Retailers are dealing with the challenge of operating across channels and also navigating a landscape that has never been more competitive, which is placing great strain on their merchandising and inventory management capabilities.
Speaking ahead of the ‘Thinking Retail Symposium’ hosted by TXT Retail in Amsterdam on 23 March, which brings merchandisers and planners together to share the latest industry thinking, Peter Charness, SVP of America’s and global CMO at TXT e-solutions, says: "Each of these two challenges by itself would be a disruptive, but taken together time it’s a nightmare. However, to a glass half-full person it represents an opportunity."
The way people now shop, in an omnichannel way, has resulted in retailers putting in place "mechanics" to deal with this in order to accommodate things like orders being taken online for subsequent collection in store.
"The problem is that this has messed up their merchandise planning. Retailers need to look at, and deal with, their stock differently. They have done what they’ve needed to do to their systems to simply accommodate omnichannel. But planning is critical for merchandising and managing inventory in an omnichannel world," says Charness.
This planning has been thrown further adrift by the "hyper competitive environment" in the retail industry that has been driven by online. Notable in the mix is the ongoing progress of Amazon, which now accounts for 50% of all the growth in online shopping. The best way to deal with this, according to Charness, is to have a unique and compelling offer which, like the fast fashion players, continually changes. However, such rotation and throughput has its challenges.
"It means retailers will look to do more floor sets and with greater frequency and more products therefore have to be stocked. There is more work involved for all merchandising areas. And it’s not possible to orchestrate this without planning and inventory management solutions," says Charness.
But for most retailers he suggests they are simply "muscling through the extra workload", which is not sustainable for the long-term as online volumes continue to grow and the use of stores for the collection of goods, rather than for generating sales, invariably increases.
"There needs to be fundamentally new ways to support these new ways of operating. It’s wholesale change that is required for retailers and not just an overhaul of some of their systems. It’s a ticking time-bomb," he reckons.
Part of the problem is the need to recognise the new operational role of the store as it shifts inexorably away from being the primary driver of sales to more of a distribution depot role that supports online sales. Retailers need to understand how to measure the contribution of the store in this new dynamic and also deal with merchandise planning within this new way of working in the physical environment and combining it with the online channel.
"It’s an imperative to have intelligent planning for what goes on the shelves in-store. And for online there is the requirement that when a customer order has been accepted then the retailer has to be able to then find the goods [across its various channels]," he explains.
As the demands on retailers continue to grow then Charness suggests some Artificial Intelligence and machine learning capabilities will inevitably be utilised within the merchandise planning field – although the focus will be more within the grocery sector than clothing where there is still a preference for "seeing and feeling" the goods.
"Lots of merchandisers do not like a ‘black box’ approach. We will get there [to some extent] someday but with textiles it is more about taste and fashion. I speculate it will be more rules-based than black box as merchants want to understand why goods have been computer selected. They will then be more willing to accept recommendations."
For now the use of such automated techniques by retailers has been limited to width and depth plans rather than having them having them impact specific product selections and recommendations.
Such forward-looking developments will no doubt be under discussion at the Symposium where, despite the competitive retail environment, Charness says experts in the merchandise planning field will come together and openly share valuable experience and expertise with their peers.
Thinking Retail - Amsterdam: Agenda and Registration at "Thinking Retail - Amsterdam"