Smart Merchandising

The Art of Merchandise Planning for Omnichannel Retail

While brands are increasingly taking to the digital space, physical stores continue to play an important role. Two ways in which physical stores can complement online channels are by acting as local fulfillment centers and being an easy contact point for receiving returned goods from customers. 

Omnichannel poses a number of challenges for optimizing operations, capturing maximum sales, and ensuring the highest levels of profitability. This has implications for retail strategy, information flow, physical flow of products, supply chain management, and last-mile delivery. Most importantly, it impacts retailers’ merchandise buying and planning decisions. 

Analytics, Forecasting, and BI

Accurate forecasting at all times is essential for the right buying and planning decisions. All the information relayed back from the market is put through smart algorithms that enable retailers to take the right future-focused merchandising decisions. 

In omnichannel retail, data streams from multiple POSs, capture, and store relevant data thus it is critical to ensure the integrity of the repositories. Data related to past customer purchase behavior, bestsellers & Never-Out-Of-Stock styles, seasonality, and festive purchase behavior, facilitate inventory planning and buying decisions. This requires an effective Merchandising platform to integrate data from across channels, enabling retailers to take the decisions with ease and agility.

Apart from leveraging conventional past data, Business Intelligence (BI) plays a critical role in a highly competitive marketplace. Timely customer-related information and BI can help retailers outdo their competitors and stay ahead in the market. With omnichannel retail, you can expect plenty of market-related intelligence and information flowing in. The big challenge is to process, analyze and represent that information effectively to enable accurate planning and decision-making. 

Retailers must integrate information across channels, use it to gain customer insights, and design growth strategies accordingly. Merchandising solutions help in gaining a competitive edge as it is impossible to manage and utilize massive, multifaceted data using conventional tools like Excel sheets. (read more)

Getting the right assortment at the store level

Placing the right assortment at the right store is critical for capturing maximum sales. Gathering information on customer preferences, past purchase behavior, and their response to discounts and promotions, coupled with robust BI analytics helps stock the right inventory.

Smart assortment plan

Fashion brands are experiencing increasing complexity due to the wide range of product styles with varying customer demands. Sub-optimal assortment planning and buying can result in overstocking or understocking of items at the store level, which amounts to inefficient distribution. 

With an end-to-end merchandising solution, retailers can leverage data to develop a smart assortment plan and achieve optimal store allocation. Using over 300 algorithms, the solution ensures accurate decision-making with the help of product clustering, store-style ranking, and the inclusion of seasonality and visual merchandising. A smart merchandise allocation plan also ensures the consistent availability of NOOS (Never Out Of Stock) styles in stores.

By ensuring the right product clustering, width, and depth of the product, automation-based merchandising solutions enhance the likelihood of conversions. They also help decide the true size-set ratio at the store level, leading to minimal size cuts. The solution keeps track of the inventory health, lead time, depletion rate, and reorder quantity, to create an ideal buy plan for each store-style combination.

Optimal store allocation

Optimal store allocation is achieved through regular replenishment and inter-store transfer of goods from low-performing stores to high-performing stores for better sales. It aims at ensuring that every single item reaches the right store. Allocation of a new store is determined by comparing the features and product assortments of similar stores nearby. 

In the context of omnichannel retail, a real-time assessment of the common pool of inventory both online and offline is important to stay up-to-date about the availability of inventory at all times. Customized reports for every stakeholder level, from CXO down to the merchandiser level facilitate the merchandising decisions at each level.

Integrate Multiple Plans into a Single Multichannel Plan

Retailers need to integrate individual plans tailored for each channel into a single multichannel plan that boosts sales, margins, fulfillment rates, and inventory turns across the whole business.  Increff Omni OMS allows retailers to expose offline inventory to customers online so orders can be placed at any point of sales and fulfilled either from the stores or the nearest warehouse, thus providing a unified shopping experience to all offline and online shoppers. 

Smart assortment planning tools help with individual store planning and forecasting, down to the SKU level. Real-time inventory updates and faster order fulfillment ensure higher margins and profitability. As omnichannel becomes the future of retail, brands experience greater reliance on tech-based Merchandising solutions that enable automation in decision-making, conduct advanced business analytics for strategizing, and facilitate forecasting at all stakeholder levels for faster business growth. 


