The Icebergs Collided! Focus On Store Networks And Retail Inventory

Timothy Hood

I was speaking at a conference for Retail IT and Marketing leaders recently. Side note: Why don’t we have more events bringing these two groups together? Near the end, someone asked me a question. Based on the looks I saw in the crowd, my answer surprised many. Sometimes I even surprise myself in these kinds of situations. The questions force a very quick and focused thought process. After all, there is a room full of people looking for a semblance of an intelligent answer.

Some context: The session was entitled “The customer revolution: How to thrive, not just survive.” My discussion focused on the new  retail reality of the customer journey. I was making the point that in fact, there isn’t one; there are many customer journeys. I felt pleased that the entire crowd remained to the end and even asked quite a few insightful questions. The question, however, that stuck with me was very basic: “What are the two things that we need to deliver this kind of experience?” Without much reflection I blurted out, “Invest in store networks and get your inventory in order.”

I’m sure that some of the shocked expressions were from the select group of retailers that have already covered these points. I’m also sure that the vast majority were from retailers that were trying to “ice the cake before it’s baked.” It sounds incredibly simple.  Yet based on my experience with hundreds of retailers, these two simple directives are extremely hard to achieve. Moreover, many retailers try to jump ahead to sexy stuff without actually addressing the bulk of the iceberg that is below the surface.

Store networks

Let’s take these one at a time. When I use the term store networks I include two things: the wireless network in the store, and the pipe from the store out to the rest of the world. Network connectivity is a significant operating expense for retailers. Why? There is a multiplier effect. The cost of setting up and maintaining a network is needed in every single store. Moreover, it is often hard for the store operations team to justify a return on this cost in the cold, hard spreadsheet world of the CFO. Yet next-generation customer experience needs a reliable connection from the data center to the shop floor. Without connecting associates and customers to data, retailers will struggle to thrive.

Content is king in customer experience these days. Images, video, lifestyle content, inventory information (more on that later) are required.

We barely have even started our journey into the Internet of Things in the retail store. What I do know is that retailers should figure out how much bandwidth they need and then get more. Just think about your personal computers. Don’t they always fill up with songs, movies, and pictures much sooner than you ever imagined?

Inventory

Getting inventory in order is a different kind of multifaceted challenge. There is a required investment in systems to achieve enterprise-wide, real-time, inventory visibility. But there is an equal challenge to put the processes in place.   And it’s challenging to maintain the discipline required to have accurate real-time inventory. Yet if you are going to send a customer to a store for a product, you better be damn sure it’s there.

Safety stock breaks down when when a store carries only a few of each item. Too little and you’ve lost a sale. Too much and you need to write down the excess inventory.

Can you save sales when the product the customer wants is not immediately available to them? Yes, but you need to be able to find it quickly wherever it may be in your enterprise.

For most retailers the inventory doesn’t sit in a distribution center waiting to ship. Rather inventory is already out there “on the edge.” Maximizing the return on inventory investment has become a major imperative. Luckily, this imperative is aligned with providing a superior customer experience.

Learn more about digital transformation in retail.

Timothy Hood

About Timothy Hood

Timothy Hood is the Global Vice President, Strategy and Technology, Retail Industry Business Unit, at SAP. He is responsible for defining, communicating and executing the SAP Retail Strategy in addition to go to market responsibility for the SAP platform & technology solutions for the retail industry and managing ISV partners.