Connected Commerce is Reinventing the Retail Store
The once simple structure of the retail business – open a store, source products, sell for a profit and repeat – has changed tremendously in the past 10 years. Perhaps the most undeniable change for retailers has been the meteoric rise of connected commerce. Leading retailers that were once the cornerstone of the industry have had to re-organize and restructure as a result of the shift in customer buying patterns and the changing role of retail stores in fulfillment and customer satisfaction.
The retail store is evolving to become both a brand experience and fulfillment center. As consumer expectations have steadily risen, retail stores must continue to find ways to deliver meaningful shopping experiences. The upheaval created as a result of the consumer-led commerce evolution means retailers must be ready to meet demand at the intersection of where online and offline channels converge.
Without the right technology, even the best-run retail operation will find it challenging to execute. They simply won’t have the insights they need for optimal decision making to support omnichannel fulfillment at the store level, which can lead to inaccurate demand forecasting and planning, and incremental losses in revenue and brand equity.
The Evolution of the Retail Store and its Effects on Inventory
As the modern retail store evolves to remain a significant part of the path to purchase, many retail executives are positioning stores as strategic assets where customers can explore and interact with their brand, both physically and digitally.
The first step for many of them is the activation of in-store fulfillment for online orders, which consumers have wholeheartedly embraced. And there is good reason why. The 2018 Thanksgiving/Cyber Monday shopping season saw a 50% increase in BOPIS purchasing behavior, compared to 2017. Industry analysts predict that growth in buy online, pickup in-store (BOPIS), and similar store-based fulfillment strategies, will continue to climb.
But while the wave of new fulfillment strategies has significantly improved the consumer experience – through BOPIS, curbside pickup, lockers and more – many retailers are finding it increasingly difficult to deliver on these commitments profitably.
Introducing Omnichannel Inventory Optimization
As connected commerce changes the game for retailers, it is critical that they invest in inventory solutions designed for the way we shop today – using modern technologies like cloud architectures and machine learning – to ensure items are stocked in the right place to begin with.
Retailers should look for a demand forecasting and inventory optimization solution that understands digital demand is now being fulfilled through physical stores and can account for channel demand patterns and emerging omni-fulfillment strategies. It must be able to model demand at the SKU, location and fulfillment strategy levels to precisely, and proactively, place items in the optimal store location to balance fulfillment execution and profitability. That’s omnichannel inventory optimization.
To ensure higher margins and customer satisfaction, an omnichannel inventory optimization solution mitigates inventory complexities against stockouts in the stores by managing asset placement for digital orders, as well as walk-in purchases.
Optimizing Demand by Fulfillment Strategy
Omnichannel inventory optimization also improves forecasting accuracy by forecasting both ‘lift’ and ‘shift’ in demand. It is vital for the retailer to have full visibility into the impact of these corresponding dynamics. Forecasting demand lift alone would result in an inventory surplus at the point of origination. By also understanding the dynamics of demand shift – from the point of origination to the fulfillment location – allows inventory levels to be optimized.
The Outlook for Retail Stores is Brighter
Today, the consumer, enabled by connected commerce technology, is more empowered and has higher expectations than ever before. Innovative companies that can reinvent the merger of physical and digital commerce with omnichannel inventory optimization will be prepared for whatever their customers demand next.
Rob Nugent has 14+ years of experience as a technology sales and marketing manager. He is currently a Senior Product Marketing Manager at Manhattan Associates and is responsible for developing the strategic product marketing direction for Demand Forecasting and Inventory Planning solutions suite. As the platform evangelist, Rob develops and launches customer insights, go-to-market plans and product messaging. He has a BS from Adelphi University and an MBA from Penn State.