The new e-commerce model of flash sales—members-only websites offering exclusive deals on everything from luxury goods and fashion apparel to wine—has emerged into a multi-billion dollar business, and is showing no signs of slowing down.
But the flash sales business model requires a different approach to fulfillment to deliver a unique customer experience—from the point of online purchase to how the merchandise is packaged and shipped and ultimately unboxed once received. This end-to-end process is part of the overall brand experience, which is fueling the growth of the flash sales market.
Unlike traditional methods of warehousing and fulfillment, flash sales presents a new set of opportunities and challenges, especially related to inventory management.
Flash sales demand incredibly fast turnaround time for a vast number of items. Because of this, receiving is intense as there are large volumes of unique items, each of which must be identified, barcoded, located and properly packaged, and logged into a warehouse management system.
In order to keep pace with the high volume of transaction on a daily basis, online retailers and flash sales entrepreneurs need to rethink how they organize stock. Trying to apply traditional warehouse methods to this model will affect your profitability and customer service.
Technology automation such as scanners, intelligent conveyor systems and a flexible warehouse management system (WMS) can only go so far. You need a new approach and mindset to effectively manage your inventory and keep pace with the explosive growth opportunities that flash sales present.
Here are a few things to consider with flash sales fulfillment:
Inventory control. Inventory for flash sales is volatile. There are often many unique stock keeping units (SKUs), and little depth, leaving no room for errors. With little depth, every piece must be accurately accounted for.
Each mistake results in a shorted order and dissatisfied customer. The goal of flash sales is to liquidate all inventory, hence extra stock translates into lost sales opportunities.
Receiving. Much of the flash sales inventory originates from overstock, returns, and buyouts. Stock often arrives in terrible condition and accompanied by inaccurate or no packing lists.
A WMS must be able to create unexpected SKUs on the fly, and have a module to accurately reconcile physical receivings to a packing list or purchase order.
In most flash sales environments, product that is received may be at the end of its seasonal cycle, providing a limited window to inventory and sell the merchandise. There is little room for delays.
The WMS must be able to track arriving stock from the time it hits the receiving dock until ready for sale. Being EDI compliant is a must to speed receiving and minimize errors.
Samples. The tight sales schedule and limited stock also means that samples for shoots and write-ups must not only be pulled immediately, but quickly returned to stock for the sale. There are typically no surplus units that can be disposed of for sampling. A WMS must be flexible enough to accurately track samples.
Storage. It’s not productive to put stock into dense or deep storage. By the fast turnaround of flash sales, in most cases, stock will never be placed in a permanent location.
Locations will be reused quickly, so the warehouse needs flexible storage systems that can handle different types of products with no equipment conversion or set up.
With inventory on certain items in the one- or two-unit range, a single location must be able to accommodate multiple SKUs. As part of the constant depletion and receiving process, the storage systems and WMS must be able to easily handle consolidation of inventory.
Entire blocks of pick locations must be consolidated and made available for new stock.New stock should be contiguous to streamline the picking effort when each sale begins.
Physical inventory. Flash sales require a new way to audit inventory. The days of annual physical inventories are no longer valid.
Because stock in flash sales environments turns over many more times per year than the typical mail order or e-commerce operation, there is increased potential for clerical errors, miscounts, and stocking errors. Continuous cycle counting is mandatory, and any system must be able to count on the fly, adjusting for open orders.
Labor. Flash sales involve older and recycled stock, so receiving is a labor-intensive process. Quality control is essential to ensure a positive customer experience, mitigating the occurrence of shipping rejected goods.
Much of the inventory must be untagged, retagged, refolded, rehung, rebagged and reboxed. The many items received, but not on purchase orders or packing lists, must be quickly resolved and made available for sale; a process that requires a high level of expertise and commitment.
Finally, inventory reconciliations and control require skilled personnel.
Similar to an airport and other complex, business-critical operations, flash sales have their own unique deadlines, and every day there are new challenges. The rigors of the business require around-the-clock management and specialization in flash-sales fulfillment.
As organizations embrace flash sales—either as an extension to existing distribution channels or an online business model—they must be aware of the challenges on the back end of the business. You’ll need new processes, techniques and technology to manage inventory, optimize revenue and deliver a unique customer service experience.
Joal Savino is executive vice president of Mercedes Distribution Co., a fulfillment/warehouse services provider based in Brooklyn, NY.