Retailers, meet your new omnichannel customer
Welcome to the latest installment of our Innovate with invent.ai blog series! Once a ...
Welcome to the latest installment of our Innovate with invent.ai blog series!
Once a month, I host an “Innovate with invent.ai” 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 this is an excellent opportunity for planners and businesses. This time, we’ll examine one of the most significant changes affecting the retail world and what it means for inventory.
Let’s dive in!
Evolution to the omnichannel customer
Over the last few years, retailers have experienced more change than in the past five decades. The days of a single approach have been replaced by an omnichannel approach. Customer data and social media aren’t mere marketing channels but comprehensive opportunities to create personalized experiences across physical and digital channels. The exact channel pathway is also varied by person, with some opting to visit a physical store, jump online, go back to the store, evaluate competitor videos online, and more.
The ability to forecast demand has grown ever more challenging, and every user experience online and offline is a potential opportunity to increase revenue and reduce lost sales. Throughout the pandemic, they struggled with stress on supply chains and inventory shortages. When those pressures finally eased up, many stores and distribution centers had to manage floods of products and deal with all the problems associated 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 undoubtedly significant changes, not everything is permanent. Supply chain issues and macroeconomic conditions can come and go. However, one important change is here to stay: omnichannel.
Today’s retail customers are omnichannel customers
We're now living in an omnichannel retail world. Customers want to buy what they want when they want—using any combination of online and offline channels. 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. 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 omnichannel. 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 omnichannel expectations gain a significant competitive advantage. Now that customers are fully omnichannel regarding purchases and returns, what does this mean for inventory decisions?
What omnichannel means for inventory management
Retail inventory management has always been a balancing act. Retailers aim to stock enough products to satisfy demand without carrying excess. Now, though, inventory decisions are much more complicated. Omnichannel planning requires a holistic approach rather than looking at demand from an individual store or regional level. Retailers must strategically position inventory across their entire network of stores and distribution centers to always make the right products available to their omnichannel customers.
This means considering:
- How to prevent out-of-stock 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 try to make these kinds of decisions about every SKU, 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 trying their best to make sense of it all. That’s why retailers need to move away from the manual, human-judgment-driven systems 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 omnichannel world. Here are three great places to start:
1. Position inventory for financial success
Savvy 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 critical goal: driving financial growth. To stay competitive in the omnichannel future, retailers must position each piece of inventory so that it is most likely to sell for the highest possible profit. With inventory always positioned and available where it’s wanted most, all the other essential KPIs will fall into place.
2. 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 2021 NRF study found that for every $1 billion retailers have in sales, they are incurring $166 million in returns.
Retailers should streamline the returns process to make it easier for customers and the teams behind the scenes. Profitability should be incorporated into every decision. With revenue as the key focus, each returned item will go through fewer touchpoints, spend less time in transport, and be repositioned where it has the highest probability of resale.
3. Automate and optimize decisions
Omnichannel inventory planning is complex, and retailers must quickly analyze and understand every possible scenario to make the most profitable inventory decisions regarding purchases and returns. Automated decision-making is critical here.
Leading retailers are adopting modern AI-driven inventory planning solutions that can analyze massive amounts of data very quickly and 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.ai, we’re excited to help large retailers embrace these strategies. We can help your organization navigate the complexity of omnichannel, manage your inventory profitably, and create the best possible experiences for today’s new omnichannel customers.
Thanks for checking out this installment of Innovate with invent.ai! 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 to speak to a retail AI expert at invent.ai.
Recent posts by Jonathan alves
Retail inventory planners, do you report to the CFO?
Invent.ai stays in tune with retailers’ take on hot industry topics and all things ...
Are economic challenges impacting your inventory strategy?
June 12, 2023 Welcome back to our new blog series: Innovate with Invent.ai! To ...