Connecting The Dots
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RSR has released a new benchmark study entitled Managing Through Disruptive Times With Data Driven Speed And Adaptability, and in many ways it’s timely because it connects the dots between the changes in the past decade on the demand (consumer) side of the retail operational model, and needed changes on the supply side of the model. We’ve been writing about the need for more agility on supply chain since 2015, mostly as a response to what’s been happening on the consumer facing side. But the pandemic and resulting lockdown really kicked that need into high gear, because consumers’ lifestyle changes that occurred in 2020 were (and continue to be) dramatic.
It took retailers ten years to absorb the implications of consumers’ adoption of always-on Internet connected technologies. As we’ve pointed out many times, shopping nowadays is a 24X7 activity, and it can happen anywhere. What the lockdown accelerated was another big change in customer behavior – a big percentage of today’s shoppers now want to either pickup their purchases at the store or at a pickup location, or have their purchases shipped directly to the house. In short, the pandemic necessitated digital shopping and a re-examination of the role of the store in that context. While the industry has been slowly shifting from selling channels to an integrated selling environment, COVID has acted like an accelerant; what was once a differentiator for retailers has become a necessity for consumers.
Now, retailers don’t have the luxury of time to make the necessary changes to the supply side in response to the changes on the selling side. How to more accurately forecast demand, how to respond very quickly to changes in either supply or demand, how to target assortments towards the consumers that are most likely to purchase them, and finally how to be profitable, are all front-and-center issues for retail decision makers now. Perhaps one of the biggest questions that retailers need to answer is, can they meet consumer demands for more localized and relevant assortments in the store and still achieve economies of scale?
That is why the new report is so timely. To get an answer to that question, retailers want to resynchronize the two sides of the business to meet the demands of the new marketplace. In the study we learned that regardless of retailers‘ size, what products they sell, or where they are located, they were entirely unprepared for a world where every product gets bought online. More than one out of every two retailers who participated in the research cited the ability to meet growing online demand as their number one business challenge. The fact that long-established and highly efficient trade routes with far-off lands were completely shut down for months on end – coupled with a full upending of worker and product safety protocols, only further compounded these problems.
Offering localized assortments and product presentations in the store doesn’t mean that retailers are willing to giving up the economies of scale that centralized merchandise management has created. In fact, although some retailers show a desire to loosen the reins a little and enable local input into the merchandise planning process, few are willing to give up on hard-won economies of scale.
Over-performing “Retail Winners” in particular believe that using insights derived from artificial intelligence is a key enabler to “smart localization”. Our studies have consistently shown that Retail Winners are adept at turning a business challenge into an opportunity, i.e., how they respond to a particular challenge creates a point of differentiation from their lesser performing competition. In the new report, we found that most retailers want help predicting what products they’ll need on hand. But Winners place a much higher emphasis on the value of data coming in from external sources. In fact, 77% of over-performers cite “being able to produce highly accurate and granular forecasts” as the highest value thing they can do to better align supply with demand, and that means turning to next generation intelligence tools for help.
So, if these are generally accepted concepts, what stands in the way? Not surprisingly, the biggest problem for retailers who try to win both the benefits of scale and the benefits of localization is that the processes and systems that supported the old model are not up to task of supporting this new model. Specifically, lack of inventory visibility throughout the enterprise and a lack of granular forecast capabilities forces retailers into the untenable situation of having to over-inventory in order to meet consumer demand – or risk disappointing customers.
As RSR does in every benchmark report, we make several recommendations for how retailers should tackle how to manage through disruptive times with data-driven speed and agility. To summarize the recommendations, they are to:
- Resist The Temptation To Think Of 2020 As An Anomaly
- Double Your Efforts On Inventory Visibility/Availability
- Recognize That The Largest Retailers Have A Significant Head Start
- Embrace The Role Of AI
- Stop Blaming Legacy Technologies, Replace Them
- Abandon Any Notion That Things Will Soon Return To Normal
Read The Report
RSR’s latest benchmark, sponsored by Relex, is entitled Managing Through Disruptive Times With Data Driven Speed And Adaptability. The report features 18 charts across 30 pages of in-depth analysis. And like all RSR reports, it is completely free of charge to registered users. Registration is also free, and only takes a moment.