E-commerce Inventory and Order Management with Scalable WMS

Businesses demand rapid scalability from brands and retailers, especially in times of peak demand and business growth. When your website takes up to 5 seconds to load, there’s a 90% chance that your customers will bounce to a competitor’s site instead. During the season, there could be a significant ebb and flow in demand due to factors like weather, end-of-season sales, or festivity. Dealing with seasonality, therefore, requires a robust and agile warehouse management system to facilitate scalable operations just when they’re needed.

What is WMS?

A Warehouse Management System consists of software and processes using which retailers can control and administer warehouse operations. When the demand peaks, an ideal WMS must ensure that orders are captured and fulfilled accurately. A cloud-based WMS like Increff WMS can scale quickly as a business is growing or experiencing spikes in demand. A scalable WMS offers the right picking, packing, and inventory management even under pressure.

How to manage inventory and warehousing operations efficiently with WMS

  • A warehouse management system allows you to match orders to facilitate accuracy in inbound and outbound logistics. By optimizing and automating the receiving process, a WMS ensures that errors are reduced. 
  • Using serialization or barcoding, a WMS keeps track of batches for effective inventory control, even during peak sales time, thus providing a consolidated view of the available inventory in real-time.
  • Automating the processes for allocation, replenishment, picking, printing labels, and fulfillment, a WMS helps meet peak demand efficiently. 
  • It offers accurate and error-free picking to avoid wrong delivery, unnecessary return, and loss of sales.
  • Managing reverse logistics efficiently in case a customer returns an item, a WMS facilitates the circulation of the product back to the sales channels immediately.

What are Economies of Scale in Warehousing?

Times of peak demand and drastic business growth provide retailers with a unique opportunity to sell huge volumes of products. This helps them accrue the benefit of “economies of scale” which essentially refers to a reduction in the per-unit cost of an item due to the huge volume of sales. 

By providing efficient operations, centralized warehousing, and large storage capacity, warehouses provide economies of scale. For instance, instead of shipping individual packages, large batches of items are shipped to the stores at the same shipping cost, thus reducing the cost per unit item. Likewise, the storage costs per unit product decline during peak demand due to large volumes in the warehouse, as opposed to fewer items during periods of normal demand.

What is Order Management; Processing, and Fulfillment?  

Order management is a vital part of operations for any e-commerce business. It starts with tracking and monitoring orders which can only be ensured with automation provided by a WMS system. This is especially true during rapid business growth and peak demand, to avoid errors and manage orders with accuracy and agility.

Order processing refers to the process or workflow from placement to delivery where reliability and accuracy are a must to ensure customer satisfaction. Picking, packing, sorting, shipping, and tracking are important steps that form part of order processing.

The entire process from when the sale takes place till the product is delivered to the customer is known as order fulfillment. This depends on 3PL partners and is augmented by an efficient WMS solution that helps drive the whole process without errors and inaccuracies. 

Perfect Inventory and Order Management for Scalability

An inventory management system can be quite complex with a number of moving parts which can cause shortages if not handled well. Inventory management for a business that is scaling up begins with forecasting the demand as accurately as possible. Projections based on past data or recent trends in customer behavior can help have the right inventory to avoid under or over-stocking. 

Having strong relationships with vendors and partners can help ensure seamless supply during peak demand. Vendors who have open stock inventory can fulfill orders as needed, this is on-demand manufacturing or Just-In-Time inventory management.

Finally, with automated order management systems, retailers can avail the benefits of APIs that offer flexibility, efficiency, and scalability. These enable a retailer to streamline operations while catering to huge customer demand.

Scalability is one of the most essential features of a WMS as it allows a retailer to meet the growing challenges of a burgeoning marketplace. Not having ample scalability means loss of sales, dent in a brand’s reputation, dissatisfied customers, and plummeting revenues.


Successful Omnichannel Strategies for E-commerce

As retailers increasingly switch to multi channel order fulfillment, they reinvent the supply chain to enhance asset monitoring, outbound & inbound storage, returns management, and distribution of goods. To survive this fast-paced retail environment, retailers need cutting-edge technologies for end-to-end visibility and inventory accuracy to enhance operational efficiency, optimize allocation, and boost turnover.

