Spring 2019 - Inside Outdoor Magazine

Tech Savvy Inside Outdoor | SPRING 2019 44 “Retailers must determine what prod- ucts to bring into their inventory, what assortment and in what quantities. We show them what to buy, as well as how much, where to push it at and when there will be peak demand at the local level.” By using Celect, retailers can evolve with the changing market, in es- sence reducing guesswork, and mak- ing more informed purchases. “Using traditional tools to plan, buy, allocate and fulfill just isn’t effective anymore,” Andrews continued. “Retail- ers today have plenty of in-store and online data, but most of it lives in com- plicated spreadsheets, making it hard to interpret or use meaningfully. This approach forces you to leave money on the table with speculative bets. Es- sentially, retailers are guessing, using gut instinct and intuition.” Andrews spoke about the difficult constraints that retailers today have to live by. “You only have so much money to spend on inventory,” he said. “You only have so much space in a store or location, and limited presentation requirements. You can’t have just one sweater, for instance. You need an assortment. Being able to optimize on that, with that understanding of de- mand, is actually really hard. That’s the nut we have cracked.” Celect, Andrews said, focuses on improving the product lifecycle, through planning, buying and qualifica- tion, fulfillment and sometimes even markdown, helping retailers to optimize their inventory at each step. Amazon, again Of course, retailers have been con- ducting inventory manually right from the start. These problems have existed for decades. Why change now? Today, digital transformation is being driven largely by the “Amazon” effect, or the continuous evolution and disruption of business by e-commerce. Companies such as Amazon are forcing retailers to modernize their internal processes and improve their operations in order to com- pete. Survival depends on it. “There’s a lot of conversations hap- pening around the challenges retail has experienced over the last five or seven years or so,” Andrews said. “The Amazon effect is real.” Yet despite all that we are hearing about the retail “apocalypse” and the end of brick and mortar commerce, that does not appear to be happening any time soon. “Research shows we probably have too much square footage per capita in the U.S. compared to Europe and Asia,” Andrews explained. “So store formats and floor space will most likely shrink a bit moving forward, but stores are not going away entirely. Even some digitally native brands are open- ing stores, and they’re doing it pretty impressively in some cases.” Brick and mortar stores, Andrews said, still serve multiple purposes, even in a purely digital world. They are helpful for fulfillment and returns, and they can be used to upsells prod- ucts to customers. Plus, consumers like shopping in stores. In one consumer study, 78 percent of buyers chose to shop in-store, spending six times more in brick-and-mortar stores than they did online. The trick to surviving the Ama- zon Effect, Andrews explained, is for retailers to be smarter about the products that they put on shelves. Retailers need to start thinking of their stores as a single, unified distribution center where products can be opti- mized on a local level and distributed based on the present and future buy- ing patterns of customers. Andrews gave an example of what this approach looks like in action. “If I can predict demand, I can tell when a store will sell out of an item like a pullover,” Andrews said. “For example, I will be able to see that if I ship a pullover from a certain store, in two weeks another customer will walk in looking for the same item and it won’t be there. There will be a lost sale, which is sin number one from a retail perspective. I will have a cus- tomer that wants to buy a product, and it won’t be in stock.” Meanwhile, he continued, “200 miles away, three of the five pullovers will sit on a shelf at the end of the season. This will lead to sin number two, which is a markdown on that product or sin number three, which might be a transfer where I need to pay to ship the product somewhere else, and it will cut into my margin and my overall growth revenue.” When you can predict demand and optimize your inventory, he said – not just on one particular order but on all External Pressures Prompting Better Merchandising Decisions Source: Coresight Research; Celect Competition Greater Consumer Choice Over Where to Buy Greater Unpredictability/Volatility in Consumer Demand The Need to Offset a General Decline in Margins The Need to Get Products to Market More Quickly Apparel Retailers All Retailers 48.6% 59.5% 54.3% 45.5% 42.9% 43.0% 25.7% 29.0% 42.9% 26.5% Ways Advanced Analytics Could Help Respondents Sell-through More Products at Full Price, Among U.S. Retailers How Much Stock to Buy Planning Promotional Schedules and Understanding the Best Products to Mark Down Types of Products to Buy 43.5% 36.0% 34.0%