The battle for online merchandising in retail



Stock management is so much more important in todays cross-channel world, says Stuart Aldridge, chief executive officer of Maple Lake.

Forrester Research reported that e-commerce sales will keep growing by over 10 per cent over the next few years, with online retail sales in Western Europe forecast as going from 68 billion Euros in 2009 to 114.5 billion Euros in 2014. With online sales becoming so critical to growth strategies, retailers are focusing on how to best serve their customers, showcase products and entice customers to buy.

Equally important is to ask, How do we ensure we profitably maintain availability across all customer touchpoints? Boil it all down, the real challenge centres on inventory management and online merchandising. So, should retailers buy separately per channel, fulfil customer orders from shared inventory or establish some type of virtual distribution centre, or do something else? The multitude of options is creating a lack of certainty when it comes to developing a strategy for buying and managing inventory beyond bricks and mortar.

The early days of online merchandising were simple; start by setting up the Web site as another store, with minimal costs or changes in inventory management. The Web as a storefront was still too newtoo uncertainto spend a lot of money on new distribution channels. But with accelerated growth, the Treat The Web As Another Store strategy soon became an Its A Very Unique, Very Big, Not Like Any Of Our Other Stores strategy. The problem was, the strategy lacked localisation, a way in which retailers can customise the offer for each point of customer contact. In fact, a targeted assortment strategy is even more important to retailers that are anticipating substantial growth from their online presence.

Retailers today understand that an online store is a merchandising priority. It is its own channel, and must be integrated within the overall mix of outlets.  This adds to the workload and intricacies of retail merchandising. So, how do retailers - particularly their merchandising teams - get it all done, be efficient and be profitable? Perhaps a hybrid approach is needed.

Consider this: A retailer sets up a virtual distribution centre (DC). It holds inventory separately, per channel; first quality stores, outlets, franchises, web etc.  Now, the retailer can more effectively manage availability levels for each customer touch point. The risk? The retailer may run short on product in channel 1, but face over-supply in channel 2. Another option is to operate from a shared DC inventory, yet that has an inherent weakness: The online channel faces chronic shortages because product allocations to stores have depleted the inventory from the start.

The Hybrid Approach to inventory management and planning is already gaining momentum as retailers fulfil their online orders directly from their stores. This maximises availability, both online and in individual stores. This is particularly effective where the demand is balanced across enough stores to ensure that a few key stores dont continually get drained dry.

The bottom line? Retailers must be nimble and adaptable and ready for change. Always. New technologies - social networking sites, webTV, mobile applications and moreare changing how retailers and customers interact. They are quicker and more complex. Closing the sale and increasing profitability means retailers must focus on inventory management process and efficiencies. The leaders in retail are already innovating in their cross channel planning and allocation efforts and are optimising the availability across all channels. Only then, can retailers find profitability, no matter the channel.

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