Real-time Stock Accuracy

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1 Real-time Stock Accuracy The key to a fulfilling customer experience for today s Omni-channel shopper always a good id

2 FACING TODAY S ECONOMIC CHALLENGES AND MEETING CUSTOMERS EXPECTATIONS The economic climate has created many casualties within the retail industry and we have all observed the demise of iconic brands because they were unable to adapt. There are many reasons behind these occurrences, ranging from the impact Government austerity measures have had on consumer spending, shifting buying patterns to favour online channels and business overheads rising disproportionately to consumer spending. This white paper aims to draw on Zetes experience as collaborative supply chain specialists and discuss the important role in-store stock management plays in ensuring retailers can run a successful Omni-channel business. Regardless of how successful an e-commerce operation is, when customers are in the store, they need to find the products they want to buy are available for sale. What solutions exist to help retailers create the right environment for this to happen? Can they really deliver a consistent and seamless experience across all of today s sales channels? Your in-store processes Find out how to Achieve the shift to omni-channel Solve the common problems for lost sales opportunities Save the sale introducing in-store stock management 2 zetes white paper

3 TAILORING YOUR BRAND TO THE WAYS OF THE OMNI-CHANNEL SHOPPER A social and cultural shift is taking place as a result of ubiquitous mobile technology and online connectivity, which has changed consumer expectations. Customers no longer distinguish between the physical and digital worlds and expect a shopping experience that is unrestricted across the different channels. Armed with a smartphone or tablet, they expect to move interchangeably from digital to physical worlds and see no justification for a brand to operate in silos. Retailers who cannot offer this level of service - whereby a customer can buy from any channel, return to any channel and have the same availability and pricing advantages online as in a physical store - will be replaced with those that can. The effect of these expectations has been to create a series of very specific challenges that retailers need to overcome. These are as follows: Store Online 90% almost 90% of retailers consider an efficient supply chain to be a key customer service differentiator 1 Rising customer expectations of retail brands Consumers expect the ultimate consistent brand experience, giving them increasing convenience, instant gratification and the best possible prices. This is regardless of whether they are shopping online, via mobile devices or in a store. And when they don t get what they want when they want it, they are using social media to vent dissatisfaction and potentially erode brand reputation. satisfaction catalogue smartphone social media Stock Accuracy dissatisfaction Escalating supply chain and IT complexity Many retailers now sell across five channels, taking into account multiple online and offline environments. These are as follows: 1) In the store, 2) Mail order catalogue, 3) Online, 4) Mobile, and 5) Social media. To ensure the customer has a single, consistent service experience, fulfilment and delivery need to be unified. The increased supply chain complexity this creates requires data to be captured at multiple touch points, using mobile devices wherever possible. For IT and operations, the ability to remotely manage an ever-growing estate of mobile devices and ensure they are available and in circulation at all times, becomes essential. Overcoming these challenges requires a back to basics approach for retailers to ensure that stock management, shelf availability management and customer service levels are impeccable. If today s retailing is all about getting the right products to the right place at the right time, across any channel, it is only by getting the fundamentals of stock accuracy and visibility right that retailers will succeed in delivering the seamless, Omnichannel shopping experience and great service their customers expect. We see this as a time of significant opportunity in a changing market. Behind the scenes there is a quiet revolution underway in our supply chain, IT and support functions. Our investment in these areas is up substantially and that commitment continues. 2 Charlie Mayfield, Chairman of John Lewis 1 SCM World, Chief Supply Chain Officer Report Forrester blog, Online growth will polarise across Europe, 13/03/2013 zetes white paper 3

