The retail industry is experiencing US$800 billion globally of inventory distortion per year, and more than 50% is from out-of-stock. Retail in Asia spoke with Ramesh Jayaraman, Vice President, Asia Pacific, Tyco Retail Solutions, who outlined the problem and shared his opinion with us. Basically, it should all start with the customer.
RIA: Where do we see the focus for retailers with customers using both online and offline services and experiences?
RJ: Having worked closely with both offline and online retailers for 45 years now, our strategy is one where we take on a ‘Customer-First’ approach. We find out what’s fundamentally happening to shoppers these days, and we partner with retailers to deliver what shoppers seek most – the perfect customer experience, which is the main differentiator.
For online channel, the strength lies in the ability to provide the convenience of 24/7 shopping, with availability, price and assortment favoured by customers. As for in-store shopping, it is that sensory experience: the ability to touch and feel the merchandise, try it on, or ask the friendly sales associates for advice which makes the experience such a fulfilling one.
Progressive retailers are those that focus on providing a great shopping experience for customers regardless of channels, which will determine whether they return or not.
RIA: Are consumers mixing both online and offline experiences? And how can retailers cope when inventory delivery is not just in-store?
RJ: What we are seeing, is the convergence between online and offline channels, driven by customers’ pursuit of the ultimate shopper experience.
Research by IDC also shows omni-channel shoppers tend to spend 35-50% more than single channel shoppers. If done right, omni-channel retailing can help create strong loyalty and advocates for the brand, positively influencing other shoppers.
Retailers are re-assessing their strategy to adopt omni-channel retailing to give customers that perfect shopping experience. In the past, online and offline were separate channels, working in silos. With an omni-channel framework, the customer becomes the key focus, and retailers would now have to look at providing them with that seamless experience across all channels. The trend is towards an integrated channel with common inventory and operations.
Accurate Inventory control is essential for successful omni-channel retailing. To delight shoppers, there must be the promise of product availability- to buy what they like at their right size and preferred colour right on the spot, without the need to make a second wasted trip or look elsewhere.
This is where Tyco’s inventory intelligence solutions can help retailers curb out-of stock situations and provide real-time visibility. According to ChainLink 2014 “The ROI for RFID in Retail” research paper, RFID enables cycle counting to be done about 25 times faster than traditional bar code scanning, resulting in an inventory accuracy improvement by typically 20-30%, allowing retailers to achieve 99% accuracy in their inventory levels. It becomes clear which items require replenishments, help maximise sales opportunities, and avoid unnecessary pre-emptive buying of retailer stock.
Inventory intelligence data also helps retailers with their work force management. This means optimising store associates’ productivity. Cutting time spent on inaccurate manual entries and inventory counts, and allowing more productive time on serving and engaging customers instead. Store associates can also be more confident of their own system, need not waste time double-checking inventory, reducing hesitant-selling.
RIA: What should retailers be looking at to ensure merchandise is available to the customer, wherever they are?
RJ: As mentioned earlier, inventory accuracy is indeed a big challenge for retailers. Inventory distortion is a US$800 billion world-wide problem, where 56% is due to out-of-stock. This can be defined as a situation whereby a shopper’s intent to purchase is not fulfilled. And reasons could be due to a lack of availability, merchandise not being replenished and still sitting at the back room, or at a different aisle or simply because the store is under-staffed resulting in lost sales.
When you think of it, this means retailers lose the equivalent of US$124 for every person per year on the planet due to inventory distortion! This is where we work with them to combat this issue. For optimal inventory management, we recommend leveraging inventory intelligence solutions to help replenish, forecast, plan and allocate merchandise right down to item level SKU.
Retailers need to integrate their inventory to enable omni-channel fulfilment. They can start with complex items that come in multiple colours, cuts and sizes, and then work towards the rest of their inventory.
RIA: Any examples?
RJ: We have been working with a variety of apparel department stores and luxury brands around inventory visibility. For example, we partner with long-term client Macy’s to roll out an inventory visibility program.
With a US$25+ billion revenue business, they were getting a 25-30% error in their inventory, which comes from an inventory erosion rate of 2-3% per month. On a compounded basis, this can get more serious if not addressed. As a result, they were unable to execute their omni-channel strategy effectively.
Having worked with them a lot previously, we got them started with their private labels first as they would have better control of these items, and subsequently to the other brands. What they did was source-tagged merchandise with RFID labels, which allowed them to get a better inventory accuracy starting from their receiving cycle. They eventually rolled it out to 800 of their stores and the results were tremendous! To such an extent that henceforth, replenishment of stock is based on actual sales instead of forecasted sales which they used to do in the past. Macy’s is now able to have their stores fulfilled for online orders and is enjoying sales increases of 3-7% since implementation.