Improve traceability using inventory tracking software

Inventory serialization with barcodes significantly reduces human errors and enhances operational efficiency by digitizing data collection and process. Barcodes store the complete history of an item to improve tracking efficiency and error accountability. 

  • Serialization enables retailers to effectively manage orders, inventory, and shipments. Since each product has a unique barcode, its identification becomes simpler and more accurate. 
  • Barcodes help locate items easily within a warehouse and provide insights into the movement of inventory.
  • Barcode and RFID contribute significantly to productivity as they automate tasks thus reducing manual efforts, human errors, and the need for paperwork. 

Build your network strategically

As customers expect same-day deliveries, retailers operating across multiple channels find it extremely challenging to catch up. There is a need to distribute inventory according to regional demand and build shorter supply chains for better demand and supply management and reduce pressure.

  • Strike a balance between CapEx and OpEx: Retailers must selectively and strategically expand their network of warehouses and distribution centers, to keep CAPEX and OPEX under control and increase the speed of delivery to customers across channels and geographies. This is very important as setting up high-capacity warehouses costs a lot. Opting for urban or market-fulfillment center strategies, such as dark stores, and dedicated fulfillment locations helps meet their strategic objectives. 
  • Leverage automation: Refining analytics and automation to better position your inventory in key markets can be highly instrumental in reducing delivery time and logistics cost to customers. Serialization enables faster, accurate order picking and facilitates express shipping of priority orders. With 100% inventory exposure across all sales channels, retailers can significantly increase their ability to maximize sales.
  • Ensure faster fulfillment from the nearest location: By processing orders from the nearest possible location (store or warehouse), the order time to the customer is significantly reduced. Regional fulfillment begins with a pre-season forecast and planning of inventory on the basis of local demand. In-season sales are then optimized with inter-warehouse transfers to meet the changing demand in a particular region. Likewise, distributed warehousing allows retailers to ensure greater supply chain flexibility and agility, and to prevent a broad-based impact across the market in case of disruptions in one location.
  • Build last-mile partnerships: Finally, to complement efficient warehousing, brands need reliable, last-mile delivery partners for faster customer service. Partnering with regional carriers and expert tech providers consistently enhances delivery standards. Such value-adding partnerships and collaborations help address last-mile challenges with greater effectiveness in the future.

Inventory vs marketplace model for inventory management

In view of the growing trend of omnichannel retail, an important strategic decision for new entrants in terms of choosing a marketplace model vs an inventory model. With D2C business gaining momentum around the globe, there is increasing popularity of marketplace-led models for inventory management. 

In the inventory-led inventory management model, large multi-brand retailers source products from merchants and stocks them. The marketplace model on the other hand, simply acts as a meeting place for buyers and sellers, although it offers shipping assistance by partnering with selected logistics players. The marketplace model is in line with the much preferred zero-inventory policy. It is investor-friendly, highly scalable, and gives brands greater control over their inventory and customer data. 

Use omnichannel for expansion, efficiency, and higher CX 

A successful omnichannel strategy puts customers in the driver’s seat. In fact, 53% of leading European retailers implement an omnichannel strategy because it improves customer lifetime value. With omnichannel, retailers can reach new customer segments and realize exponential growth in their business due to plenty of flexibility and convenience.

Operational efficiency is one of the major challenges in retail supply chain management. With the omnichannel strategy in place, retailers have a holistic overview of their market and there is no need to create or implement separate strategies for each channel. By gaining better visibility and exposure to their inventory, retailers are able to increase inventory turnover, optimize stock levels and automate replenishment. This avoids losing business due to out-of-stock scenarios. The most significant benefit of omnichannel retail is increased sales and revenues. Having the right strategies in place to tackle the challenges inherent in omnichannel retail is crucial. Which strategies retailers opt for depends on their business objectives, constraints, assets, and leadership outlook.


Building Integrated Digital Supply Chains for Omnichannel Retail

Supply chain integration brings together all the functions in omnichannel fulfillment into a single system. It necessitates careful coordination and alignment to ensure everyone is working towards the same objective. Supply chain integration is an ongoing process that needs to be regularly updated and tweaked as the business evolves.