4 Section 1. ACHIEVING THE SHIFT TO OMNI-CHANNEL Mid-tier retailers face unprecedented pressures Most of the business trends and changes observed within the retail sector are incremental 3 with experiments to test different shop layouts, delivery options, or a new loyalty programme, being the most common. Then, every so often, something transformational occurs, which provides an opportunity for a new breed of retailer to steal an advantage. Today increased price competition from online entrants and lower levels of disposable income changing shopping habits are forcing retailers to continuously innovate, and Omni-channel retailing is the latest example of this. As levels of competition amongst retailers have intensified, service and stock availability become more critical to success. Based on our estimations, there are in excess of 4,500 retailers with multiple outlets across Europe facing an identical dilemma. How does a retailer expand its reach and coverage without the expense of opening new stores? E-commerce and m-commerce offer a chance to do more with less, by increasing the capability to maximise revenues, provided the building blocks are in place to ensure a seamless, Omni-channel experience for the customer. In addition, offering new services like Click and Collect help to bring customers into physical stores where they may continue to make additional purchases. YOU MAXIMISE REVENUE MINIMISE COSTS customer YOU customer 40% of consumers spent more money than planned when visiting a store 4 Having to manage with less disposable income has created a tendency for consumers to polarise shopping habits between luxury brands and super low cost, value ranges. The outcome of this is fierce competition for market share within the largest middle range market, whereby a greater number of retailers are chasing fewer sales opportunities. Whilst retailers in the luxury and extreme value segments of the market face the greatest potential demand, it is mid-sized retailers - across all segments - that face the greatest commercial pressures to secure the sale. 4 zetes white paper 3 McKinsey & Co, The Future of Retail Grocery in a Digital World, Recent study commissioned by Zebra Technologies

5 Section 1. ACHIEVING THE SHIFT TO OMNI-CHANNEL Social and cultural shift in expectations Omni-channel retailers offer their customers a totally identical shopping experience in terms of pricing, choice, availability and service, regardless of the way they choose to shop. Although aware of the need to offer this level of cross channel shopping, it s still a daunting prospect for most and regardless of the retailer s size, creates problems. CUSTOMER IS KING INSTORE ONLINE MOBILE over of 50% 85% said US retailers admitted their ability to offer a consistent cross channel experience was being outpaced by customer expectations 5 that achieving expectations was a top three business challenge Although retailers may understand the need for creating a seamless, Omni-channel offering for customers, the reality of physically delivering such a seamless shopping experience is much more challenging. Doing this effectively requires a retailer to be particularly agile and have the capability to effectively catch their sale across multiple mediums, in line with the individual whims of each customer. 5 Retail Systems Research: Omni-Channel The Long Road to Adoption zetes white paper 5

6 Section 1. ACHIEVING THE SHIFT TO OMNI-CHANNEL Goods delivered any way the customer would like them In the customer s eyes, an Omni-channel retailer would allow them to take any conceivable path to purchase and delivery, with any combination from the following: Fulfilling this requirement means having very agile supply chain processes and the ability to ensure the right goods are always available, for the right price, in the right place, at the right time. Actually achieving this in practice requires a combination of mobile applications and devices, plus barcode and RFID tagging to ensure that retailers have real time visibility of stock right through the supply chain at any one time and the ability to access and move available inventory to ensure a customer order can be fulfilled in the most efficient way possible. Online Research & Order Store social media smartphone tablet catalogue is the exact item available? where is it now? (store? back of store? dc?) are alternative colours or sizes available? pick-up & delivery Store back of store home click & collect point returns management distribution centre Customer Purchase Channels Fulfilment Points - Where stock accuracy is critical 6 zetes white paper

