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You can’t be ‘omnichannel’ until inventory is solved

Key takeaways

  • The ability to measure stock levels accurately is an ongoing issue for retailers, but one that they need to solve to become truly omnichannel.
  • Some big-name global retail brands are using RFID tagging to great effect, but broader industry adoption has stalled as the technology isn’t easy to implement at scale.
  • Integrating real-time stock information with online shopping platforms such as Google Shopping or Amazon presents a more compelling business case than ever.

It’s hard to refute the fact that the future of retail lies in omnichannel. Empowering the customer to coast between your brand’s online and offline contact points, in one seamless experience, is what most brands are striving to achieve.

This means that now, more than ever, retailers in such ‘bricks and clicks’ models need to get ahead of the competition by undertaking a revolution on the role of their stores. We’ve seen the introduction of click-and-collect become more widespread, for example. But, to cost-effectively enable customers to buy online then pick up in store requires full visibility of stock.

Here lies a problem. Traditional live inventory systems have been efficient at raising the bar on accuracy but, in today’s complex retailing world, that’s not enough. Maintaining traditional live inventory in a chaotic store environment introduces data integrity and data timeliness issues.

So, to effectively engage in today’s hyper-speed retailing, we have to rethink the approach to solving the inventory challenge.

Inventory is a problem worth solving

Accuracy of information is still a core challenge with maintaining inventory. When a customer buys a product, current systems update the store stock at point-of-sale, but this doesn’t paint the fullest picture. When the customer makes a return, or when stock is transferred to another store, listed for repairs or is lost, staff still need to manually adjust the system. This creates data integrity issues. Underpinning this is the manual, laborious process of conducting the stocktake periodically – which then introduces problems with data timeliness.

Needless to say, you can’t rely on incorrect information to make business decisions, nor can you optimise operational processes based on a system with lagging data.

Efforts to improve inventory accuracy in recent years have focused on tightening stock management controls through the supply chain, or implementing a process and culture of cycle counting, to obtain regular audits of highly traded stock.

These practices can only lift accuracy so far, and certainly not to that of full visibility. So the retail industry is calling out for better solutions – ones that leverage what computers do best: laboriously repeat processes, at scale. If we can automate the counting of stock, store associates will have their time freed up to get back to the business of delivering delightful customer experiences.

Live Inventory 2.0

Long has radio-frequency identification (RFID) been lauded as a technology solution to help retailers thrive. The technology is mature, with an estimated 10.4 billion RFID tags shipped in 2016. The majority of those, 4.6 billion, were for apparel¹.

Size of RFID Market 2016

An estimated 10.4 billion RFID tags were shipped in 2016 – almost half of them to be used in apparel.

RFID solutions in apparel work by applying RFID tags to each item of clothing and then implementing readers in-store that either periodically or in real-time identify if the tag (and therefore the item) is in store.

Operations vs. customer experience: you can have both

Peter Drucker said it best: “You can’t manage what you can’t measure.” And being able to measure your stock accurately is core to the business of retailing.

There are some exemplary retailers that have been able to reach clarity and stock accuracy. UK department store John Lewis, for example, went from stock accuracy of 60-70% to around 90% after implementing RFID technology².

Globally, retailers including Zara, Macy’s and Marks & Spencer have implemented RFID in their businesses and their successes have been quantified (usually) by appeals to productivity. However in today’s budget constrained retailing environment, high investment, multi-year business cases are a luxury that few executive managers can afford to indulge.

These traditional business cases relate to improved loss prevention, lower store costs and improved on-shelf availability. While these have been shown to increase bottom line, the scale of the undertaking and timeframe for return on investment doesn’t appear to be making RFID adoption a significantly compelling proposition.

Feeding the shopping channels

Fortuitously, a revenue-based business case is emerging, in which RFID is used to drive direct customer growth. Not uncoincidentally, it goes hand in hand with the rise of mobile.

Since 2015, more searches have been done on mobile than on desktop³. Now, we know that 30% of mobile searches are related to location – for example, trying to find a nearby store4. More than three quarters of people who search for something nearby on their smartphone visit a related business within a day, and 28% of those searches result in a purchase5.

Customers are looking for products on-the-go. As smartphones continue to be their preferred tool of discovery, it’s the ideal opportunity to showcase products and entice them into stores.

In the US, Macy’s – on a mission to position itself as ‘America’s Omnichannel Store’ – continues to innovate around this. By the start of 2017, it had implemented RFID to 60% of its inventory and if all goes according to plan, by the end of the year, Macy’s will have RFID tagged 100% of its items6. This could help accelerate a holistic digital transformation of which customer service is a core component: enabling a more efficient click-and-collect service and cost-effective ship from store program7.

As part of its customer and marketing innovation, Macy’s has long been using real-time advertising on Google that’s fueled by inventory feeds. When users search for a product on their mobile phone, Google Shopping will display the item8 and tell them whether that inventory is in stock in local stores or not.

For this search result to appear, however, retailers must be able to provide an accurate and timely feed of information. If the feed is wrong, then both the search engine and the retailer risk disappointing the customer that has gone into a store, only to find out the item isn’t in stock.

Google Shopping isn’t the only marketplace for retailers to sell their inventory. Think of Amazon or eBay – both shopping destinations for a retailer that would benefit from a real-time count of stock. This offers a remarkable opportunity for retailers to scale up without having to build any new stores.

The trouble with RFID: how to RFID?

If RFID can help shift inventory with such accuracy and aplomb, why isn’t it being adopted more widely? The current challenge is that the end-to-end, enterprise-ready RFID technology is difficult to buy. Often, retailers are required to purchase the components out of the box and assemble the system themselves.

We’ve learnt this the hard way. In building prototypes in our labs that stitch RFID and the internet of things together, we’ve come to see that hardware vendors are very vertically specialised and the software options require specialist skills to develop. Furthermore, undertaking a full RFID program from source to store (as opposed to just one part of the value chain) can encompass a heavy amount of system integration work.

This means there’s great opportunity for the major technology players that can provide modular solutions for retailers that makes implementation easy and fast, in order to deliver a quicker return on investment. Consumerisation of RFID technology is a must. Otherwise, retailers will have to reach for the alternative: which is to subscribe to a multi-year systems integration or invest in building the in-house capability to solder, wire and pipe data themselves.

The key for retailers that are still unsure about whether to adopt RFID is to perhaps focus less on end-to-end productivity, and more on supporting individual stores to drive customer growth through click-and-collect, ship from store, and innovations such as real-time advertising. With customers now browsing virtually and looking to shop locally, they will inevitably spend their money with those than can deliver.

This article was co-written by Rob Chan and Chris Warry.