What is the role of omnichannel experience on merchandising evolution?

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“In light of these sweeping changes, a retail executive might be tempted to rip up the roots of their business model and institute hasty reforms. The wiser approach is to analyze granular details about customer preferences and remain agile in responding to them”.

Richard Bezuidenhout, Global distribution operations manager, Daniel Swarovski Corp.

The modern consumer is replete with choices regarding how, when, and where to shop. However, this range of options has both complicated matters for the retail industry and given some incredible opportunities to expand by meeting customer demands in new ways.

Omnichannel inventory management during COVID

It is easy to blame our shifting retail environment on the effects of COVID. The pandemic has changed buyer habits and behaviours and brought numerous challenges to us all.

However, the shift towards an online, omnichannel, and more personal service was already in progress before the pandemic hit. Despite a big interruption to business as usual, the net effect has been a 5-year acceleration of the pre-existing trajectory towards increased omnichannel retail and online sales.

As the lines between online and physical shopping become less distinct, it is harder for omnichannel retailers to anticipate consumption from customers who expect the best of both worlds.

Predicting demand and allocating stock across different channels is a challenge for beleaguered inventory management professionals, who must balance shifting shopper behaviour against the eternal task of ensuring adequate visual display to entice customers into making a purchase while keeping enough stock to cater for all potential sales between replenishment.

Shoppers expect a seamless flow between the online and physical shopping experiences, however variable demand across localised markets and online sales make it harder to predict which items need to be in stock and where.

We see the following trends as dominating the fashion retail landscape today

  • Consumers moving away from big malls and shopping centres towards localised, smaller shops.
  • An increase in omnichannel retailing and experience-driven shopping.
  • A powerful synergy between online and physical sales (online sales drive increased physical/omnichannel sales).
  • Consumers are increasingly seeking more personalised shopping experiences that deliver more than just a ‘good deal’.
  • More empty retail spaces as physical stores close.
  • Uncertain SKU longevity per channel, unpredictable demand across sales channels  (physical, online, omnichannel).
  • Rapid cycling of new trends driven by online and social interactions.
  • An increasingly challenging omnichannel inventory management environment, in the face of variable sales and buying habits.
  • Increased difficulty in merchandising to different audiences at the local level and online.
  • Customer (high) expectations of a seamless physical-digital sales process.

Physical Stores still matter

omnichannel inventory management

The role of the physical store will continue to be pivotal in driving and facilitating sales. We can see parallels in the retail banking sector, which has already seen a rapid shift to online and digital, alongside physical branch closures. While customers adore the convenience of digital banking and banking apps, they still want the reassurance of being able to go into a physical branch for advice or if something goes wrong. Local branches are now fewer, smaller, and more focused.

For the fashion industry, the same is also true; customers will still want to be able to come to a physical store to see items or get advice, to pick up an online order on their way home from work, or to simply immerse themselves in the brand experience.

Demographic-specific changes

The shift to online and omnichannel sales is being led by predominantly younger consumers, and also those with more expendable income; Gen Z, Millennials, and those with incomes above 100k are most likely to increase their online and omnichannel buying. Many market segments, however, will continue to shop in-person as they did before.

Switching allegiances

Customers will change their shopping behaviour (including brand loyalty) based on availability, convenience and value. Understanding how these three factors are linked to the local situation can help avoid customers walking away – by ensuring they get the products they seek, in a convenient way, and for a price they love.

Local data can lead to successful local decisions

The goal of maximising throughput in the supply chain can be achieved by perfectly matching each store or channel with the right selection of products, based on a detailed data-driven overview of the local customer demand and what actually sells through those stores. The only way to achieve this is with location-rich data that maps real demand to the location.

Solutions to enable better omnichannel experience

  • Enable the collection of data at the local level to provide real insights about granular details of local shopping habits and trends.
  • Analyse the frequency and content of BOPIS (or ‘Click-and-Collect’) orders to determine matching accessories that can be offered in-store.
  • Customer tracking in-store (indoor location intelligence) can give anonymised heat maps of hot items in-store, or this intelligence can be linked with data from customer shopping apps to give more detail or to send special offers.
  • Survey local employees daily/weekly to give a snapshot about products that customers show interest in (but do not buy), busy times in store, shopper habits/trends, customer requests, and other local, qualitative data.
  • Analyse your local customer base for each store or location to see what prevailing demographics might be at play. Hiring decisions can help catalyse sales by ensuring a better connection between the local shopper and the sales assistant helping them.
  • Demand sensing, based on real-time sales data (which can be examined at the per-store level) will give a direct cue for product replenishment.

Special considerations during COVID to perfect the omnichannel experience

Local differences in infection or vaccination rates lead to different attitudes about safety and different service expectations.

  • Store layout needs to accommodate any safety measures needed, allowed shopper density, etc.
  • Procedures will need to reflect the local situation, and what the local customers expect or feel safe with.
  • Transparency about hygiene procedures can raise customer confidence.

Action to take right now:

  • Don’t panic – the right approach to tackling shifting demand is to make small, frequent changes.
  • Start the discussion internally about how to rationalise your physical and omnichannel experience and retail strategy.
  • Start to collect data immediately – the most important data are those that reflect real demand and actual sales at the store level. A smart software solution like Retailisation can immediately give you a real-time view of demand for each SKU in each store.
  • Discuss with colleagues in sales and marketing about the possibilities of leveraging physical retail in a way that reflects the best qualities and strengths of your brand. Experience shopping can be a great way to engage with shoppers, but it should align with your brand values and image.

Create something special: ‘Pop-up shops’ as a solution

omnichannel experience

The ‘pop-up shop’ concept is a great way of using empty retail premises, but they also give brands an intriguing option for testing the water in regards to locations, store size, and personalised shopping experiences.

As shopping malls become less significant, consumers will shop online for the price, but in person for the experience. A traveling ‘pop-up shop offensive’ can provide a broad picture of demand for different services and products across wide areas, while promoting your brand to previously inaccessible customers.

We now know that online sales do not cannibalise sales, but rather foster further sales through omnichannel and physical shopping; this indicates that customers still crave the physical shopping environment, but they want it to do something different than before.

You can explore different options with a pop-up store, and collect data on the success of different shopping experiences.

The key to success here is the same as with every local store or sales channel – data.

Ensuring your systems are able to communicate with each physical operation will lead to being able to satisfy demand on the local level. The technology for integrating data collected from physical and online stores already exists; it can plug into existing systems, and it can automate many data-driven decision-making processes that used to be plain guesswork.

The bottom-line

Physical stores will continue to have a critical role in fashion sales, especially once you have optimized the in-store experience using detailed local data that captures the consumer demands at the local level.

There are some things that the online store just cannot offer, but which the customer still demands.

A pop-up store armed with local data collection can play a huge role in developing your optimized physical shopping experience, but this can also be achieved with the same data collection in existing local branches

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