Most common Supply Chain Integrations: 

  • Vertically integrated Supply Chains: Vertical integration occurs when a retailer takes control of one or more stages in the fulfillment process. Thereby, owning multiple stages of the process with the aim of increasing market share and gaining tighter control over the supply chain. Vertical integration can be backward, towards procurement & production, or forward towards the end consumer. 
    • Backward Integration: When a retailer expands across multiple supply chain segments beyond its value chain, e.g. merging operations with another company that provides the goods or services required for omnichannel fulfillment. A basic example of backward integration could be that of a fashion retailer partnering with a garment manufacturing unit.
    • Forward Integration: When a retailer takes control of the business activities ahead in the value chain, expanding to the next levels of the supply chain and getting closer to the end consumer in the value chain. For example, a fashion retailer pursues forward integration if it partners with a last-mile delivery company.

Marketplaces are a great example of vertical integrations. They bring together sellers and buyers in a single platform, making it easy for both to find what they need; a greater reach to a larger audience, and better prices.

  • Horizontally Integrated Supply Chains: Horizontal integration is a strategy when related or similar functions being done by multiple companies merge. In its most basic form, horizontal integration is acquiring a commercial entity operating in the same industry or level. In this technique, a company takes control by buying, merging, or seizing control over other businesses in the same sector’s value chain. Actual examples of horizontal integrations can be Adidas with Reebok and the merger of Vodafone with Idea. 

ERPs are an excellent example of horizontal integrations. They combine the various functions of a company, such as accounting, marketing, and purchasing, into a single system, thus allowing companies to streamline their operations and making it easier to track inventory and sales.

Benefits of Supply Chain Integration:

  • Improved control over distribution
  • End-to-end visibility
  • Enhanced flexibility to demand fluctuations
  • Increased efficiency
  • Cost savings
  • Improved customer satisfaction

Methods for increasing productivity & effectiveness through integrated supply chains:

  • Present and Future Business Mapping: Determine the present level of supply chain integration and the gap to reach the future desired state. This mapping could be done at four broad levels:
    • Basic: At this level, the extent of the silo approach needs to be mapped; if various departments within the company work on issues separately and disconnected.
    • Functional: Map the information flow within the company to determine the dependability and responsiveness of interdepartmental working.
    • Internal: Determine if all departments and functions are connected to one IT structure, use insights from central data analytics and inter-related information dashboards. Additionally, map the alignment of overall company objectives, for example, the customer-first approach, along the entire value chain.
    • External: Determine if all vendors and service providers in the supply chain collaborate and operate almost as one to meet customer demand, boost efficiency and profits, and meet OTIF.
  • Data Integration and Data Analytics: Consumers produce an enormous amount of data, that can significantly impact supply chain management and improve demand forecasting. Using consumer and corporate data to identify threats and opportunities in the supply chain can assist retailers in mitigating risks in omnichannel fulfillment. This is only feasible if supply chain system integration is implemented. Also, real-time updates are essential for effective supply chain integration. Everyone involved in the process needs access to up-to-date insights to make quick decisions based on the latest data analytics. Supply chain planning with real-time data analytics ensures economies of scale, OTIF, and that inventory is correctly aligned with demand.
  • Integration with Logistics Partners: This ensures that products are stored in distribution warehouses and delivered to the customer quickly and efficiently. Crucial for supply chain integration is better collaboration with vendors through connected systems, leading to overall improvements in inventory management. End-to-end supply chain transformation is required to implement a successful last-mile plan. Retailers must establish a last-mile strategy that addresses their current end-to-end supply chain inadequacies and aligns them with the final objectives. A digitally integrated supply chain, for example, may help distribution centers construct a comprehensive last-mile solution that reduces delivery lead times.

Digital supply chain integration strategies are essential for companies looking to fulfill orders through omnichannel retail. Businesses can streamline their operations and provide a great customer experience using the right tools and tactics. Bringing all the stakeholders together to streamline processes as one continuous and transparent flow might be challenging. There are, however, a variety of tools available today that can make the process of supply chain integration simpler.

Smart Merchandising

Allocation and Replenishment for Omnichannel Retail

As omnichannel retail becomes a steady trend, conventional allocation and forecasting can cost millions and appear to be rather tedious. The omnichannel approach demands proactive and integrated strategizing across all points of sales, responsive allocation, and timely replenishment. The growth of omnichannel retail has therefore created new challenges for retailers, especially in allocation and replenishment. Accurate decisions to meet evolving customer demands can be taken by leveraging past data, customer buying patterns, competitors’ tactics, and seasonality with automation and analytics-based merchandising solutions. 