7 Section 2. COMMON PROBLEMS FOR LOST SALES OPPORTUNITIES Omni-channel aspirations let down by poor in-store stock management Many retailers continue to repeat the same mistakes relating to stock availability and visibility when trying to create an Omnichannel shopping experience. A common reason for failure is poorly optimised in-store stock management and poor visibility of where stock is located once in the store. This arises because whilst retailers have sophisticated merchandising and stock ordering systems to manage ordering stock for arrival in-store; and they have effective POS systems to translate sales achieved into replenishment orders, there is a visibility gap between the time stock leaves the warehouse, its arrival at a store, and the time it spends in-store prior to a sale, when little or no proactive stock management takes place. This time period is often referred to as the hidden zone. CONSEQUENCES OF POOR IN-STORE STOCKMANAGEMENT Consequently, poor in-store stock management leads to lost sales because retailers cannot: Differentiate between stock items intended for sale on the shop floor and pre-paid Click and Collect orders Check stock availability accurately in real-time for in-store items and those available for home delivery distribution centre Store hidden zone SALE Identify whether additional products are in the back of store area, to avoid creating out of stock problems Interchangeably process customer returns from sales made via both physical and online channels Manage inter-branch stock transfers to fulfil unexpected short term demand or an urgent Click and Collect order Managing the hidden zone period This period is highly relevant to the success of Omni-channel. At a time when retailers are trying to introduce new services like Click and Collect, in-store stock management becomes more important than ever, to ensure stocks are handled appropriately, inventory levels are accurate and pre-picked orders are quarantined, ready for the moment a customer arrives in store. From experience, the longer stock is left unmanaged after its arrival in-store, the more likely that inaccuracies will be introduced into the supply chain. Empower staff with mobile access to product information to answer customer queries and stock enquiries on the spot Balance the amount of time needed for in-store admin with time spent pro-actively selling to customers in the store. zetes white paper 7

8 Section 2. COMMON PROBLEMS FOR LOST SALES OPPORTUNITIES Impact on sales for an Omni-channel retailer When combined together during a busy working day, these issues culminate in the following all too common problem scenarios and negatively impact revenues. Lost sale #1: Products not on shelves when customers are in store looking to buy According to a UK research study conducted by YouGov on behalf of Venda, retailers are missing out on billions of pounds worth of sales during the course of a year because of poor stock management resulting in Out of Stock situations. 38% of consumers had left a store empty handed because the item sought was either not in stock, or unavailable in the right colour, size or style The failure to satisfy consumer demand was translated into a financial loss of 43 7 worth of sales every month, for each adult in the UK. 8 zetes white paper 6 You Gov/Venda research - Missing billion basket report about 51

9 Beware OF Out of Stocks Although this has an immediate financial impact on revenues, longer term, it translates into the risk of losing the customer all together as they seek a more reliable alternative and, potentially, tell others about their negative experiences. Added to this, not having the right goods available to buy in-store creates another problem, as it is effectively encouraging a shopper to buy online, where a competitor offering a similar item more cheaply may only be a couple of clicks away. SOLUTION Lost sale #1: Retailers can eliminate out of stocks by having a single view of stock availability across all channels. A mobile in-store stock management solution helps to achieve this by managing stock availability and visibility from anywhere, including the so called hidden zone, when goods arrive in store and are not visible on central inventory systems. Right from the time when stock first arrives, an in-store management solution will ensure that goods can be registered as inventory items and given both an identifier and location. By capturing the identifier using a mobile device, goods can then be tracked throughout their lifecycle until they finally leave the store. This includes sales floor inventory management, replenishment, stock taking or cycle counting, to eventual departure, either when purchased by a consumer or transferred to another store for a customer order. Three factors behind out of stocks The problem of out of stocks within a retail store may be caused by three factors. distribution centre Store A Store B 1 Unprecedented demand, resulting in a shortage of items in the supply chain. Whilst this is inconvenient, it may be beyond the immediate control of the retailer. More concerning, is a situation whereby inefficient supply chain processes often due to poor visibility of store processes have created out of stocks and this is entirely avoidable. MOBILE TERMINAL 2 Poor logistics accuracy. Here, the wrong product e.g. a stock replenishment order, ends up being shipped to the wrong store. The error could have been caused by something as simple as a driver unloading the wrong cage at the store because adequate goods receiving systems were not in place. 3 Poor shelf replenishment processes and low stock visibility in the store. Poor in-store stock accuracy can be avoided by knowing what is in the store room and shop floor, with care taken to monitor shrinkage levels. Beware of Click and Collect Errors When introducing Click and Collect, it is essential to have inventory checking services to ensure customers are given accurate information. Equally, if a logistics error caused a Click and Collect order to be delivered elsewhere a replacement needs to be allocated from the shop floor and this item needs to be booked out as sold. zetes white paper 9

