Retailers, Meet Your New Omni-Channel Customer
Welcome to the latest installment of our Innovate With Invent blog series!
Once a month, I host an “Innovate With Invent” live huddle session on LinkedIn. Retailers around the world tune in to chat about trends and challenges that are top of mind across the industry. After each session, I recap the highlights in a blog post.
In our last post, we discussed why more inventory planning teams now report to the CFO and why that’s a great opportunity for planners and businesses as a whole. This time, we’ll look at one of the biggest changes impacting the retail world—and what it means for inventory.
Let’s dive in!
Evolution of omni-channel
Over the last few years, retailers have experienced more change than any time in the past five decades. Throughout the pandemic, they struggled with stresses on supply chains and inventory shortages. And when those pressures finally eased up, many stores and distribution centers had to manage floods of products coming in and deal with all the problems that come along with carrying excess inventory. On top of it all, ongoing talk of a looming recession left retailers concerned about what that would mean for business.
While these were certainly big changes, not everything is permanent. Supply chain issues and macroeconomic conditions can come and go. However, one major change is here to stay: omni-channel.
Today’s retail customers are fully omni-channel
We're now living in an omni-channel retail world. Customers want to buy what they want, when they want—using any combination of online and offline channels. And they expect their shopping experiences to be seamless, no matter how they choose to shop.
Just look at some of the acronyms buzzing around the industry, and it’s clear that today’s customers have so many convenient options to choose from. Most shoppers are already familiar with BOSH (buy online, ship to house) and BIS (buy in store) which have been around for decades. But now, we have BOPIS (buy online, pick up in store), BOPIL (buy online, pick up in locker), and BOPAC (buy online, pick up at curbside).
It's not just the buying side that has gone omni-channel. Customers expect the same level of convenience when making returns, leading to options like BORIS (buy online, return in store), BORO (buy online, return online), and BISRO (buy in store, return online).
All the new avenues to browse, buy, receive, and return goods are now key elements of an exceptional customer experience. Retailers that go above and beyond to deliver on these omni-channel expectations gain a major competitive advantage. Now that customers are fully omni-channel when it comes to both purchases and returns, what does this mean for inventory decisions?
What omni-channel means for inventory
Inventory management has always been a balancing act where retailers aim to stock enough product to satisfy demand, without carrying excess. Now, though, inventory decisions are much more complicated. Rather than looking at demand from an individual store or regional level, omni-channel planning requires a holistic approach. Retailers need to strategically position inventory across their entire network of stores and distribution centers so that the right products are always available to their omni-channel customers.
This means considering:
- How to prevent out-of-stocks, while minimizing overstock
- When to replenish inventory, and how much to replenish
- Which store or DC should fulfill orders
- How and where to position returned products
Inventory planners are trying to make these kinds of decisions about every SKU, for every store, every day. There are so many different combinations and possible scenarios to consider, both on the purchasing side and on the returns side of the transaction. It's mind blowing for planners who are trying their best to make sense of it all. That’s why retailers need to move away from the manual, human-judgment driven systems that are still in place today.
Instead of relying on traditional approaches to inventory management, retailers can set themselves up for success using strategies designed for the omni-channel world. Here are three great places to start:
- Position inventory for profitability
Smart retailers are already shifting away from making decisions based on rules and KPIs set by human planners. Instead, their primary focus is on the most important goal—driving profitability. To stay competitive in the omni-channel future, it will be critical for retailers to position each piece of inventory where it will have the highest probability of selling for the highest possible profit. With inventory always positioned and available where it’s wanted most, all the other important KPIs will fall into place.
- Streamline the returns process
When a customer returns an unwanted product in store, most retailers don’t have the visibility to determine the best possible return path. Assuming they even have room for the extra stock, or that it’s part of the store’s assortment, returned products often end up sitting unsold in the wrong location. Or, they get sent back to a fulfillment center and have to go through many different touch points before they make it back to a store for resale—if they make it there at all. Each touchpoint adds incremental costs and further erodes the product’s profitability. Poor returns management is costing retailers big. One NRF study found that for every $1 billion retailers have in sales, they are incurring $166 million in returns.
Retailers should work on streamlining the returns process to make everything easier for customers and for teams behind the scenes. And profitability should be incorporated into every decision. With profitability as the key focus, each returned item will go through fewer touchpoints, spend less time in transport, and get repositioned where it has the highest probability of resale.
- Automate and optimize decisions
Omni-channel inventory planning comes with so much complexity and retailers need to quickly analyze and understand every possible scenario so they can make the most profitable inventory decisions, from both a purchase and returns standpoint. Here, automated decision-making is critical.
Leading retailers are adopting modern AI-driven inventory planning solutions that can analyze massive amounts of data very quickly, then make optimal decisions about millions of SKUs across hundreds of stores every single day. With decision-making automated and optimized, inventory is always positioned, available, and sold where it generates the highest possible profit.
At Invent Analytics, we’re excited to help large retailers embrace these strategies. We can help your organization cut through the complexity of omni-channel, manage your inventory in the most profitable way, and create the best possible experiences for today’s new omni-channel customers.
Thanks for checking out this installment of Innovate with Invent! Until next time, keep learning and keep innovating.
Check out the full recording of our huddle on this topic here.
Ready to talk sooner? Reach out here.