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Analysis 13


Moving the goalposts W


hether it is a “revolution” or an ”evolution” few would dispute that


PENELOPE ODY


Regular columnist Penelope Ody is a retailmarket specialist.


UK retailing is currently undergoing some fundamental changes. Researchers talk of 20 high street stores closing down every day while 52 retail chains went under in 2012 – the highest level since the recession hit in 2008. Despite the best efforts of Mary Portas,media headlines regularly highlight our declining high streets – with the BBC suggesting in one broadcast that traditional outlets are now being replaced by pawnbrokers and payday loan shops. The blame – apart fromthe


continuing slump in consumer spending – is generally laid on the internet with ever growing numbers preferring to sit at home and buy online than venture to the shops. According to a survey by the IMRG, an e-commerce trade organisation, online shopping could account for 38 per cent of total retail spend by 2014.


Misplaced The blame is probablymisplaced. Shopping is a social activity and many people love it. They also like collecting the orders they’ve placed online at their local store – hence the boomin “click and collect”. Today, despite the IMRG’s forecasts, it is impossible to identify which sales happen wholly in-store and which wholly online. US department store chain Macy’s got it right in February when it stopped analysing sales in this way. As the company’s CFO Karen


Hoguet told analysts: “Candidly, it’s getting so hard to know what’s a store sale and what’s amobile sale and what’s internet. It’s getting harder to figure out the lines between them.” She refused to give any estimates for the company’s e-commerce sales saying: “I really can’t give you that number. Imean, I don’t know it. But clearly, the growth is continuing very aggressively. But sometimes, it’s being bought on a mobile device sitting in a store. So


Supply Chain Standard April 2013


I’mnot sure how to define that.” Macy’s currently has 292 stores


which also act as e-commerce distribution centres fulfilling orders fromstore inventory for both collection and despatch: by the autumn, according to Hoguet, that number will have risen to 500. While this blurring of


boundaries and “click and collect” have clearly had an impact on retail supply chains, the greater change involved is perhapsmore “revolution” than “evolution” and involves a fundamental shift in mindset. Instead of being structured towardsmaintaining inventory levels tomeet anticipated demand,many retail supply chains now seemto be focused on delivering goods to


Candidly, it’s getting so hard to knowwhat’s a store sale andwhat’s a mobile sale and what’s Internet. It’s getting harder to figure out the lines between them.


stores in response to individual orders. As one systems vendor put it tome: “They aremoving from replenishment to fulfilment”. Just as we’re happy to place


online orders and see our goods drop through the letter box two or three days later, so a growing number of retailers seemto believe that the customer will be just as delighted to call back the next day to collect what is currently out of stock. Visiting a branch ofMarks &


Spencer in a town far fromhome, because I happened to be passing and thought Imight as well buy the basic pair of trousers I needed there, “fulfilment” had clearly taken over. I was rather surprised to find gaps onmy chosen rail and nothing inmy size – not in any colour. A few years backMarks & Spencer led the way with


As the lines between in-store and online blur, are retail supply chain priorities shifting from regular replenishment to delivering to order with “keeping the shelves filled” no longer considered a necessity?


implementing RFiD to reduce stock-outs. Clever technology allowed staff to check stock in minutes and place overnight orders for delivery to store the next day so that the shelves were always kept full.M&S executives delivered numerous conference presentations telling just what a successful boost to sales it all was, because customers wanted to buy then and there rather than come back when the itemwas in stock.


Tomorrow On this occasion when I asked a sales assistant about the lack of stock the reply was: “That’s not a problemwe can get it in for you by tomorrow”. Good customer service, possibly, except that I had no intention of re-visiting that particular town “tomorrow”. A quick trawl around any


number of high street outlets will soon reveal thatM&S is not alone in adopting such tactics. Shelves are light of stock and sales staff eager and willing to take special orders. Understandably when times are hard retailers need to cut overheads and spreading stock more thinly is clearly one way of doing this, but what has happened to all those number-crunching, planning, allocation and replenishment systems that used to ensure that all sizes and colours were in stock – at least until the tail end of the season? This change in store supply


chains fromreplenishment to fulfilment not only impacts warehouse picking routines and allocationmodels butmust also add to the “total cost to serve”. Add the time and expense to log the special order, process it through the system, deliver to store and have it ready for collection next day, or despatched for free home delivery if that is what the shopper prefers, and that cost certainly increases. If such an approach is the price of keeping our high street shops open, then it is something both retailers and real world shoppers will have to get used to – or itmight just send evenmore of us back to buying online.


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