10 Section 2. COMMON PROBLEMS FOR LOST SALES OPPORTUNITIES Lost sale #2: Sales staff lack access to product information and are poorly informed 67% of shoppers say they have a better in-store experience when staff are equipped with mobile devices 8 The capability to provide consumers with all the information required on the spot, to avoid them leaving a store without making a purchase, is essential. When consumers were asked what they have done in the past because they could not purchase the item they wanted and the option to buy online did not exist, only 27% either went back another time, went to another store, or visited the store s website to buy at a later date. 73% 73% did not make the purchase or bought from a competitor in store or online Shoppers today tend to do in-depth research before committing to a purchase. They check product information, competitor prices, reviews and discuss their intentions with friends via social media. 61% 61% of shoppers said they thought they were better informed than shop floor staff 8 Retailers need to respond to this by ensuring their store staff are as knowledgeable as consumers - not just about product features, but where to find the product in a store, and if it is not immediately available, where else they can purchase it. Research conducted by Motorola 8 into consumer expectations of retailer s knowledge levels highlighted the importance of equipping store staff with the ability to look up product information, plus check stock location and inventory levels using mobile devices. 73% of retailers within their research sample had already begun this process with investment into customer service orientated technology solutions including digital signage displays, electronic shelf edge labelling and personal shopping assistants on mobile devices. Investment into mobile devices for in-store use will have an immediate impact on customer perception levels The expectation that a retailer is knowledgeable extends beyond product information. Omni-channel retailers need to know how shoppers have previously interacted with them either online, in the store or via mobile devices, and what their purchase history is. Again, this reiterates the importance of seamless inter-connectivity between physical and digital operations. Consumers do not distinguish between the different channels retailers offer and cannot conceive why a retailer should either. For them, they are buying from a single brand, and the channel they happen to choose is irrelevant. However, if poorly managed, arming shop sales staff with mobile devices can create as many problems as it solves. A retailer with a network of retail stores and multiple distribution centres needs to ensure all mobile devices in use can be managed remotely using a centralised mobile device management system. Working in this way means software upgrades and fixes can be deployed from a single location without the need to take devices out of circulation. Additionally, routine maintenance checks and usage trends can be monitored in real-time. 10 zetes white paper 8 Motorola 2013, What s Driving Tomorrow s Retail Experience, White Paper

11 Section 2. COMMON PROBLEMS FOR LOST SALES OPPORTUNITIES SOLUTION Lost sale #2: COLOUR SIZE ORIGIN... TABLET Using an in-store management solution running on a mobile device, in-store sales staff are transformed into knowledgeable experts, able to satisfy customer queries with high quality information on the spot. Mobility means the ability to operate a fully functional customer service desk from anywhere inside or outside the store. They have the power to look up product features or provenance, check availability in the stock room and the distribution centre, or organise for Click and Collect at another local store. This is achieved at the point of interaction, rather than allowing the customer to walk away and potentially lose the sale. Beware of Poorly Informed Staff Looking ahead, wearable computers, like Motorola s Smartbadge or Google Glass, will enter the mainstream and complement smartphone type mobile devices for customer service applications. Their main purpose to trigger an immediate dialogue with a consumer will be supported by the availability of a more powerful smartphone, able to communicate between locations to complete stock management functions. In addition to ensuring better customer service levels through satisfying information requests, wearable devices will support productivity improvements more quickly, by informing sales staff of key tasks to be completed throughout the working day. zetes white paper 11

