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Make Omnichannel Retail Profitable Start with Gaining Complete Visibility into Total Global Demand Breaking down inventory walls between retail, eCommerce and wholesale channels to gain visibility into total global demand. Maximize profit opportunities through integrated merchandising.

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Page 1: Make Omnichannel Retail Profitable - 7thonline · Make Omnichannel Retail Profitable Start with Gaining Complete Visibility into ... • What does omnichannel retailing mean for inventory

Make Omnichannel Retail ProfitableStart with Gaining Complete Visibility into Total Global Demand

Breaking down inventory walls between retail, eCommerce and wholesale channels to gain visibility into total global demand. Maximize profit opportunities through integrated merchandising.

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How can you ensure that your omnichannel retailing strategy is a way to profitable business in addition to creating happier customers? A crucial link that is often missing in this exciting discussion is a retailer’s ability to gain complete visibility into global demand across online, store and wholesale channels—even though they may no longer exist for your 21st-century shopper as separate “channels”. Gaining such visibility is a highly strategic yet practical step to begin aligning your entire supply chain and distribution with the omnichannel consumer. And it is within such alignment where the new gold of retail is discovered.

• Do you know your best/worst sellers at any given time, in any or all of your channels—eCommerce, brick-and-mortar store or wholesale?

• Do your merchandising, sourcing, production, and finance teams all have the same visibility into cross-channel demand in order to coordinate strategies?

• Are you able to drill down to style/color level by door or by account to identify sales opportunities or inventory risks?

If you are not sure about your answer, it is never too late to get started. You too deserve to gain that extra competitive edge of knowing your total demand and staying proactive in an omnichannel environment.

This paper discusses how omnichannel retailing is changing the requirement for effective merchandise and inventory management. More importantly, it identifies areas of opportunity for increasing revenue and lowering costs through the strategic ability of gaining visibility into total global demand. It then discusses how retailers can use technology to harvest, analyze, plan and track demand better in order to turn those opportunities into real bottom line increases.

What You Will Learn:

• What does omnichannel retailing mean for inventory• How does gaining visibility into total global demand impact profitability• What are the key capabilities in harvesting total global demand and what technology to look for

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Inventory Imperative: Breaking Down the Walls between Channels

Supply chain needs to change

In this new omnichannel direction, many experts recognize the challenge of supply chain and the need for it to adjust. Increasingly, supply chain is required to juggle many different order profiles, and the current setup of multiple channels with separate inventory, processing and delivery systems will no longer appropriately support the new omnichannel shopper who might view her items on the phone, stop at a shop to try, make an order online, and potentially return at another outlet. The way inventory and supply chain is managed today has to change, and the changes have to be combined with an end-to-end view of inventory across all the different sales channels.

Gaining cross-channel inventory visibility is the first stepIn Deloitte’s 2012 Omnichannel Assessment of 10 leading omnichannel retailers, the authors identified “cross-channel inventory visibility” as the top capability for them to move towards greater business transformations. This capability is called out specifically to enable further efforts to eventually offset distribution inefficiencies across channels. “Combining inventory into a single pool, retailers can show customers online which items are available in local stores and show in-store customers what additional items are available online.”

Omnichannel retailing as a notion is almost entirely driven from the demand side—the new shopper today often uses a combination of mobile, online or physical stores for her purchase instead of only staying with one. This rise of the tech-enabled, brand-conscious consumers is credited as the force behind what Deloitte calls “The Great Convergence”. Alison Paul, vice chairman and U.S. retail and distribution leader for Deloitte said during NRF 2013: “There are no channels any more. It’s only you and the customer.”

Much of the action items derived from this concept is, as a result, highly concentrated around upgrading the customer’s overall shopping experience – to make it seamless between online, offline and on-the-go. As various reports on strategic IT spending can testify, today’s technology spending in an omnichannel world has began to shift more towards marketing and other customer-facing areas.

As the channels converge and become indistinguishable for an individual shopper, another important convergence is also happening behind the scenes–merchandising, marketing, and supply chain management are also converging to take greater advantage of the rise of customer analytics and sales data. Such convergence aims to arrive at a better and deeper understanding of a brand’s diverse set of consumers, and to make sure that such understanding can be translated accurately and rapidly into matching merchandising and supply decisions. Ultimately, the age-old retail mantra stays unchanged: it is still all about delivering the right product, at the right time, in the right place to the right customer. What has changed is the retailer’s capability in linking and making sense of all the complex information and calling the right shots at the right time.

