce, truly integrated “bricks and clicks” businesses are the exception and not the norm.
Retailers need to quickly accommodate customers who cannot find the size, color, or variation they seek in stock at a particular location if they want to save the sale. Many retailers cannot even locate alternatives without pulling associates off the floor to manually call other locations and warehouses, never mind being able to quickly and efficiently locate the right product and have it shipped to the customer’s home, work, or preferred retail location. In fact, today’s savvy, data-driven consumers can often find the same product somewhere else more quickly using their smartphones than a retail associate can by conducting their own search.
Retailers do have resources at their disposal to fulfill the omni-channel promise by taking a more sophisticated approach to managing and fulfilling these orders. Heavily stocked locations are prime candidates for fulfilling out-of-store and online orders, reducing the risk of later markdowns. Accepting returns at any location, regardless of the purchase channel, also greatly enhances the omni-channel experience for customers and creates additional opportunity to strategically restock high volume locations as goods flow back into the organization.
The command to ship products from any location and accept returns anywhere cannot be built on the back of outdated, batch-processed inventory systems, however. Customer databases that fail to connect the dots between in-store buyers and online shoppers are equally inadequate. A single data source, connected across ecommerce, point of sale (POS) and mobile devices and capable of quick, real- time access, is key to the omni-channel revolution.
Omni-channel strategies are not solely driven by technology, however, and effective merchandising backed by analytical tools is still vitally important. Business rules that not only minimize markdowns, but also keep vital loss leaders or frequently bundled products on store shelves are crucial for the long-term success of an omni-channel strategy.
In many ways, this is just another variation on a familiar industry refrain: Overcome inventory challenges or die. Without a modern, real-time and technologically advanced omni-channel strategy, satisfying customers is all but impossible.
Meijer upgrades fashion offering
Meijer has upgraded its fashion offering to challenge national retailers in the apparel and accessories space.
The Grand Rapids, Mich.-based retailer touts itself as a pioneer of the one-stop shopping concept, but it said in a release that it is best known for its produce and meat departments. The company, therefore, has taken steps to upgrade its fashion offerings, not only by stocking a variety of on-trend merchandise, but also creating a dedicated fashion website and launching a social media initiative to promote their upgraded apparel and accessories category.
"Restyling our fashion offerings is not only great for our customers, who are searching for on-trend fashion items at the right price, but it also enhances the Meijer promise of a one-stop shopping experience," said Peter Whitsett, EVP of merchandising and marketing at the Grand Rapids, Mich.-based retailer. "We knew our investment was sound over the holiday season when apparel realized a nearly 20% increase in sales."
Meijer’s style team is headed by Lynn Hempe, the retailer’s group VP of softlines and includes fashion adviser Mariana Keros. The team put together a Fashion Look Book and helped create the new website, meijerstyle.com.
"We want our customers to know that we are serious about offering the most up-to-date fashion in our stores," Hempe said. "Our goal is to find that just-right mix where affordability and on-trend fashion inspire our customers to recognize opportunities to update their day-to-day style."
Meijer will expand its focus on apparel this year with regional advertising in national fashion magazines, including Marie Claire, Harper’s Bazaar, InStyle, Cosmopolitan and Elle, as well as the distribution of another Look Book that will feature spring trends.
To date, the company said it has seen improved sales in women’s wovens, sweater dresses and leggings. Fleece and yoga pants drove women’s active up 56% over last year. The company also reported a 19% increase in accessories, drive by cold weather accessories and sterling silver. The Men’s department saw double-digit increases in all categories with active and work wear as the drivers, and supported by on-trend national brands like Carhartt, Dickies, Wolverine, Caterpillar and Asics.
This Year in Retail Pricing
By Dr. Paul Helman, KSS Retail
Before 2013 was over, prognosticators were making bold predictions about retail margins in 2014. As technology disrupts the market and chains feel the squeeze, a number of key areas will demand attention in the coming months.
Rock Bottom Pricing
The 2.3% growth of holiday retail sales from 2012 to 2013 was a win for retailers. But the tactics they had to employ to get there are rightly causing concern. With unprecedented aggression in price reductions and promotions, a fiercely competitive market is seeing diminishing returns on its pricing strategies.
Some truly disruptive changes in the market – including the technology-enabled ability of customers to instantaneously compare prices across online and offline, from retailer to retailer and brand to brand – are presenting big challenges. How will retailers resist the “race to the bottom” in a climate where customers feel almost entitled to deep discounts?
