THE OMNICHANNEL HOLIDAY CHALLENGE WITH STORE INVENTORY AND FORECASTING

Holiday shoppers have just a few more days to get their shopping done. Do they order online and get it shipped? Do they order online and then pick up in store? Or do they go into a store hoping to walk out with the items they want to purchase? Retailers have the challenge of meeting all of these needs, many of them using store inventories as distribution centers to handle online purchases, whether shipping it to the customer’s home or having it available so they can pick up the item in the store.

An online customer who is having their products shipped does not care which store or warehouse handles their purchase. A shopper in the store or on the way to a store does – they expect the item to be available on the shelf. Retailers are using different strategies to manage these needs. Some, such as Target, are holding inventories back from online purchasers in order to keep inventory on the shelf for their in-store shoppers. In Target’s example, an online shopper may try to go online and buy or reserve an item in store but are unable to do so. Other retailers, like Toys ‘R Us, have a “first-come, first-served” strategy. The big challenge is for retailers to determine, by product and by store, how to divvy up the store’s stock, and need to forecast in-store purchases to try to have the right amount of inventory on the shelves.

 

Tracking item-store inventories as real time as possible is the best way for these retailers to make these forecasts. Retailers without inventory systems who can keep up with purchases are having to keep extra available in the store and not online, in order to avoid the mistake of selling the same item to two customers around the same time.

Source: Chicago Tribune.com, Wall St. Journal

US BEAUTY MARKET EXPECTED TO GROW TO $90 BILLION IN 2020, AND ACCELERATED ANALYTICS COSMETICS BRANDS ARE IN THE NEWS!

Today’s $80 billion US beauty market will continue to grow according to a report by Euromonitor International. This growth rate will mean the beauty market will grow by 45% in 10 years. In 2015, the premium beauty category grew 7%, with premium foundation sales increasing 14.2%, compared to just 3% the prior year. Consumers have been shifting to premium products, looking for high quality products. Many luxury beauty brands who use Accelerated Analytics POS reporting to optimize inventory levels, track promotions and drive sales are in the news with big headlines this week, such as Parlux Fragrances, Shiseido, Inter Parfums, Estee Lauder, Elizabeth Arden, Coty and L’Oreal. Click Here to learn more about our solutions for beauty brands.

IT’s DAYS OF SUPPLY INSTEAD OF WEEKS OF SUPPLY FOR DIY RETAILERS LIKE HOME DEPOT

While the DIY retail segment is currently booming – Home Depot is targeting a 15% sales growth by 2018 – their strategies for inventory in their stores is changing. “Get comfortable with days of inventory, not weeks,” Tom Shortt, Home Depot’s senior vice president of supply chain, says is the message going out to stores. 

Rather than filling its warehouse stores with inventory, Home Depot wants fewer items on its shelves and wants those items within customers’ reach. Online shopping is making retailers think of better ways to profitably serve online shoppers and have inventory in stores, as well. They need to decide if they will ship to consumers from a distribution center or store.

WalMart and Target have also made changes to in-store inventory levels. WalMart’s inventory levels rose slower than sales, helping to improve their gross profit margins in the first quarter.  Boosting sales and stocking less items increase the percentage of cash they get back from the amount they invest in inventory. The strategy is to put less inventory in the stores and replenish more frequently based on demand instead of a forecast.

Home Depot’s strategy is called “Project Sync” which includes such changes as seeing suppliers send 2 trucks five days a week, versus 5 trucks 2 times per week.

Monitoring the return on invested inventory capital and tracking consumer demand closely in order to manage inventory and replenish based on demand can only be accomplished with frequent analysis of POS data in stores, looking at SKU-Store sales and on hands, trending days of supply and sales to stock ratios.

Source: Wall St. Journal

TARGET’S NEW RULES FOR VENDORS TO TIGHTEN UP SUPPLY CHAIN AND INVENTORY

Target Corp is tightening its supply chain requirements for its vendors as part of a multi-billion dollar plan. The rules, effective May 30, include tighter deadlines for deliveries to warehouses, and fines for late deliveries and inaccuracies in product information.

Says Target’s COO, John Mulligan, vendors need to help keep shelves stocked, maximize sales and control costs. A letter was sent to suppliers. In the letter, Target stated the goal to keep products stocked to “lower missed sales for all of us.” Target US stores in 2015 held 8 to 9 billion items on store floors, in transit or in warehouses at any point in time.

The new rules will be phased on over the summer, with household, paper, and pet products needing to comply in June, health and beauty complying by July and apparel, home and electronics in August.