Omnichannel Retailing: from Aspiration to Business Strategy

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GAIN VISIBILITY INTO TOTAL GLOBAL DEMAND

In omnichannel retailing, the focus is to break down inventory walls between traditional channels in order to make integrated merchandising and assortment decisions based on complete visibility into total demand

RETAIL

WHOLESALE

ECOMMERCE

WHITEPAPER | MAKE OMNICHANNEL RETAIL PROFITABLE

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Understanding Your Total Global DemandAs a brand or retailer, your complete visibility into total global demand should be based upon detailed analysis of sales at the lowest planning level within each of your channels: be it brick-and-mortar retail, wholesale, or eCommerce.

RetailFor your physical retail channels, this demand should not be merely an aggregated unit or dollar amount. You should be able to drill down to each and every style/color by week by door. Some have traditionally used clustering to breakdown high level merchandise plans. In today’s omnichannel reality, merchandising decisions can and must go down to a lower level such as individual door in order to best leverage the analytical power to deliver tailored assortment plans that answer to very specific localized needs.

Wholesale If you are a vertically integrated brand that also sells to major retailers or specialties and boutique stores, style/color level demand needs to be properly captured as well. Nowadays, brands are gaining greater access to a retailer’s POS data. Such information, if available, combined with orders, receipts or shipment data, can provide a clear picture of demand within the wholesale channel.

eCommerceeCommerce as a channel is born with ample amount of data and analytics. Sales performance at the style/color level has to figure in to the total global demand from the various online channels that a brand might engage in.

As an aggregate number, this total global demand can help management monitor the entire business’ progress towards corporate financial objectives. It can also have direct supply chain impact in terms of better guiding production orders, factory capacity and delivery planning.

When drilled down, this total global demand can help leaders within each business unit or division to gain a deeper understanding of the ongoing sales and inventory performance. Reporting on best/worst sellers, for example, can help pin point styles that are making the biggest sales impact for a door or a region. Management can then make the right pricing or inventory decisions to maximize the opportunity or minimize the perceivable damages.

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TOTAL GLOBALDEMANDVISIBILITY

PRODUCTION LOGISTICS

OMNICHANNEL SHOPPING & ORDER FULFILLMENT

ALLOCATION

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INVENTORY VISIBILITY: REALITY CHECK

Source: RSR Research, July 2012

A July 2012 Retail Systems Research study reports a gap between the perceived value of inventory visibility and the current status of owning such visibility.

WHITEPAPER | MAKE OMNICHANNEL RETAIL PROFITABLE

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Profit Opportunities in Gaining Total Global Demand

To turn omnichannel retailing into tangible profits, a retailer must be able to turn the increasingly in-depth consumer insights and readily available sales and inventory data into key merchandising and supply chain decisions. Without the ability to effectively analyze consumer and sales data for merchandising decision making, it is a wasted effort to collect an explosive amount of consumer data in the first place.

So how can complete visibility into total global demand across channels impact revenue and profit?

• Earlier and more accurate buy and/or production orders• With today’s global supply chain stretching from Asia, Latin America to Europe and the U.S., being

able to generate accurate production orders with ample lead time remains an important part of supply chain management. Asia, as many have observed, has seen an increase in labor costs and consolidation of manufacturers. Accordingly, they are demanding longer lead time with stricter requirements. As a result, the need for more accurate production orders that can best anticipate future demand becomes increasingly critical.

• Ongoing inventory optimization—fine tune assortments according to localized demand, thus eliminating excess, increasing turns, and lowering markdowns

• The ability to adjust sales strategies as the selling season unfolds is an important area of competitive advantage. This aspect of in-season merchandise management can help identify selling opportunities or inventory risks for a particular style/color at a specific door, region, account or online store page. Being able to quickly re-forecast and optimize for localized demand separates market leaders from the rest.

