It’s nice to share
Collaboration in retail supply chains, both the sharing of infrastructure, like shared trucks and warehouses, or the sharing of data, would give great benefits to retailers and their customers.
But retailers shy away from it because they think that their supply chains are a source of competitive advantage. In fact, because they all suffer from common inefficiencies, retailers’ supply chains are probably a source of collective disadvantage at the moment.
With the rise of online shopping there is a trend to smaller, more frequent deliveries (as opposed to the full truck, once a week of the past). But that means lorries driving around the country half empty and that is costly to retailers, their customers and the environment.
So what are the barriers to collaboration? In a nutshell: irrational fear. Managers want to protect their empires and see collaboration as a threat. Retailers don’t feel they can completely trust their own supply chains let alone someone else’s.
Yet I recently heard of a project where two competitors used the same unbranded vehicles for deliveries. It drove down costs for both without compromising service for either. So the potential for profitability gains through collaboration are definitely there.
Return to sender
Supply chain efficiency is particularly important for omni-channel clothing retailers where customers return 22% of what they buy online (Martec, 2013). The cost of processing a return can be 2-3 times that of an outbound delivery and can eat up 35% of the profit of the transaction. But a well-executed returns strategy can be a driver of loyalty and can add 2% to profitability.
The trick is to treat a return as a conversion opportunity, especially in the case of a BORIS (buy-online-return-in-store). The most precious commodity in retail today is footfall. If a customer comes into a store to return something bought online, the store staff should be trained and motivated to sell them something else.
A good up-front returns offer is necessary to put you into the shopper’s consideration set. But many retailers offer them without understanding the true costs of returns processing. Marketing and supply chain functions need to co-ordinate more closely and merchandisers should track returns percentage by product SKU (stock-keeping unit).
Outward logistics tend to be standardised and efficient, but reverse logistics are often less-well understood and can have a big impact on profitability. Returns are also often not accounted for prudently, with stock being returned to the balance sheet at full value, when a 25% mark down in value would be more realistic.
Services like BT Trace which enable collaboration, improve supply chain visibility and drive down cost to serve the customer are going to be of strategic value to omni-channel retailers.
Posted by Mark McDonnell, Senior Marketing Manager, BT Global Services
We’re about a third of the way through a nine-month project to install a new integrated multichannel solution for footwear specialist Charles Clinkard, including a merchandising system, point of sale, and CRM.
After three months of hard work on both sides, we’re bang on track to have the new system up and running in all 34 branches before the next big trading period for footwear retailers at Easter (yes, that’s right, Easter. Apparently people don’t ask Santa for shoes).
With the software now in place and the design phase drawing to a close, we’ve been working together to figure out how to set things up so that Charles Clinkard gets the most out of the functionality that comes with the Mercatus merchandising system. The company’s current system has served it well for the past 10 years, but it just can’t cope with the demands of a more integrated, multichannel world.
Right now that’s a nuisance – soon, it’ll be a disaster. Customers are getting used to seamless, multichannel shopping and increasingly expect things like click and collect.
As the teams have kicked around different ways of overcoming the more fiddly aspects of footwear merchandising (such as every size of every style in five different widths!) we’ve been regular visitors to the Charles Clinkard head office – as much as 2-3 times a week over the summer.
Fortunately everyone seems to be getting on and that familiarity has bred a great working relationship that’s really helping us create a solution that should support Charles Clinkard for many years to come.
Watch the video and read the full story, including the views of Tim Payne, Charles Clinkard’s merchandise director
About Charles Clinkard
The business began in 1924 with the opening of a shoe shop in Stockton. From small beginnings The Clinkard Group has now grown to be the leading Independent Footwear Retailer in the North East and one of the largest Independents in the UK. The current Managing Director – Charles Clinkard – is the grandson of the founders and continues the values that have established the business. The group consists of two key components: Charles Clinkard, which is the retail arm, and Intershoe the wholesale operation.
Further reading: Retail Week on the Road: North East and Yorkshire
It has always been one of the unsolved mysteries of the universe, something that our minds can’t grasp, the intellectual challenge that relates to the question: “What would happen if the indestructible force met the immovable object?”
Relating that thought to retail software and services, and coming fast over the hill is the indestructible force ‑ the move toward Software as a Service (SaaS). Here, we’re told that businesses will be able to simply subscribe to software as a service, and therefore be up and running overnight, much as one does with internet service provision, but this time related to business applications. It sounds attractive, the approach is compelling, it can’t be resisted.
However, on the other side of this hill is the immovable object, the traditional ERP (Enterprise resource planning) project. This is the implementation of software applications into the business, including the adoption of numerous complex business processes and the spreading of the vision to a wide group of people, in different departments, with different skill sets and conflicting objectives.
