Reimagining Retail With No Inventory

Achim Schneider

In the past, the retail sale of products has almost always required some stocking of inventory. However, as retail steps into the process of digital transformation, there are some new inventory possibilities.

Digital innovation is a basic requirement to compete in today’s markets. It also creates some new opportunities to cut costs and save time with new data-driven strategies that create value where it did not exist before. And this related value creation is significant. A connected digital economy can offer almost unlimited advantages and opportunities.

Retailers understand that any cost savings is a critical advantage. The cost of stocking an inventory has always been one of the highest costs of doing business. Many solutions that help address this area have been around for quite some time, and more are on the way.

The idea of drop-shipping started in the 1950s with mail-order catalogs. Drop-shipping benefited the business model in two ways. First, no inventory meant low or no costs of purchasing, storing, and maintaining stock. Cash flow cycle also benefited, as retailers would receive payment in full before they placed the order with a supplier. Computers made the process much more efficient.

Reimagining the retail sales process

In the age of digital transformation, the process is accelerated and has been streamlined even more. The ability to reimagine the sales process with digital capabilities offers some unique advantages. Business networks now connect buyers, sellers, and suppliers with each other. This simplifies the process, saving everyone time and money. The business brokerage model has come of age. Now businesses such as eBay, Alibaba, and Walmart are fulfilling orders to the tune of billions of dollars every year. They are able to do this because of the data-driven strategies that are now possible through the digital transformation of commerce.

Digital transformation of the process creates flexible supply networks that are making shopping, buying, selling, and supplying an interconnected web. This connected network changes the separate needs and relationships into a common cause, giving retailers new ways to reach consumers and satisfy their needs.

Some businesses are even allowing third parties to market their products alongside their own, which opens up further advantages. The primary business has more products or more variety to offer, and the third parties have more exposure for their products.

Print-on-demand and 3D printing allow even greater flexibility and control of inventory. Products can be “printed” only when needed to meet the needs of a specific transaction. An outside supplier is not required, and there is no inventory to maintain. Before long, retailers will be marketing only a design, which consumers will then create by printing the products at home.

The reimagining of retail resulting from digital technology has brought us business models that supply entirely unrelated goods and services. In these models, the supply side is satisfied by independent entrepreneurs, usually web-driven – like Etsy and Fiverr. These model sites  act as a sort of broker, taking a fee from each transaction.

With the potential of digital capabilities, companies are reimagining their business models, capturing and/or creating new value sources. With digital innovation, retailers are providing more of a unified customer experience through hyperconnectivity.

Retail without inventory is one path toward this extraordinary achievement. Having no inventory translates into an easier time exceeding customer expectations. The digital revolution has arrived, and it is only going to keep accelerating. Those businesses that most aggressively pursue its benefits will survive and thrive.

Learn more about digital transformation in retail.

Achim Schneider

About Achim Schneider

Achim Schneider is the Global Head of SAP Retail Business Unit. He is a dedicated and passionate leader committed to delivering real customer value through innovative software solutions with a high priority on global customer relationships, and overall customer satisfaction across all aspects of the retail business.