• Providing the critical foundation for further offsetting distribution inefficiencies • Just as most merchandise and inventory planning is currently set up separately for each channel,

distribution networks are still largely organized based on traditional channels. Gaining complete visibility into total global demand is the first step towards breaking down those walls and facilitating distribution based on where demand flows. This ability can help offset inefficiencies and lower operational costs

• Lower inventory• Foundation for offsetting

distribution inefficiencies

• Accurate & earlier production orders• Ongoing inventory optimization• Greater sell-thru• Lower markdown• Higher inventory productivity

+ Driving Revenue

- Reducing CostsW

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Technology Enablers to Drive Cross-Channel Visibility and Planning Capabilities In order to gain unified visibility of cross-channel inventory and to effectively analyze demand information, retailers need to continue to make strategic IT investments in the following areas:

• A cross-channel platform that manages important aspects of demand planning • A retailer needs to have one place to go for an aggregated view of its total global demand as well as

the ability to drill down—by channel, by door, by region or by account. Such dynamic views and information need to be available on a central information platform that is accessible to various internal teams such as merchandising, sales, production, sourcing or finance. This visibility can help streamline internal communication, encourage greater internal collaboration and inspire better decision making based on accurate and timely demand information

Ultimately, a retailer needs to be proactive instead of reactive to demand. Its ability to effective plan, track and optimize merchandise and assortments is one important management and operational aspect. Omnichannel retailing further demands a greater level of tailoring of assortments to localized or personalized needs. A retailer therefore needs to be able to drill down to style/color level by door or by account to understand granular level demand and deliver on it.

• Domain-specific BI tool • Gaining cross-channel visibility opens a whole new door to data analysis and its power to guide

decision-making. The availability of data, however, does not require all business decision-makers to also become data scientists or programmers in order to harvest the important insights embedded in all the retail data. A new breed of BI tools today can simplify this process and help business users with limited technical experience to achieve high-quality analysis with intuitive interfaces and minimum training.

Furthermore, BI is at its best when it is industry specific instead of being a generic out-of-the-box product. When designed with industry knowledge, a BI tool helps managers get to their desired reporting faster with the key metrics and attributes most relevant to their businesses.

• Industry-specific forecasting • Similar to owning BI tools for essential reporting and analysis, system forecasting is critical in guiding

important planning decisions. In the realm of merchandise and assortment planning, system forecasting can incorporate historical as well as in-season selling trends to help determine the best mix of merchandise and to guide continued optimization through the algorithms’ self-learning properties.

The Next StepWhere does your omnichannel retail strategy stand today in creating happy shoppers while growing margins? If you are moving towards a true cross-channel platform for that critical total global demand, you need the right analytical and planning tools to systematically analyze all the demand information and take action. Many retailers are still in the beginning stages of breaking down existing walls between channels, and it is a crucial step to begin re-aligning supply and production with the new omnichannel setup. Partnership with cross-channel planning platform providers with industry expertise can be highly critical in such a process: with the right technology and experience, such a partnership not only helps speed up technology adoption, but can also bring onboard industry best practices. This can ensure lower risk of investment and a significantly greater chance for successful value creation right from the project start.

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About 7thonline

7thonline is the leading provider of cross channel merchandise and assortment management solutions to the retail and wholesale industry. The company’s cloud and enterprise software enables more effective planning, demand forecasting, and consumer centric optimization for global and fast growing brands. 7thonline’s embedded business intelligence and analytics offer cross-channel inventory visibility for retailers, eCommerce, and vendors allowing for greater operational performance, increased sales, reduced markdowns, and improved margins. Customers include G-III Apparel Group, GRI Retail Group, Jimmy Jazz, Michael Kors, Nautica, Oakley, Phillips-Van Heusen, Under Armour, VF and others. 7thonline is headquartered in New York City with global offices.

For more information, please visit: www.7thonline.com

For 14 years, 7thonline has been servicing leading apparel, footwear and accessories brands, providing them with merchandise and assortment management solutions with embedded analytics for wholesale, retail and eCommerce channels. As a result, in today’s omnichannel environment, many of our clients are able to move faster than their competitors to a cross-channel platform with 7thonline planning and forecasting. Together, the goal is crystal clear : retailers and brands need to take advantage of the demand information coming from all channels to better serve their customers, meet their rising expectations, and drive real margins in an increasingly complex retail operation. 7thonline as a strategic partner specializes in providing the critical ability to aggregate, drill down, forecast and plan for total global demand across any or all of these channels, and this capability can serve as a springboard to re-align supply chain and distribution to cater to today’s omnichannel consumers.

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