Commerce Trends

by Manhattan Associates

Condition your stores for success

Retail sales have seen 25 consecutive months of growth and are worth approximately £6.9bn every week, according to the Office for National Statistics. Of this total, £802m is spent online – that’s more than £6bn still spent in stores.

Market conditions and consumer preferences are rapidly changing and they have altered the face of retail indefinitely. However, the importance of bricks and mortar to the overall equation of profitable sales has never been higher.

The store itself creates the conditions for a sale. The experience that consumers can be given in store is more immersive, tactile and engaging. These more emotional connections can lead to immediate sales, and to increased loyalty in the long term.

These things do not come automatically though, they are the result of a complex, scientific process. Understanding the science of shopping is fundamental to continued success.

Department store

The first step to boosting the in-store experience involves a de-centralisation of the distribution process. If the whole organisation gravitates around the distribution centre, it can get sucked in. This is problematic because customers do not see the DC. This creates confusion and frustration when the limitations of the DC negatively impact a customer’s in-store experience.

By diffusing control of distribution and inventory throughout the whole organisation – including to stores by enabling them to locate available product from across the network – the fulfilment experience for the customer becomes a positive one even if product is not on the store shelf. Time-to-fulfilment is inversely proportional to success when it comes to customer satisfaction.

Decentralisation elevates the store’s status, but that’s only a part of the equation for achieving success. Instead of a sequential approach to fulfilment and service, stores need to evolve from being just the end point in the sales cycle to become product advisory outlets, experience centres, mini-DCs, despatch centres and collection locations. At the same time, retailers need to embrace the science of marginal gains so this key asset is made to work harder and smarter on a perpetual basis. Reducing stock holding, increasing floor space, speeding up movement of in-demand items and evolving profitability algorithms compound one another to boost sales and margins.

Because the store is no longer the end point, the profitability equation is made more complex. Today, as retailers offer multiple fulfilment options to keep pace with evolving consumer demands, the equation has many more floating variables. Proximity to the customer, capacity and cost to fulfil must all factor into the calculation. There are also more corporate inventory rules that exist today, either to support branding or to manage risk versus cost. The outcome is that rules-based order processing is essential to ensure that the end result is still profit.

Complex algorithms are needed to handle the increasing volume of ifs, whens and buts that occur naturally in the sale-to-fulfilment process. The approach of de-centralised distribution, getting more from the stores and a re-assessed profitability equation will help to ensure success. It’s not rocket science; it’s the science of shopping.