Say Yes to the Dress — Whatever the Color
Today’s current viral sensation involving the debate regarding the color of a certain dress highlights (in whatever hue you choose) the need for real-time retail in responding to new demand triggers — as well as traditional retail challenges like stock-outs.
#thedress Or, as I say, Hashtag whatever. The current debate about the color of a certain dress — is it black, gold, or even pink — and subsequent demand highlights the need for retailers to rapidly pick up and capitalize on real-time trends driven by such vagaries as social media or the appearance of a certain article of clothing worn by a movie star on a red carpet.
This website has published numerous blogs on how retailers can increase sales and profitability if they could just speed up their ability to identify and respond to demand that is real-time. The dress is just the latest example. We’ve also written about weather, local events, social, sports, mobility, and many other facts of today’s life that can make consumer demand turn on a dime (to use an old fashioned, pre-social media term).
To successful single-shop owners, much of this is old hat (pun intended). They sense changes in customer demand and respond accordingly to keep their customers coming back. They know when it rains, to put umbrellas out front. The challenge for retail chains is to get manufacturing partners, merchandisers, supply chain, marketing, and store operations all on the same page to respond as rapidly as a successful single shop owner does. Old challenges are getting harder. Carpe Diem has become Carpe Hora.
I hear the skeptics: of course your sales will increase if you identify customer demand and respond the right way at the right time. To which I reply, I totally agree. So rather than address (pun intended again) global demand trends driven by social media gone viral, let’s take a simple problem that retailers still have not solved and which is getting worse: stock-outs.
“For about 80 percent of stock-outs on the shelves, the product was in stock in the back of the store,” a colleague of mine with more than 20 years of retail operations remarked to me this week. “And yet, the problem is fairly easy to solve.”
Why? Retailers have systems already in place to know what they’ve ordered and received at stores. They also know what their high selling items are. They don’t need fancy technology to identify stock-outs, he explained. All they need is a real-time program that knows the count of items somewhere in the store, the average sell through rate, and access to POS data to track ongoing sales of those identified products. If products are known to be on hand (and for almost all retail chains, this is known) and sales of a certain fast moving product have suddenly plummeted, chances are the product is out of stock on the shelf. So raise an alert and have someone go to the back of the store and replenish!
This is not rocket science folks. It is basic math.
The problem is, even though POS data is captured in real time, too often it is used solely on a 24-hour basis as the trigger for a replenishment order. The data is there but it is wasted by not acting fast enough.
This is just one example where retailers fail to connect the dots in real time. By not evaluating, and responding to, the POS data in real time, retailers have yet to crack the 8 percent stock-out rate, a problem that will be exacerbated by the additional pressures of omni-channel strategies such as “Buy Online, Ship from Store.” (We’ll have more on that in our next blog.)
So I hear on the nightly news that the manufacturer of that dress (remember the dress? It’s how I started this post) is going to make more in that color, and even start making dresses of the same design in other colors. Which may mean today’s hot seller will be tomorrow’s markdown. People are already tweeting that they hate the dress. I hope the company’s demand chain is real time.