Today this really is an immovable object. Projects are run by documenting a series of business process blueprints, produced from a lengthy series of workshops, discussed and eventually agreed by a group of business sponsors. This lengthy and time-consuming process is required before the software can be used, indeed before the training can start, and it’s costly and challenging for all parties.
As we know though, you can’t stop an indestructible force, so there must be a solution. Perhaps the force will simply go round the object or maybe they’ll call it a draw and settle it through penalties.
At a recent trade show, I was approached by a former US colleague visiting the UK to see what opportunities exist. He wanted to know the name of the organisation that acted on behalf of UK retailers, considering industry trends and providing solutions. In North America the National Retail Federation is the body that does this, enabling retailers to debate their approach. We don’t have an organisation like this in the UK.
So it seems to me that the answer to our question is closer to home than we think, but it requires collaboration, something that challenges our UK culture. Clearly we need standards, and a body that considers these things, to make the immovable object budge a little! Then one of the challenges of the universe may have a chance of being solved…
By Robin Coles, Director of Supply Chain Consulting, BT Expedite
This week we were very pleased to announce a deal with Charles Clinkard, one of the largest independent footwear retailers in the UK. Charles Clinkard had been looking hard for ways of integrating its on and offline activities; current systems needed a lot of manual processing for functions such as click and reserve. But after its research of the retail technology market place the company chose BT Expedite so I’m grateful to it and our people who worked so hard to show what we could do.
We’ll be installing Connected Retailer multichannel system for Charles Clinkard, including Mercatus central merchandising, Store 6 point-of-sale, integrated store and Customer Relationship Management (CRM).
Retail integration projects like this can be very complex, and Charles Clinkard wanted to be certain that the installation project could take place without business interruption. We’ve got quite a bit of experience of carrying out these projects now and we were able to show what we’d done for other retailers in similar circumstances. It also wanted to ensure that anything we put in would be future proof, constant expenditure on systems and a small IT team meant that ‘keeping ahead’ was vital. We showed how we continually invest in our technology to keep it ahead of the game.
These projects are fascinating. Clients can go into them with some trepidation and they’re right to do so but there’s plenty out there now that have hit the new wave of combined on and offline retailing, and we’ve been pleased to help them along the way. We’re looking forward to making Charles Clinkard into another text-book case study – we’re a great fit for it, and it should know!
Now in its ninth year and sponsored by BT Expedite and BT Fresca for the third year running, Martec International has just published the IT in Retail Survey 2011-12. The study covers 150 of the largest retailers in the UK and represents something like 75% of all retail sales. Data is gathered by interview with CIOs or other executives responsible for IT and two versions of the report are published – the Top 100 Retailers and the Top 125 Non-Food Retailers.
The first key finding is that IT budgets as a percentage of sales have declined yet again. Now at 1% sales overall, they were 1.1% sales for the two previous years and 1.3% of sales for the 4 years before that. By segment, the range is wide with grocers averaging 0.7% sales and non-store retailers averaging 3.4%. Recent years have been tough for CIOs managing shrinking budgets, a problem compounded by the growing spend on e-commerce and mobile commerce applications.
E-Commerce sales were 8.5% of total sales for the non-food group, an increase of 9% on last year. For the top 100 retailers which includes: grocers, e-commerce sales were static at 6.3% sales. However, this is distorted by the fact that new entrants to e-commerce pulled the average down while established retailers grew their online sales. For the first time ever, two retailers said that they expected to do smaller online sales as a percentage of total sales, both companies with a high online share, which might start to indicate that for brick and mortar retailers moving online, somewhere in the range of 30%-40% of total sales is where the online share might top out.
2011 was the year that mobile commerce took off. Amongst the top 100, 16% are using mobile commerce already and 12% plan to in the next year. Amongst the top 125 non-food retailers 14% are using mobile commerce and 18% plan to in the next year. Kiosk usage is also expected to be a lot higher.
Martec asked retailers to identify their top spending priorities and for the first year ever, e-commerce was the front runner in the top 100 retailers and the top 125. Store systems came second in both cases but the percentage of retailers planning store systems improvements is well down on recent years.
Retailers have been forced to invest in e-commerce and mobile commerce and because of shrinking budgets they have had to cut elsewhere. In recent years there has been a rise in outsourcing and off-shoring though this year’s survey shows no growth in that area, probably because those inclined to do it have done so already. However, there are many retailers planning to replace or upgrade applications like merchandise management and supply chain and add applications like CRM and merchandise planning.
Martec believes that this year may be the last in which retailers can manage on reduced budgets and that they will have to start going up again soon. If 2012 is the year of the recovery, it will put greater pressure on retailers and their systems. The wise among us will start investing now to grab market share as the economy improves.
Blog post by Brian Hume, Managing Director - Martec International
For more information or to download a summary of the IT in Retail reports click here