Merchandising and the automated retail workflow

Carla Anderson, Senior Director, Merchandising Strategy

3 omnichannel journeys you can't profitably execute without merchandising

“I want it in 1 hour or less.” Customer expectations have never been higher. Retailers are under pressure to deliver in the same time it takes to watch an episode of Stanger Things, finish a spin class, or grab a quick lunch. Do you feel confident in being able to deliver within 1 hour? Meeting that customer expectation is no small feat and it requires efficient and streamlined operations along with accurate inventory visibility. Most retailers today can deliver some semblance of an omnichannel experience to their customers. They accommodate customers’ need to buy from, take delivery from, or make returns to any contact point, whether it’s the ecommerce site or a store in the chain. But many of the larger opportunities associated with a true “no barriers” retail operation remain unfulfilled. These are customer-facing opportunities, such as being able to find, view and access sizes, items, colors, anywhere anytime, as well as operational gains such as fully leveraging supply and demand opportunities no matter where inventory may reside.

The ROI Issue

Solving these issues offers significant benefits. According to statistics compiled by Auburn University, the average level of inventory accuracy for U.S. retailers is 65%. While that level may be enough to support traditional retail operations, that level is not high enough to support omnichannel effectively; additionally it’s a financial drain on the company. When a retailer has too much merchandise, it cuts into its margins. According to a study by IHL Group, overstocks contributed $471.9 billion in lost revenues. And overstocks are just one of the inventory impacts to the bottom line as out-of-stocks accounted for $634.1 billion in lost retail sales.

Quite a lot of retailers just do not have the back-end transparency and integration to really know what product(s) they have, in which location(s), and how best to make it available it for their customers. Most retailers have at least part of their omnichannel strategy in place, in particular customer-facing services such as the ability to buy online and return to the store, but for many, a full-blown, end-to-end omnichannel capability remains out of reach. Largely, what has happened is that early in the process they made strides in the customer-facing parts of the business, like the website, thinking that the supply chain would eventually catch up or that they would have time to do the investments in their supply chain later.

Not As Easy As It Sounds

Unfortunately that hasn’t happened. One reason for this failure is that the basic idea behind omnichannel commerce—high transparency married to high flexibility—relies entirely on a modern merchandising operations system at its core. A reliable, single version of item, order and pricing information must be accessible regardless of channel. However, the most critical component to effectively executing an omnichannel strategy is accurate inventory across all fulfillment locations – stores as well as warehouses. To understand why, let’s look at three very common omnichannel customer journeys.

  • Buy online, pick up in store. Buy online, pick up in store or “click and collect” continues to grow in popularity globally, with it set to double by 2025 in the UK alone. But before you notify a customer their product is available to do an in-store pickup, you need to ask yourself if you have enough confidence in the accuracy of your inventory to be sure the item you’re sending them to the store for is actually there. The role of the merchandising system is crucial in omnichannel as it provides the inventory values being used by your order management system when determining how to source the product.

  • Refer to another store for an out-of-stock item. Now the question is, can your associate quickly check inventory and confidently make the referral? If the customer comes into a store wanting something that’s out of stock, and the associate sends them to another store three miles away, that item had better really be there.

  • Buy online, return to the store. This is particularly common in apparel where the customer may order three different colors and/or sizes of an item, keep the one that they like best, and return the other two. Can an associate easily process the return and—almost as important—immediately put the returned items back into inventory so that another customer has access to it or be able to keep the item unavailable for sale until an assessment has been done on the item? If the system doesn’t know where the inventory is, it can’t sell it.

For many retailers, including some who are offering cross-channel options to their customers, the answer to the questions posed above is no. The industry is well aware of this problem; in a recent study conducted by Retail Systems Research, for example, 54% of surveyed retailers agreed that “Consumer expectations outpace our ability to deliver cross-channel experiences.”

Moving to a Flexible, Holistic Retail Merchandising System

In the same survey, when asked about areas of opportunity that were preventing them from meeting their customers’ expectations, 48% said “Improving operational execution across all channels is the top opportunity”. We’re hearing the same thing from our customers in the field. Retailers attempting to adapt existing supply-chain management solutions—many of them already modified and altered to accommodate earlier requirements—are finding it difficult to attain the level of accuracy required by the business.

To have the kind of accuracy we’re talking about, a retailer needs a fast, accurate, complete, and highly flexible merchandise operations system that is easy to use and that provides one version of the truth. Getting to that from their current solution often requires more than an upgrade; it requires a new implementation.

Retailers like Dubai Duty Free are doing just that. They completely upgraded their merchandising system in just eight months, and were motivated not only by the need for a complete solution that supports their various customer journeys and growth plans, but also by a completely new way of working with their merchandising system. With a clean, modern interface design that puts analytics at the start of every interaction and highlights business exceptions, Dubai Duty Free has empowered their business users. At Dubai Duty Free, the Oracle Retail Merchandising solution interfaces with its ecommerce, Oracle E-Business Suite, warehouse management, and store inventory management systems to establish a full omnichannel solution that has set the foundation for future innovation and growth.

At Oracle Retail, we have significantly shortened and tightened the implementation of our Retail Merchandising solution by offering it as a cloud-based SaaS solution. Oracle Retail Merchandising Foundation Cloud Service and Oracle Retail Merchandising Insights, underpinned by the Oracle Retail Integration Cloud Service empowers merchants to synchronize end-to-end merchandising operations from buying to inventory valuation—driving to a single version of the truth. Daily tasks such as purchase order approval and sales auditing are efficient and effective with exception-based dashboard notifications and alerts. Merchandising Insights enables merchants to understand both current and historical performance for sales, inventory, pricing and more.