The impact of omnichannel on retail inventory
03 July 2023
Gone are the days of relying on ineffective traditional forecasting and allocation methods.
THE RISE of online sales has proven costly for retailers who struggle with inventory management. Dealing with misplaced inventory, high shipping costs, and markdowns has become a common challenge. Fortunately, artificial intelligence (AI) algorithms offer a powerful solution through underrated omnichannel allocation capabilities, allowing greater visibility of customer demand and movement of inventory.
So, how does omnichannel allocation differ from traditional methods? Let's explore six key differentiators:
- Customer Demand: Planning in retail all boils down to the customer demand. It’s not enough to predict the wheres and the whys; retailers need to have a thorough understanding of what drives customer demand from changes in behaviours, to an exact knowledge of what influences their purchases. Omnichannel allocation takes a comprehensive approach to understanding customer demand. It goes beyond historical data and considers various factors, such as customer behaviour, influences, and changing trends. By leveraging machine learning and AI algorithms, it predicts demand for both online and in-store channels, leading to better inventory placement.
- Returns: Traditional allocation calculations often overlook the impact of returns. Unlike traditional methods, omnichannel allocation considers returns as a critical factor. With the increasing popularity of online shopping, returns have also risen. Another factor is the customer choice in returns, with many preferring to return to a store rather than online which would be extremely difficult to predict. Allocating inventory immediately after a promotion, for example, requires accurate consideration of return rates. Ignoring this aspect can lead to over-allocation.
- Continuous Forecasting: Given the ever-changing nature of customer demand, continuous forecasting is essential. Static pre-season forecasts are becoming less valuable as economic factors and customer situations fluctuate. Dynamic planning algorithms and models that incorporate up-to-date information about customer behaviour are necessary.
- Markdowns: Anticipating how inventory will sell through different stages of a season is crucial to avoid over or under-allocating. Traditional methods rely on evaluating current sell-through rates and weeks of supply, reflecting past performance rather than future demand. Predicting future demand is vital to prevent excessive markdowns required to clear unwanted stock.
- Platform: Omnichannel retail revolves around prioritising the customer experience. An omnichannel allocation software built on an AI demand intelligence platform allows seamless collaboration among various retail functions, such as planning, pricing, and fulfilment. This unified approach ensures accurate inventory placement throughout the retail operation and supply chain.
- Persistent Experience: With numerous traditional inventory planning methods, it can be challenging to determine the best approach. However, in the modern retail landscape, where online and in-store experiences converge, AI-powered omnichannel allocation is necessary. It provides a holistic view of demand across all channels and enables better decision-making.
By adopting AI-powered omnichannel allocation methods, retailers can achieve significant improvements. Customers have reported a 2x increase in ship completes and a 250% enhancement in inventory turns. But the true driving force behind adopting omnichannel allocation is the ability to intuitively meet customer demand, accurately predict returns, understand the relationship between allocation and pricing, and deliver a superior user experience.
Embracing technology allows businesses to unlock amazing possibilities, just as it has transformed the customer experience. So, will you seize the opportunity to revolutionise your retail operations?
Why Choose Bar Code Data?
Bar Code Data can guide you painlessly to the right inventory management solution for your retail business. Our software solutions from Zebra uniquely identify inventory, streamlining work processes, saving time and money. We offer a leading range of mobile devices to ensure your business benefits from the most productive, reliable and secure technology. We can provide expert advice on inventory management, including Zebra software and data capture hardware such as scanners, thermal printers and label consumables. We appreciate that each business is individual, and no two have the exact same requirements, so we will talk you through the entire process, helping you to understand exactly how to get the most from your inventory management.
Call our Sales Team on 0333 254 4448 for a free consultation to answer any questions you may have and provide expert advice. Bar Code Data also has an expert team of after-sales service professionals, ready to help with technical or support and maintenance enquiries, we provide solutions tailored to the needs of the client.