Added value for changing times

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The growth of multi-channel operations is transforming the way UK retailers do business – and that includes supply chain operations and opportunities for logistics providers.

Time was when a vital component in any retailer’s IT armoury was some sort of sophisticated planning software to crunch the numbers, analyse the historical sales record and recommend precisely how much of every product line should be delivered to each store to minimise stock-outs and maximise sales.

Today it is rather different. Initial allocation is still important but retailers, especially in areas such as apparel, increasingly talk of a “single stock pool” or “virtual stock” providing visibility of real-time inventory available throughout the estate, both on- and off-line. This “virtual” model enables fulfilment from anywhere to meet the growing expectations of multi-channel shoppers. Customers want to “click and collect” or return goods to a local store rather than put them back in the post. If a particular item is out of stock they are happy to have it delivered next day to their home or office, while they may also expect the retailer to bike the item across town from another branch within hours.

This combination of changing customer expectation and real-time visibility can have unexpected impact – as Tony Bryant, head of business development at retail software specialists K3 says: “If you have a single stock pool do you need an army of merchandisers managing allocation and replenishment?”. In future, Bryant suggests, this merchandising head-count could be switched to customer services: “Retailers need to look forward and not focus on what went wrong yesterday,” he says.

With growing numbers of returns to store as well as more inter-branch transfers many traditional merchandise planning concepts may no longer be relevant. Indeed, do you need constant revisions of individual store plans if the total stock picture is a seamless entity?

While consumer demands for an integrated cross-channel experience and instant gratification have been driving developments such as click and collect, they are also providing plenty of new supply chain opportunities. Launched in London in time for Christmas 2010, Shutl now claims to offer a 90-minute delivery option to 65 per cent of the UK’s Internet shoppers – with this expected to rise to 90 per cent by the end of June when all “urban and semi-urban” areas will be covered. Current average time from purchase to delivery is running at just over 75 minutes.

“There is no problem with capacity,” says head of marketing, Guy Westlake, “as there are around 3,000 motor bike or bicycle couriers in the country and as they no longer have documents to deliver urgently, thanks to e-mail, they are very happy to switch to moving small packages.”

Combine the Shutl model with virtual stock and the opportunities for couriers to move single items between store locations to meet ad hoc orders are considerable. Retailers may take a margin hit to cover the transport charges but this may be no worse than a typical seasonal markdown if the item fails to sell: after all “50 per cent off” in the sales is commonplace these days and in the current economic climate many retailers will do almost anything to make a sale.

Shoppers also want more information about what is available in store without the need to find an assistant and ask. At the Retail Business Technology Expo last month, Tagsys RFID, for example, had added NFC [Note to sub: i.e. near field communications] technology to its existing in-store RFID offering. Shoppers equipped with an NFC-enabled mobile phone will be able to zap an item (in the window or in store) to pick up the real-time stock availability for that product. Without even bothering to cross the threshold, tomorrow’s customers, for example, would be able to discover the availability by size and colour at that location of a fashion item displayed in the window.

Add augmented reality and a “virtual fitting room” – both technologies also currently being implemented – and they could probably also bring an image of what they might actually look like wearing the outfit to the phone’s display screen.

NFC is also set to transform payment options enabling customers to simply touch their phones against a reader – as with an Oyster card on the London Underground – to pay for purchases at the till with no need for plastic cards, chip readers or PINs.

For Dave Smith, managing director of City Link, this is another potential growth area for logistics providers enabling payment to be collected electronically at the point of delivery by the carrier’s driver. The advantage for shoppers, he argues, is that the payment is not made until the goods really do arrive, while for retailers there is the guarantee that the customer has personally accepted the goods, so no more claims of “non-delivery” or complaints that payment was taken long before the items actually arrived.

Retail analysts argue that added-value premium services are a key differentiator for multi-channel merchants and are attributes for which many shoppers are very willing to pay.

In tomorrow’s changing world, timed and rapid deliveries, payment on receipt and access to both product information and stock availability data via a mobile will, for many consumers, be essential attributes. For supply chain managers the challenges of multi-channel can only proliferate.

Regular columnist Penelope Ody is a retail market specialist.

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