How multi-brand retailers can benefit from automated ordering
Big-brand retailers of fashion and sportswear have invested heavily in digital technology. These have led to revolutionary changes to their business models. Many of these investments focus on adopting and leveraging digital technology to maximise profits and optimise operations. The most significant advantages have come from the automation of manual decision-making tasks. These handle complex data to produce favourable results: increased profitability, better customer experience, and carefree stock management. A lot of these large-scale changes have come at an eye-watering cost, yet the gains outweigh them – many times over.
It’s easy to imagine these benefits are the exclusive domain of large-scale corporations with massive budgets; however multi-brand retailers of any scale have a great deal to gain from this kind of technology.
For independent multi-brand retailers there are enterprise-ready solutions that can integrate with their existing systems and data. It doesn’t need to be a big, expensive, proprietary system. There’s an opportunity to leverage digital integrations to optimise operations, manage inventory, and automate ordering. These ultimately result in improved customer experience and higher margins
The job of multi-brand retailers is to provide what the customer wants, when and where they want it; but this seems to get harder each year.
Demands change almost instantly. Meanwhile, complex supply chains, long lead-times and the embedded economy of scale (large order quantities) make it hard to offer the agile responses required. The retailer is forced with an impossible task. How can they match consumer demands with the constraints of the modern supply chain? How can an independent multi-brand retailer hope to compete in such a market?
One major technology that helps to manage this complexity is automated replenishment and automated ordering systems. This has been demonstrated by some of the biggest fashion retailers to massively streamline operations.
Of course, smaller multi-brand retailers don’t have the budget to develop their own automated inventory systems. However, a multi-brand retailer can still benefit from the agility of automated replenishment and an automated ordering system, without needing to develop a custom solution themselves.
Many independent multi-brand retailers are choosing an integrated platform like Retailisation that can easily handle this task. It essentially plugs-in to the existing company systems and data. Although more cost-effective than a custom-built solution, it’s very different to a ‘standard’ ERP because it’s custom-designed to work for the fashion and sportswear retail sector. It combines industry-specific algorithms with smart predictive capabilities and turns these into automated responses and outputs that dovetail perfectly with fashion retail systems and methods.
An automated ordering system keeps an eye on the amount of stock available in-store at any time. When an item is running low, or the sales velocity increases, the algorithm pinpoints the optimal reorder point, and places the orders automatically. The automated ordering system does this by using real-time sales data and historical data intelligence.
Retailisation’s smart algorithms essentially ‘hide the complexity of stock and inventory management. By accumulating and processing granular data (that’s already being collected), it’s able to output correct responses and automated decisions.
This ensures the right amount of stock arrives just in time to maintain consistent availability. The result is a smoothly-operating retail enterprise that serves consumer demand precisely.
When these data-heavy tasks are handled by a smart machine, it allows staff to focus on optimising the customer experience and other tasks. It makes the entire operation more efficient and cost-effective by eliminating human errors, and reducing the unnecessary workload for staff.
We often focus on profits – the bottom line – as our primary motivation. That’s understandable. However, another key part of any retail operation is the curtailment of waste.
Not only does waste erode margins; it’s also a real downer. Consumers and staff feel bad about producing unnecessary waste, and it’s harmful to our environment. When an automated ordering system handles things, waste is minimised. Each store only orders what it needs – and always has what it needs in stock.
For customers and retailers the biggest waste is a wasted opportunity. It’s a real shame when customers leave a store empty-handed due to insufficient stock. It’s a lost sales opportunity too. Retailisation’s automated replenishment prevents this kind of waste by determining and maintaining the exact right amount of stock. It does this for each item and for each store, and – most importantly – it makes sure it’s always the right amount in store by automatically reordering the right amount (at the right time).
But surely, you can return unsold stock at the end of a season?
Maybe, but during the entire season your capital has been tied-up in waste stock, and there is a series of avoidable costs that come from this methodology. Loading and unloading stock that never sells is not part of a good business model. Plus, all those wasted journeys taken by delivery trucks add a cost somewhere, not least to the environment.
The Inditex group includes a constellation of big brands including Zara, Zara Home, Pull&Bear, Massimo Dutti, and others. For many retailers, 2020 was a washout year. In the first quarter of 2020, Inditex group made a €409 million loss due to the pandemic. No surprise there.
However, by the second quarter they pulled a profit of €214 million.
How did they achieve this? Like many others, online sales were the key. In the first half of 2020, online sales grew by 74%, and their net cash position increased by €734 million.
The secret to their success has been their ability to remain agile, while handling incredibly complex data across their many brands. Inditex has invested heavily in a proprietary digital integration platform that enables the group to connect data across the entire portfolio –every brand, and every store.
Digital transformation has been pivotal in enabling Inditex to handle a record 1 million orders in one day for the first time during this period. While others were left scrambling to facilitate online and omni-channel sales, Inditex already had a head start because they were already using their data to inform decisions.
Inditex’s custom-built integrated stock management and open data platform enables the versatility to handle data in new ways. This data has also been used to power customer apps that enrich their experience and facilitate sales. Specifically, customers can access stock from the entire group, and have the ability to ‘access’ a store of their choice at any time. Using this they can make Click and Collect purchases, or get help finding stock in the store (using RFID location data). They can even book a fitting room. This helps customers avoid waiting, and ultimately improves the customer experience.
Looking more specifically at Zara (the crown jewel of Inditex), we can see how integrated data use positively effects retail operations. Zara’s model leverages close control of their own production, which enables them to produce items nearly on-demand. So an item can be available in-store just 2 weeks after it appears on catwalks.
The key to their model is flexibility. This is supported by small batch production and small, regular stock movements.
Amazingly, only 15-20% of Zara’s range is locked-in six months in advance. This allows them to manufacture about half their stock during the season, responding closely to real demand and customer feedback. Store managers easily feed customer feedback information to the group data platform. If an item is a dud, the production can stop – but if it’s selling fast, they can scale-up production to match. This means their full range is always available. Thanks to automatic handling of complex in-season data and automated inventory optimisation, Zara ensures that small-batch twice-weekly stock movements are in step with the real demand.
This is similar to the flexible approach used by H&M. Unlike Zara, they have no factories of their own. Instead H&M works closely with more than 700 suppliers, 60 pattern makers and 20 worldwide production centres to serve the customer needs. This complex ecosystem of partners would be difficult to manage without an extensive IT infrastructure to automate the sharing and processing of data. However, H&M goes a step further, by leveraging its modern IT structure to maximize flexibility. By instantly sharing data with stakeholders, H&M is able to manufacture up to 20% of their stock based on present-day trends.
The advantages outlined above aren’t the exclusive domain of big brand retailers, but are also available to franchises and independent retailers. Most of these advantages come purely from the automation of processes like ordering and replenishment, resulting in a lean and agile enterprise. You don’t need to invest millions in a custom-made solution to achieve these cost savings and smooth operations. Retailisation’s powerful solution can leverage automatic ordering technology using a software package that has been custom-designed for the fashion retail sector. Once you start using automation in the area with the most operational impact, it becomes easier to leverage data for other purposes too.