Jan 12 2015
Every now and then through history, something comes along—a powerful new idea, a brilliant and forceful leader, a transformative invention—that changes everything. Whenever one of these game-changing catalysts appears, time suddenly takes a new shape: there was Before, and now there’s After.
Historians debate these watershed moments, but one indisputable transformation has been the introduction of the Internet on mobile devices and the ensuing rush to transfer as many systems and processes as possible onto the Cloud. Through readily available subscription services, we now expect to easily complete any task we want, at any time and in any place. This is the new After.
Seeing Through the Cloud
This Cloud revolution represents a rapid global scaling-up of accessibility and interconnectedness, allowing billions of users to engage on shared platforms that integrate data from many different sources. For retailers, that sudden change of scale has created its own Before/After scenario: how things were done before mobile e-commerce and omni-channel merchandising, and how they are done now. Many are still making the transition.
The benefits of retailing in the Anytime-Anywhere Age are pretty clear: better marketing, better forecasting, more customer engagement, multiplied touch points, increased merchandising scope, opportunities for disruptive business models … the list goes on.
But for all its benefits, mobile e-commerce also presents a number of significant challenges, and of these perhaps the biggest is maintaining accurate inventory awareness.
Inventory management has always been difficult, and the problem of out-of-stock—with all its damaging outcomes, like distorted forecasting, customer alienation, and lost revenue—continues to loom large for retailers.
Giving Up the Ghost Economy
Before the digital shift, when Periodic Inventory systems predominated, the process of updating inventories was incredibly sluggish. Even after the introduction of Perpetual Inventory (PI) systems, many retailers and product vendors continue to rely on outmoded data management software. Rather than the easily visualizable real-time data they need to respond quickly to market forces, business leaders are usually confronted with dense spreadsheets that need to be laboriously sifted before they yield any actionable insights … often after the period of their greatest relevance.
While PI systems were supposed to show retailers their inventory in real time (and then however long it takes to actually make sense of the endless columns of data!), they weren’t designed to support all the complexity of multi-platform merchandising. The inherent weakness of those systems has been exacerbated by the multiplication of different avenues for online ordering.
As a recent CNBC article on the problem of out-of-stock and phantom inventory—what’s sometimes called the “ghost economy”—pointed out, an item that appears in-store on the website may actually have been purchased earlier with the “pick up in store” option and simply not yet recovered by the customer.
According to the retail technology company Order Dynamics, as much as 25% of products that customers see on retail website are actually out of stock.
In the worst-case scenario, someone can place an order online, only to discover that the product has actually already been sold. It’s one thing to walk into a store and not find what you want, but it’s quite another to buy a product and only then discover that it isn’t available.
For retailers and their product vendors, the trouble of integrating traditional merchandising with e-commerce can lead to another equally troubling inventory management problem: overstock. It’s not uncommon for such companies to discover millions of dollars of inventory waiting in warehouse limbo, with no proper exposure online and yet dwelling outside of the supply chain, destined for unnecessary and costly markdowns.
Clearly, in the highly competitive landscape of mobile e-commerce, retailers can no longer bank on the old PI approach to maintain adequate inventory awareness. Improved visibility of real-time sales and inventory data – for retail merchants, category managers, planners, store managers – is key to optimizing against this increased complexity. Furthermore, improved visibility of this same data and analytics by a retailer’s product vendors is also critical to success: having more eyes on potential problems through effective retailer-supplier collaboration will help ensure that all stakeholders are working in concert to avoid out-of-stocks, overstocks and lost sales.
To find out how Askuity’s easy-to-use and powerful retail analytics platform can help reduce out-of-stocks, eliminate phantom inventory and drive sales, please contact us.