Forecast right down to the store level

It is important to forecast demand across multi channel retail accurately to ensure that the right quantity of stock is allocated to the right warehouses and stores. Predictive analytics helps determine the timing of replenishment, size of the consignments, and frequency of allocation. 

Analyze Patterns of Online and Offline Demand 

To determine allocation and replenishment accurately, gauging customer demand patterns is critical. Retailers must consider factors that decide the quantity, timing, and motivations of customers’ purchase decisions. As compared to the traditional methods of analysis, data-driven decision-making helps in easy, instantaneous, and accurate demand analysis. New-age merchandising solutions help retailers drill deep into product & size level granularities to predict the exact style-size combination to serve customer demand across both offline and online channels.

Right Allocation for Ideal Demand Fulfillment

Once the pattern of demand is identified, it has to be backed up with the right allocation. In case of a sudden spurt in demand in a particular market, in-season reallocation can be optimized through inter-store and inter-warehouse transfer.

Likewise, using Increff Distributed Warehouse Inventory Optimization solution as part of your pre-season allocation strategy helps maximizes fulfillment from local warehouses. It enables retailers to provide cost-effective fulfillment by reducing the shipping distance. Delayed order delivery is one of the major reasons for returns, fulfilling orders faster from regional warehouses helps reduce this significantly. It increases margins, provides operational efficiency, and minimized shipping costs immensely while ensuring the highest levels of customer service and repeat purchases.  

Turn on Auto-Replenishment 

An ideal merchandising solution enables retailers to set auto-alerts to notify when the quantity of a fast-moving style has reached below a certain level and needs to be replenished. While setting the alerts, it is prudent to consider the average lead time and keep a provision for supply-side delays. In case a particular product or style is unavailable, the merchandising solutions can suggest the next best alternative which can be considered for replenishment. This helps capture maximum sales and avoid loss of revenue due to the non-availability of goods.

Sales of bestsellers (e.g., plain white T-shirts) are not seasonal and their replenishment can happen throughout the year. If sales of some styles that are in limited quantities, pick up suddenly during a season, then alternatives styles can be replaced to ensure consistent sales.

Use Markdown Management to Boost Sales and Improve Margins

Throughout the season, retailers expect crests and troughs in demand. Whether it is the end-of-season sale or festivities, retailers must anticipate demand accurately for the right inventory management and to avoid over or under-stocking of inventory.

At the end of a season, retailers usually sell off the leftover stock at high discounts so it can be replaced with new stock. A number of factors like True ROS™, Ageing & Cover, Health of stock in a store, etc,. are critical factors to consider in determining the right percentage of markdowns. Since omnichannel can complicate the markdown decision immensely, retailers cannot rely on excel sheets for decision making. They need to implement the right markdown optimization tools to accurately access discounting percentages, ensuring maximum sales and high profitability. 

Markdown management is also useful to expedite the sale of slow-moving stock during the season. For this, an appropriate discounting percentage must be applied that avoids causing excess loss or devaluation of merchandise. Discount levels can also be manipulated based on the store-level customer demand for a particular product. 

Manage Returns Proactively 

Omnichannel commerce increases the complexity of returns as customers who buy online often prefer to return the goods offline at physical stores. Brands, therefore, have to facilitate easy returns management by putting in place quality checks and product sorting right at the store level, or at a nearby fulfillment center. Finally, they are required to expedite reverse logistics to the warehouse so that the merchandise is made available for resale as soon as possible. 

As is evident, omnichannel adds to the need for proactive strategizing, better forecast and demand anticipation, greater demand fulfillment from regional warehouses, and accurate inter-warehouse transfer to meet customer demand, helping capture maximum sales and boost profitability. For all this, retailers need the robust support of automation and predictive analytics provided by an ideal merchandising solution.