Source: Reuters.com

US ECONOMY STARTS 2016 SLOW YET STEADY AS CONSUMER SPENDING GOES UP IN JANUARY

Consumer spending grew in January, showing an improvement in retail sales and home purchases. On Friday, the Commerce Department reported personal spending rose 0.5% in January from the prior month. Americans’ pretax earnings from salaries and investments increased at about the same pace. US consumer confidence dropped slightly in January but recovered slightly in February, a sign of slower but steady economic growth.

Reports Friday also revealed that gross domestic product advanced at 1%, higher than the estimate of 0.7%. Inflation still runs below the Federal Reserve’s 2% inflation target.

Improvement in overall economic growth for the quarter ending January 30 was mainly due to the fact that companies pulled back on inventory less than originally expected. Economists have cautioned that first quarter growth may be slow as companies take longer to work through their well-replenished stock.

Source: The Wall St. Journal

NORDSTOM IS RANKED FAVORITE RETAILER IN RECENT SURVEY

A survey of over 5,700 consumers found that Nordstrom ranked first among retailers in customer satisfaction. It specifically ranked highest scores for atmosphere, checkout speed and finding the correct size/product the customer was looking for. One in five customers surveyed indicated they were dissatisfied in general with their fashion retail experience across all retailers. 40% of these customers indicated that the sales experience was very important to them, and that less than half of them were approached by a sales associate, which was key to their satisfaction. Nordstrom’s sales associates assisted customers the most and received the highest satisfaction scores.

Coming in behind Nordstrom were Marshalls, H&M, Ross, Kohl’s and Macy’s.

With merchandise selection and ease of finding items and size selection the top of customers’ needs, retailers and vendors recognize the importance of partnering to share point of sale and inventory data in order to optimize store assortments. Many vendors, such as Brahmin Leather, Anastasia Beaute and The Sak, utilize Accelerated Analytics to monitor and act on inventory levels and customer buying patterns in Nordstrom and other retailers to maximize their effectiveness in this area.

Source: Chain Store Age

NRF SURVEY REVEALS INVENTORY SHRINK IS A $44 BILLION PROBLEM FOR RETAILERS

Inventory shrink, or the loss of product due to shoplifting, employee and vendor theft and administrative errors, costs retailers billions of dollars. The NRF and the University of Florida provided survey results this week stating that in 2014 inventory shrink averaged 1.38% of retail sales, or $44 billion.

Shoplifting accounted for 38% of the loss, followed by 34.5% in employee theft. The rest consisted of 16.5% administrative errors, 6.8% vendor fraud or error and 6.1% unknown loss.

While grocery chains have the highest shrink rate, home center/hardware/lumber/garden reported average shrinkage of 1.09%.

Tracking inventory effectively is key to managing shrink. Actual and accurate inventory counts eliminates the over/under counting in the results. Verifying product delivered is what was ordered and is accurately described in systems is also paramount – if an expected-sized item was not available, and the vendor ships a different size, but that difference is not noted, a retailer can end up with a surplus of one size, a shortage of another, and a dent in their inventory valuation. Inventory measurements should be looked at in both units and dollars. A retailer could be 99.5% accurate in dollars but only 94% accurate in units.

Shrink-related data is stored in different applications such as POS/point of sale, inventory, receiving and store applications. Having the ability to obtain reports that combine point of sale and inventory data in a timely fashion is imperative to take action quickly before the data becomes outdated.

Accelerated Analytics is a comprehensive service for collecting, analyzing and reporting on POS point of sale and inventory data, to increase sales, optimize inventory, recognize inventory shrink and respond faster to this information.

Source: Chain Store Age, ProSales

FOSSIL GROUP EXECUTIVE MOVES TO VERA BRADLEY, INC., AS CMO

Vera Bradley, Inc., has hired Theresa Palermo from Fossil to be its new Chief Marketing Officer. Ms. Palermo will start at Vera Bradley on June 22.

"Theresa comes to Vera Bradley with an accomplished retail marketing background," said Vera Bradley CEO Robert Wallstrom. "She has a terrific blend of creative and analytical skills and a solid track record of building brands, engaging consumers, and driving sales through designing and executing comprehensive marketing programs. Marketing is a key focus for Vera Bradley as we work to create excitement around our brand and introduce consumers to our myriad of new products. We are anxious for Theresa to get started." 

As CMO, Palermo will be responsible for marketing strategies and initiatives that build brand awareness and revenue growth across all of Vera Bradley’s product channels.