In grocery, retailers now realize they need better ways to use data and science to optimize prices and promotions to attract and keep customers. Data-driven price optimization and market basket analytics help identify trip drivers, loss leaders, and the right promotional and product combinations. Retailers must move beyond simple rules and unwieldy spreadsheets. A science-based approach to shaping and iterating the mix of store prices is not just a nice-to-have, but an absolute necessity.
Supermarkets are closer to a longer-term pricing resolution than big-ticket retailers. It’s hard to make up margin via tuning category-mix pricing in the context of higher-priced retail, such as electronics. Several years and holiday cycles will pass before prices for these items return to a more rational pricing model.
We might see a slow-motion version of price evolution as conducted in the fuel industry. Nothing says ‘competitive visibility’ like multiple gas stations’ posted prices in the same view. Eventually, one vendor raises prices, taking an immediate hit to the bottom line but eventually recovering. Competitors follow and consumers adjust.
In big-ticket retail, when retailers do eventually return to more rational pricing, they must focus on winning on something other than price – such as service, personalization, assortment, rewards, and overall experience.
Strategically Targeted Deep Discounts
Department stores have much room for improvement in strategic deep price reductions. Existing strategies often fail in addressing frequency and depth of marked down prices. How quickly and by what mechanism should a chain go deeper on a markdown? That’s a question to be answered with rigorous data and a science-based approach. With an eye solely on the calendar and a rush to clear inventory, opportunities for margin are lost.
Selectivity about who gets the deep discount is also critical. Retailers need to figure out, with the right historical data, which customers would be most appreciative of a discounted price and be moved not just to make one purchase, but to repay the retailer with their loyalty. Rather than looking at the process as merely clearing inventory, chains can focus on rewarding customers with a remarkably good deal that data science shows would be very valuable to them. The deep price reduction becomes an investment, not a throwaway.
Often, customers don’t realize the true value of the discount they received, due to the complexity of some retailers’ promotions. The “buy one item from Brand X, one item from Brand Y, and figure in your loyalty points to get your total discount” approach frequently means shoppers aren’t aware of the true savings they received – or how they achieved them.
Due to the amount of margin that can be gained on private label products, the right market basket mix can be a big winner in satisfying customers and retailers alike.
Again, science-based strategies with a strong focus on the customer are essential. It’s imperative for a retailer to know which categories they can penetrate and which they can’t. This includes understanding which segments of customers are likely to take an exploratory approach to private label in which categories. Solid data can show which categories are riper for exploration, which national brands don’t have an ironclad loyal following, and which aren’t distinguishing themselves in the category. With those insights, retailers can intelligently decide where to plant their flag in private label.
One caveat: Private label demands a focus on quality. This means resisting the temptation to cut corners on production and distribution. Private label products have to be comparable to the national brand’s quality in order to gain traction. It’s a worthy investment when the private label line establishes credibility with customers to deliver consistent margin gains long-term. This also plays into the strategy that has proved so lucrative for many retailers: making your most loyal customers eager to keep coming back. Consistent customer purchases drive profitability.
A big retail tech story of 2013 was the launch of Apple’s iBeacon. Using Bluetooth technology ubiquitous in cell phones, iBeacons allow retailers to push promotions and other communications to mobile devices, based on a shopper’s location in the store.
Some are hailing this as a great step forward in delivering personalization. But retailers should exercise caution. Being influential means making sure the customer truly values the communications, and that your offers are wisely tailored. Chains need to be highly strategic, allowing shoppers the time to be forward thinking about purchases. How persuasive will an offer be in-store when the customer left home with a structured market basket already in mind? Many shoppers are meticulous in their planning, without much deviation. Your most loyal customers, who know your store well, will not immediately change their behavior. And when they do, it’s not going to happen as a result of a less than strategic use of a real-time stimulus like iBeacon.
From grocery and department stores to large electronics retailers, all players are quickly coming to the realization that winning on price alone will not be good enough for long-term success. The victory comes in treating your most loyal customers right and knowing which items need to be competitively priced, backed by science-based strategy. Any other approach is more 1914 than 2014.
Dr. Paul Helman is chief science officer of KSS Retail (a dunnhumby company), a global provider of price optimization and shopper insight solutions for the grocery, convenience, chain drug store, general and online retail industries He was previously a founding partner and chief scientist of Standard Analytics. He can be reached at [email protected].