Softlines purchasing and stock management across a given season is something of a black box. Many responsible for this even describe their skills as an art form, because they have spent many years honing the abilities that allow them to select lines, sizes, colors and quantities of items from anywhere up to a year before the items will be seen by customers.
Increasingly of course, big data and data analytics are playing a role in that buying process, helping retailers to optimize margins, pricing and promotions that they run. The insights that can be gained by connecting data silos and systems together can have a direct impact on revenues and margin.
Data analytics is a step in the right direction, but the world has moved on, and consumers want omnichannel experiences. Shoppers are demanding a seamless experience across all brand channels, both on- and offline, but retailers are struggling to move at the speed their consumers want and need. Those were the findings of a Periscope survey at World Retail Congress 2016, which found that 78% of retail executives admit there is no one brand experience across their channels, while also acknowledging that “a well-defined cross or multi-channel strategy” was the top innovation that would drive digital growth (64%).
What is clear is that while there are technical challenges to delivering omnichannel experiences, the biggest challenge for retailers is the organizational change that needs to take place: the removal of silos, creation of new processes, and forming of teams that work across, rather than within, channels. These take careful planning and execution, but cannot be ignored, because without them any retailer is doomed to fail.
Apparel has some of the biggest challenges in the softlines sector: 1. getting the trends right, 2. buying the right quantities in the right sizes and styles, and 3. managing the sell through of these items across their short lifecycle. All of these complexities drive erosion in margin.
The Apparel Triangle
There are three issues that commonly occur among fashion retailers season after season, which can all be solved with a properly implemented omnichannel strategy:
• Stock can often end up trapped in stores – Once stock arrives at a store that is typically where it stays until the end of the season, where mass-discounting then takes place to try to ensure that as little stock remains in the company as possible.
• Bumping stock around – When retailers do move stock around, this tends to happen without any understanding of “where” lines should move in order to sell and at a good price. Ranges tend to be simply moved en masse to the stores with the biggest foot traffic.
• Localized promotions against the clock – When the end of the season approaches, promotions can be haphazard, and in some cases an absolutely desperate attempt to clear stock. The problem is these promotions are often controlled by local management teams, at a regional or store level, and do not take into account whether the stock may sell at a higher price or in another location.
All of these challenges can be addressed by adopting an omnichannel approach to system design. It solves these problems by opening new opportunities during the sales cycle. Ultimately, wherever stock is held, it can get into the hands of customers on demand, wherever they are ordering from, whether that is online or another physical store. A retailer can better leverage online, introducing features such as ship from/to store, and stores can also use this as an internal process to support customers that visit their locations.
A Leap Into the Future
For the retailer, this helicopter view of stock holding, demand, customer behavior and sensitivity by store overlaid on connected systems creates agility — an environment where a holistic and proactive method can be used for lifecycle pricing and stock movement of seasonal goods.
Digital transformation projects are complex and multifaceted — there is no getting away from that — but with the right approach a true omnichannel experience can be achieved for softlines retailers. The processes and insights that come from this approach have been demonstrated above, all of which improve the services that can be offered to customers, driving satisfaction and brand loyalty.
Channie Mize is the general manager for the Retail Sector for Periscope™, By McKinsey