Palermo was VP, Global Marketing and PR for Fossil Group. Prior to Fossil, she held key marketing roles with Collective Brands, The Timberland Company and the J.Jill Group.

Vera Bradley, Inc. designs women’s handbags and accessories, luggage and travel items, eyewear, stationery, gifts and baby products.

Both Fossil Group and Vera Bradley, Inc. are customers of Accelerated Analytics, using their POS and Inventory analytics and reporting tools to manage stock levels, store performance, sell thru and sales activity.

Source: Retailing Today 

The Role of Analytics in Retail

The role of analytics in retail has evolved substantially over the past few years and it’s having a significant positive impact.  The days of hearing a vendor say “Oh, we get an EDI 852 but we don’t really do anything with it” are starting to fade into the rear view mirror.  This blog post will discuss some of the mega trends we see occurring in business intelligence in retail and their impact on demand planning and forecasting.   

Retailers are much more open to sharing point of sale (POS) data with vendors now than they were a few years ago.  Wal-Mart paved the road with Retail Link, which gives vendors access to a wealth of data, and most other retailers use EDI 852 or a web site of some kind to make data available.  [As a side note there are some major retailers like ACE Hardware and Publix that still refuse to share POS data, which is pretty amazing]  Mega-trend:  retailers will begin to expand the metrics they share and they will slowly move toward providing daily data.  We have recently seen retailers begin to share on hand data and sales dollars which they had not shared previously.  Providing those additional data elements enables category management and demand planners to greatly expand their analytics.  We are also seeing retailers begin to make daily data available, which is probably the most exciting development in business intelligence for retail.  Demand planning and forecasting for retail is dramatically improved by daily data vs. weekly data and daily data creates the opportunity for things like weather analysis.   

Key performance indicators for retail are pretty easy to define and calculate.   Sell-through, weeks of supply, year over year comp or % change, gross margin, gross margin return on investment, etc.    We find however that many demand planners do not have the time or tools to monitor KPI’s at the store / SKU level of detail which diminishes the value that should be realized.   Mega-trend: vendors are using cloud based software as a service (SaaS) to get access to sophisticated retail reporting without having to invest into business intelligence tools and a bunch of expensive development.   Retail point of sale reporting and analytics can basically be purchased ‘out of the box’ and then customized to fit your precise business needs in a very small amount of time.  When a large customer like The Home Depot is asking you to get into the POS data, you don’t have the luxury of waiting on your IT team.   Outsourcing your retail POS reporting and analytics provides a very fast path to keeping your customer happy. 

Mega-trend: Vendors use of EDI 852 and POS analytics will become more and more sophisticated.    Not that long ago, when a vendor invested in POS reporting, they were getting ahead of their peers by using technology to improve their business.  They would build relatively simple retail dashboards with key performance indicators for retail stores, like units and dollars sold.  Today, however, we are seeing increasingly complex analysis for demand planning and forecasting, complex retail replenishment models, category management and even weather and demographic analysis.  This is a natural evolution of business intelligence in retail and it is driven by the availability of SaaS tools and very real results that vendors are experiencing.

Improving EDI 852 On Hand Data for Useful Inventory Reporting

Nearly all EDI 852 files report activity of SKUs or UPC's.  While this probably seems like an obvious statement, it does create some work to create a data set which is suitable for good inventory on hand reporting.  EDI 852 activity based reporting means that a SKU which is on hand, but which did not have a sale or return in a given week, will not be reported in the EDI 852 file because there is no 'activity' to report.  Without some work on the data this creates null on hand records which impact the ability to do good out of stock and inventory exception reporting.  For example, a SKU might have 100 units on hand but not sell for a two week period and so the current week on hand will be null.  To improve upon the data one must carry forward the last known on hand value that was reported in the EDI 852 so that each SKU has an on hand. 

The downside to this approach is that your database will grow in volume over time, and so it is also necessary to put one or more rules in place to decide when on hand for an item will no longer be carried forward.  This can be accomplished using the SKU status - for example do not carry forward the on hand for an item when it changes from 'active' to 'inactive'; or you can create a rule to discontinue the on hand carry forward automatically after some number of weeks with no activity reported in the EDI 852.

Our team has implemented these types of rules to improve upon the EDI 852 for Home Depot, Macy's and a number of other retailers and it has greatly improved our ability to produce accurate and useful inventory out of stock and exceptions reports.

