Retail planning and allocation is once again under the spot light. Will Severn, explores how retailers across Europe, North America and South America all struggle with the same issues; fierce competition, increasing price sensitivity due to growing transparency and pressure to shift to a Omni-channel retailing model. “Retailers need to make difficult decisions when it comes to Omni-channel retailing, but they often find themselves limited by the capabilities of their existing IT systems”.
You don’t have to be a retail specialist to notice that there is a lot going on in retail right now. Even well-known retail brands that have enjoyed success for a number of years are now having a hard time whilst web shops offering lower prices enjoy impressive year on year growth.
While many physical retail outlets remain profitable, the shift of demand to online channels is inevitable. Equally though, a growing number of e-commerce businesses are now starting to open offline shops as consumers still have the need to see and feel the product before they decide to buy. This industry development is forcing many teams to rethink their approach to retail planning & allocation.
Look for new ways to plan your retail operation
In order to cope with this changing consumer behaviour, retailers are increasingly looking for new ways to combine physical stores with online sales channels. Omni-channel is the buzz word: the orientation phase of the buyer journey takes place online, after which a physical store is visited to have a good look at the product. The consumer makes their choice right there, but then goes back to the internet to compare prices. The customer buys the product at the lowest price they can find and has it delivered at the location and moment of their choice. And this is just one of the many buyer journeys a consumer can take.
To be a successful Omni-channel retailer, you must be able to make decisions that are not only optimal for one channel, but for all of them. However, this is not an easy task! Supplier lead times are increasing, whilst product life cycles become shorter and shorter. Thus, in order to adapt quickly to changes in demand, and to be able to proactively manage inventory, retailers require advanced planning software.
I increasingly find that existing IT systems are often hindering retailers instead of supporting them. This is especially true in well-established retailers who rely on old legacy systems that are comprised of custom-made rules and Excel-lists. You simply cannot rely on these systems to make the optimal decision.
The role of ERP has shifted for retail planning and allcation
The business technology analyst, Gartner, researched this topic and concluded that the role of company-wide ERP systems has shifted. Retailers not only require a robust back bone that encompasses master data, transactional data and processes, they also require dynamic, best of breed solutions which have been specifically designed to help them overcome the supply chain challenges they face.
I think this is the main reason why relatively young retailers like Rituals, Udea and Pabo have gained a substantial competitive advantage against the ‘older’ retailers. They are not stuck with inflexible IT systems and as a result these business all utilise agile best of breed solutions.
Time for a change
My advice to retailers is to evaluate their IT landscape very carefully. In order to change your IT landscape from an obstruction to an enabler, you have to be brave enough to update your systems. Put simply, if you want to be a successful Omni-channel retailer, the time for a change is now. And your retail planning and allocaiton process could well be your quickest win.