12 Section 2. COMMON PROBLEMS FOR LOST SALES OPPORTUNITIES Lost sale #3: Inconsistent and uncompetitive pricing across channels Lost sale #4: service levels do not meet the customer s expectations With 40% of shoppers admitting they use a mobile device when inside a store, it is unsurprising that trends like showrooming are becoming so widespread. Here, consumers visit a high street store to view goods and instead of buying the items, use their mobile device to check for cheaper stockists of the identical item online. Showrooming is forcing retailers to stretch their pricing capabilities and respond with more competitive offerings. This requires retailers to have the technological agility to implement immediate price cuts visible in the store and online to match competitor deals, and to launch one off flash sales. Implementing electronic shelf edge labelling will enable retailers to implement immediate price cuts visible to customers shopping in any medium. SOLUTION Lost sale #3: The concept of a drive-thru originated in the 1950s with drivethru restaurants. Now rebranded as Click and Collect, drive through shopping is booming and one of the fastest growing ways for consumers to purchase goods online. For retailers, Click and Collect is attractive because it resolves the age old problem of last mile delivery, which is expensive to absorb and potentially an inconvenience for consumers, if faced with waiting at home for a parcel to arrive. Beware of Fulfilment However, for as many problems as it solves, Click and Collect also opens up new challenges as retailers need to identify ways to fulfil these orders either using store based inventory, or from a central warehouse, where they are then shipped to the store or collection point. Using an in-store management solution with price and promotion management modules, retailers can implement price cuts at the item level and capture the price markdown as a permanent record. It is also possible to swiftly re-label products and create in-store specials to respond to online discounts immediately at the point of customer interaction. Using mobile technology in this way ensures the connection with each customer is maintained and a price match transaction takes place. When a retailer is armed with the right technology, Click and Collect services can provide a means to save the sale. This is by offering consumers who may have arrived in the store and not found the goods in stock, a chance to order from another branch and either arrange to collect the items, or have them delivered. Fulfilling this requires in-store stock visibility capabilities to check with real time accuracy, exactly what stock is available to purchase and where, with the means of taking a payment there and then. Returning to the Missing basket 9 report, such an investment would pay dividends. 42% of shoppers disappointed by an out of stock situation said they would purchase the product from the retailer if a shop assistant was able to check nearby stores for availability and 44% said they would still purchase from the retailer if they offered the option to buy the item online and have it delivered to their homes instead. 12 zetes white paper 9 You Gov/Venda research - Missing billion basket report 2013

13 Section 2. COMMON PROBLEMS FOR LOST SALES OPPORTUNITIES SOLUTIONS FOR LOST SALE #4: Selecting the right model for Click and Collect Solution to Model 2: Fulfilment from the DC distribution centre In the same way that fulfilling e-commerce orders requires warehouse picking and fulfilment processes to be re-thought to cope with single orders instead of bulk shipments, Click and Collect creates specific challenges for retailers. Depending on the retailer s stock ranging strategy, they may opt to fulfil Click and Collect orders either in the store, or centrally, from a distribution centre. Regardless of the approach taken, stock accuracy and visibility is critical to ensure customer satisfaction levels. Solution to Model 1: In-store fulfilment distribution centre distribution centre Fulfilment from the DC requires an in-store management solution to ensure that pre-picked and/or orders are booked in and can be located quickly when the customer arrives. Due to ranging issues, this is the more common fulfilment model and requires the retailer to operate a mini warehouse in their store. Since customers will frequently have pre-paid for goods, retailers need advance warning of problems, to enable remedial action. For example, if an item is missing, could it be fulfilled using in-store inventory instead, to avoid disappointing the customer? Or could the item be delivered? An in-store stock management solution enables this to be administered quickly leaving more time for sales staff to engage with customers. To achieve this level of visibility, retailers need to identify exactly where an item is at any stage, from the point the order is placed, to its collection by the customer. This means tracking its movement along the supply chain with a single unique identifier and real-time integration with proof of delivery (epod) systems. Using Collaborative Supply Chain solutions and a cloud based data repository, it is possible to fully integrate each stage in the process and pre-empt issues before they escalate. Fulfilment from within the store requires accurate real-time inventory visibility. An in-store management solution delivers this from the moment an item is picked for a Click and Collect order by ensuring inventory levels are updated instantly from the shop floor, to trigger replenishment orders or inform other members of staff of lower stock availability. With the exception of mega stores, which carry every stock item available, it can be difficult for retailers who operate a ranging strategy to offer Click and Collect with in-store inventory. If this is the case, it is preferable to operate Model 2 and dispatch pre-picked goods from the DC to the store. Beware of Time Consuming Admin In addition to preventing lost sales, an instore management solution ensures shop floor staff are working effectively. This is achieved by balancing the need to complete core administrative responsibilities like stock counting and replenishment efficiently with spending as much time with customers as possible. Administrative tasks like perpetual cycle counting can be integrated into the daily routine to ensure stock auditing is always 100% up to date. zetes white paper 13