Vendor Managed Inventory (VMI): the Holiday Season

September 2 articles in the Wall Street Journal and the Chicago Tribune warn of potentially mild holiday buying driving inventory trends in major retailers across the country.  The chief concern cited in both: fear of too much inventory when the season ends and the resulting “frantic price slashing” (Tribune) and “discounting bloodbath” (WSJ). The Journal article cites slow back-to-school shopping as a harbinger of slow holiday sales and the Tribune goes on to quote a supply chain management expert as characterizing many retail locations as “zombie stores” regarding their dropping inventories.  “At best,” he says, “a store like that looks boring. At worst, it's a struggle to get people to come in and buy product."  This fear of clearance selling due to slow sales projections has retailers reducing the “breadth and depth of their assortments” going into the holiday season. 

For retailers, this trend is actually helping their numbers, keeping investors happy.  The Tribune reports that mainstream department stores and large discount chains actually improved their gross margin bottom line in the second quarter over last year (the notable exception being Macy’s).  But this trend can be bad for retailers, and the Tribune correctly notes that fickle, unhappy shoppers will just as soon go to another store to get what they want than buy the next best thing on the shelf. Further, Perry Ellis CEO George Feldenkreis says, "Inventories have been very depleted at retail and retailers are going to find themselves in a situation where some of them, if sales just improve a little bit, are really going to be out of inventory and they are going to be chasing inventory."

What this means for vendors is that, among other things, it underscores the need for vendor managed inventory (VMI).  Given the current retail inventory trends and the projected trends for the holiday season, it is absurd for any vendor to think that they will be able to sit passively and wait for an order to be placed by their retail partners.  Rather, the vendor that supplies the most similar product to the need and can provide it most rapidly will be filling the voids this season, because the last thing that a retailer wants in this environment is to have an order need to be filled the next day and arrive three weeks later, too late to sell most of it, so that the lion’s share of the order ends up on a clearance rack.

So how does a vendor manage their inventory so that they can meet inventory needs at their retailers without too much cost for themselves?  Rainmaker has identified four key indicators that should be tracked:

• Out of Stock Stores

Stores with no items on the shelf cannot sell those items, and the longer they sit without sales, the less likely the retailer will be to re-order them in light of the industry trends.  However, take care not to overstock those stores by checking the sales trends for the last several weeks that the store did have inventory and the same period sales the previous year.  It stands to reason that sales will be down slightly over the previous year for most items, so reconcile that against the preceding several weeks and resolve stock outs immediately. 

• Under Stocked Stores

Current sales trends and same period sales the previous year combine to provide a valuable barometer for sales in the near future.  Consider these and identify those stores with too little inventory to meet anticipated demand, and bring them back up to minimum required amounts of inventory to meet the short term demand, lest they end up in the out of stock category.

• Warehouse and DC Inventories

Not all retailers distribute their products the same way, so knowing how the distribution of products works, and considering the general or store-specific inventories sitting in warehouses and distribution centers for retailers, will help prevent overstocking or overproducing products that may not be on a retail shelf, but might well be on a warehouse shelf or already on their way to a retail outlet.  Sum up item-level needs to resolve out of stock and under stocked stores to their associated warehouse or DC to prevent over-producing or over-shipping. 

• Gross Margin Return on Investment (GMROI)

MSRP is a fine concept, but more often than not, it isn’t a true gauge of what an item is selling for.  Additionally, shipping items to one retailer or store has different associated costs than to ship to a different retailer or store.  Calculating an average selling price for an item for each retail partner, and combining that with cost and inventory levels, allows one to identify which retailers are generating the highest gross margin return on investment. Further, as retailers reduce their assortments, key in on the items with the highest GMROI and allow the others to fade out.

To track these indicators, it is essential that it be done at an item/store level if buyers are going to take the vendor seriously and relinquish any control over the ordering process.  Managing inventory at this level can be difficult, especially for smaller vendors whose budget and resources are limited but whose retail partners are many.  Simply receiving, storing, and analyzing the vast amount of information required to track these indicators often requires whole departments, which are even then most often understaffed and overworked, degrading the quality of the answers they provide. Accelerated Analytics offers a comprehensive solution to these needs that culminates in a set of intuitive, business user-friendly reports that allow a vendor to begin analyzing data within hours of the arrival of data from a given retailer, rather than burning the lion’s share of time collating and formatting the information and only briefly analyzing it before it becomes stale. For a fraction of the cost of the overworked and understaffed department that attempts to handle these needs now, Accelerated Analytics' solution can automate and improve this process dramatically. To see how Accelerated Analytics can assist in the resolution of your stock out and under stock troubles, request a free stock out exposure analysis or contact us today!