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Retailers going back to the future for risk-free stock control

Sunday 1 May, 2011

Retailers going back to the future for risk-free stock control


Globalisation and technology are changing the face of retail. But it's a face you might recognise. They say that nothing is ever truly new, and in retail we're seeing the return of a retail model and customer service approach that wouldn't have looked out of place in days gone by. In the drive to create a more efficient, less risky supply chain, with stock only sourced as and when it's needed, the emerging model is more akin to a business to business trading exchange, albeit instantaneous and on a global scale. So we asked supply chain guru Robin Coles to explain what the impact of this would be.

Traditionally businesses would have multiple channels each working with their own system, meaning that stock would effectively be allocated to each channel. The pressure for retailers now is to try to integrate the channels and create one pool of stock to supply them all.

However, one of the big growth areas for many brands is in the business-to-business (B2B)/wholesale channel. This means businesses need a system that can manage both wholesale and retail stock. It sounds easy, but the model poses unique demands, such as pricing issues for example. How do you gauge the selling value of current stock when you have different prices depending on whether it's sold wholesale or retail? This is a challenge for planning, inventory management and business reporting. Perhaps it's time to move back to managing stock at cost, which is how it has to be accounted for the taxman anyway.

 

What's coming next?


Essentially today, it's no longer about retailing and wholesaling or selling through stores and the web, nor concession and franchisees, but rather how businesses can trade effectively across multiple channels, in multiple territories, maximising brand presence, without creating artificial barriers between them.

Retailers are now striving to only buy stock for a channel when it's needed to meet customer order demands. As long as the goods can be provided in a timely manner, why should the business take all the risk? So essentially we're moving to a "many to many" world, with lots of channels at one end, the supply chain in the middle and lots of stock sources at the other.

 

What does this mean for the supply chain?


To support this, the supply chain has to be fully integrated. Merchandising systems are migrating from a single channel towards a B2B trading environment. What's being created is a B2B trading exchange, creating back-to-back orders with the supplier.

This in itself isn't new – retailers outside the fashion world have been working with this model for a long time. But even here the trading market model has killed off the traditional structure by offering multiple brands under one umbrella – such as Amazon. The reality is that the differences between trading exchanges like Amazon, wholesalers and retailers are wafer thin – and increasingly blurred. And traditional sourcing and merchandising systems just aren't coping with the new models being created.

This new model is inherently less risky and you can offer multiple brands under your own trading name, although it might not suit design led businesses.

 

Retail going back to the future


All things go in cycles. Two hundred years ago there were no chain stores. Basically it was impossible to do – shopkeepers were those who knew where to source goods that their customers wanted. Everyone knew all their customers, what they wanted and what they might be interested in. Arkwright's store is probably the ultimate in CRM.

Technology has enabled retailers to template their stores and manage everything centrally – providing the same products and shopping experience up and down the country, at minimum cost. But this has been at the expense of customer service, with too many customers to provide the personal experience that shoppers now demand.

So once again retailers have been wrestling with local versus central control in a bid to get the optimum customer service, price and efficiency balance.

Essentially, the internet and increased customer expectations are breaking down this "chain store" mentality. It might be a stretch to say that we're moving back to an "honest Joe" trading platform (albeit global) but it's not a million miles from the truth.

 

So what do I need to do?


The changes in retail can't be tackled without technology and expert guidance. These changes are fundamental in nature and retailers would be better advised not to 'plough a lonely furrow' but to be part of a community wrestling with the same issues of stock valuation, inventory placement and financial management.

This can only be done with a full service technology partner, who can bring together the best thinking, services and technology to make it happen.

Our heritage in supply chain systems and work with leading customers like Aurora Fashions, Thomas Pink and Monsoon Accessorize has led us to a point where we are able to support this diversity, with suppliers, manufacturers and factories at one end and an ever-increasing array of local and international channels at the other.

For more information on our Supply Chain solutions, visit www.btexpedite.com/supply-chain, or call us on 0870 8506880.


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