14 Section 3. HOW IN-STORE STOCK MANAGEMENT HELPS RETAILERS TO SAVE THE SALE Perhaps the best way to demonstrate how in-store stock management solutions help to create a seamless Omnichannel experience and in doing so, save the sale is from the perspective of a customer - Mrs Smith. She needs a cardigan to wear for a university reunion and finds exactly what she s looking for online, from a well-known high street retailer. She needs to wear it in 2 days time but express shipping costs are pricey in her opinion. She hasn t seen anything else similar so definitely wants to have that item and be sure of obtaining it. The retailer s website says the item is in stock for Click and Collect orders, which she selects, arranging to pick up and pay for the cardigan from her local store the following day. Upon arrival at the store, she finds there has been an administrative error. Although the item was delivered into the branch that morning, it was put out on the shop floor by mistake and sold to another customer. It s not an ideal situation, Mrs Smith has yet to pay for the item, but that s the least of her concerns. She just wants the cardigan. How can the retailer redeem the situation, save the sale and keep Mrs Smith happy? Secondly, by using a mobile device to check stock availability elsewhere in real-time, the store staff could have offered Mrs Smith the chance to purchase the item from another branch and have it express couriered to her home within one hour. She agrees to this and shortly after arriving home, the cardigan she wants arrives. It is a perfect fit and she is impressed by the way the retailer has responded to ensure she could receive the item she wanted at the right time. Without the support of a mobile in-store stock management solution to provide the retailer with real-time stock availability and visibility data, this level of individualised customer support would have been unviable. This sale would have been lost and with it, any future sales to Mrs Smith. Clearly the above account is hypothetical but it raises two common problems, each of which is resolved with an in-store stock management solution. Firstly, the Click and Collect order would have been correctly administered in the first place. At the time the garment arrived in store, it would have been logged in as a special order using a unique identifier and then given a safe storage location until Mrs Smith arrived to collect. 14 zetes white paper

15 Conclusion Advances in technology have effectively created a double-edged sword 10 with technology being simultaneously a driver of changing attitudes and Omnichannel expectations, and a limiting factor in being able to satisfy the demands of consumers. Technology is driving change at this pace due to the ubiquity of smartphones, constant availability of Internet connectivity and ease of commercial transactions. On the down side, technology is a limiting factor in being able to meet the demands of consumers. Therefore, retailers who have not invested adequately in the right capabilities to sustain an Omni-channel strategy with agile logistics operations both in the warehouse and store areas, plus real-time inventory management - will inevitably disappoint customers, who are likely to seek alternatives. To be successful at Omni-channel retailing, and Click and Collect in particular, requires 100% stock accuracy. Retailers need to have immediate visibility of the stock available in their local area at all times and this data needs to be accurate enough to win both the sale and continued support of the customer. Depending on the fulfilment model, stores either need the processes and technical capability to act as miniwarehouses, or the flexibility to handle both traditional sales and pick to collect orders. Get these things right, and retailers can have a very powerful offering, that will enable their brand to deliver a compelling physical experience in the store and satisfy demand for immediacy and price, potentially competing head on with pure e-commerce specialists. Successfully merging the two is the essence of Omni-channel and will ultimately win the loyalty of shoppers. 10 McKinsey & Co, The future of Retail Grocery in a Digital World Questions? dheedene.sarah@zetes.com zetes white paper 15