Advantages of the Marketplace model vs Inventory model for E-commerce

The e-commerce industry has been around for more than a decade now, and it has changed the dynamic of operation of most of the world’s retail marketplaces. One of the major shifts e-commerce players have experienced is the shifting from an inventory-led model to a marketplace model for inventory management. The inventory-led and marketplace e-commerce models are both major parts of the e-commerce industry, but play different roles in the market. Marketplace platforms and online stores have both become powerful e-commerce business models within the digital economy.

Let’s look at the definitions of the inventory model and the marketplace model:

Inventory Model

This is when a marketplace e.g. Amazon, sources volumes of inventory from brands & sellers and stocks it in its own warehouse. The e-commerce marketplace owns the inventory and sells it directly to the customers, managing the logistics and every aspect involved in the e-commerce business. 

Marketplace Business Model

Following a zero inventory policy, the e-commerce platform acts as a facilitator between the buyer and the seller, providing an efficient, transparent, trusted virtual environment for commerce. The inventory remains with the seller and customers directly buy from the sellers, while the e-commerce platform manages the logistics. 

With increasing momentum in the D2C business model, the marketplace model of inventory management has become popular. As marketplaces can stay lean, they are prepared to adapt to the changing competitive e-commerce landscape easily.

5 advantages for sellers to take on the ecommerce marketplace business model of inventory management are:

1) Better Capital Utilization for maximizing efficiency

Managing capital investments wisely means better cash flow, faster business growth, and greater competitive advantage. Traditional e-commerce ventures were highly capital-intensive involving setting up large storage spaces and handling associated management, warehousing, and logistics costs. The marketplace model of inventory management now distributes this burden to individual suppliers thus making business more viable. While Marketplaces manage the platform and logistics, sellers manage their inventory which gives them better control over the supply chain.

2) Highly Scalable 

New-age technology solutions like Increff WMS, allow sellers to expose 100% inventory across multiple sales channels simultaneously. Without segmenting or blocking inventory for a specific channel, sellers can achieve greater inventory visibility, higher sales, better margins, and greater cash flow. With the real-time inventory update feature of Increff WMS, as soon as an order is placed on one channel, that quantity of inventory gets deducted from the overall stock, so the available quantity of inventory is only visible at all times. This prevents marketplaces from accepting excess orders even during peak sales. The robust tech backend facilitates millions of interactions between the servers every second, without any downtime, to ensure perfect sync. With the rise in SaaS technology solutions, infrastructure upkeep is low for sellers since maintenance and updates are handled by the tech provider. 

3) Better control over customer data

As orders directly reach the seller, they get complete access to customer data. With efficient warehousing and faster order processing using Increff WMS, brands/ sellers can ensure faster order fulfillment and better customer service. They can analyze region-wise demand and plan merchandise for the upcoming season accordingly. 

4) Wider Reach

Marketplaces have an existing well-developed customer base so individual brands/ sellers can capitalize on it thus saving efforts and costs in marketing for themselves. They also have a well-established network of Third-party logistics providers so brands/ sellers can ensure efficiency in the last mile.

5) Investor-Friendly

Entrepreneurs need financing and support to flourish their startup idea. Marketplace provides an established platform to expand the business, maximize sales, minimize returns and increase brand loyalty. D2C aggregators like Globalbees, G.O.A.T, Mensa Brands, etc. are investing in D2C brands and using advanced tech platforms, like Increff WMS, to boost the business growth of individual brands in their portfolio. Such immediate growth creates an advantage over other businesses searching for an investment.

Increff WMS solving challenges of the Marketplace model for Brands & Sellers

  • Increff WMS allows efficient inventory management, 100% accuracy, and traceability of inventory within the warehouse. 
  • Sellers need a central standardized platform to view all data that would be coming from multiple marketplaces. Increff WMS provides a single platform to view inventory movement across different sales channels and multiple downloadable reports, at every stakeholder level, for in-depth analysis. Brands can analyze sales at individual channel levels and estimate the right assortment plan for each channel to capture maximum customer demand.  
  • The real-time inventory order sync feature ensures no excess order is received from any marketplace and that the inventory is updated at all times for a better customer experience
  • The robust tech solution supports millions of interactions per second between the Marketplace and seller panel, without downtime, to ensure smooth system interaction and zero glitches. This allows easy, effortless business scalability and growth. 
  • Inventory serialization in Increff WMS allows rapid returns processing and efficient re-commerce to maximize sales opportunities.