Relief for high-street retailers appears to be in sight, as non-essential shops start to prepare for the re-opening of their stores and the consumer boom this Spring and Summer. Whilst the past year in retail has been more about survival than growth for many businesses, the relaxation of restrictions should be viewed by retailers as an opportunity to adapt and innovate their operations and strategy.
However, the re-opening of retail in the unusual economic climate brings new and unique challenges for businesses.
After a year of unprecedented challenges for retailers, with Covid lockdowns costing the sector £22bn in lost non-food sales, the promise of non-essential shops open for business again creates a pivotal juncture. Merchandisers, buyers, planners and traders are under immense pressure to make the right decisions to hit the ground running on an upward trajectory.
There are two key problems which pose a challenge here.
Firstly, as a result of the financial impact of coronavirus and multiple lockdowns in which high street stores have been forced to close, large amounts of out-of-season and untouched stock have piled up in warehouses and shops. This introduces the questions of how to shift this stock in the most profitable manner, and how teams can optimize their inventories as retailers start to re-open.
Secondly, there is the challenge of unpredictable consumer behavior. Over the past year customer shopping habits have changed at an accelerated pace, and with the future of the economy uncertain, it remains hard to reliably predict consumer behavior. This makes decisions around products, quantities, sizes and styles, even harder and more complicated for time-poor merchandising teams.
Surplus stock and volatile customer behavior
In anticipation of lockdown restrictions lifting, merchandisers must act quickly and decisively to solve these two central problems – clearing stock profitably and keeping on top of unpredictable customer behavior.
Both these challenges can be overcome by leveraging intelligent data from across a retailer’s business and enriching it with AI. AI enables businesses to make smarter and faster decisions to accelerate growth and profit. In order to achieve growth and success as we emerge into a post-Covid economy, merchandisers need to exercise more agility when determining stock allocation, replenishment, buying and markdowns.
Teams may know and trust the spreadsheets that assist them in their day-to-day role. However, merchandisers don’t have the time to comb through every single cell, row and column to guarantee each decision is the right one, and human error cannot ever be completely avoided. A new way of working is needed – and new technology is ready to power the future of merchandising.
The key to inventory optimization
Enter AI-powered forecasting and inventory optimization. AI can leverage multiple data points that don’t usually mix, and use these to do the number-crunching and offer intelligent decisions informed by all the necessary factors. Such data points could be point of sale data, physical store data, eCommerce data, supply chain data, marketing data, and could include information that merchandisers can’t typically access.
Utilizing a more holistic view of data from across the business, AI can accurately predict consumer behavior, even in these turbulent times, and make highly complex decisions around buying, rebuying, allocation and pricing, almost instantly.
By connecting data from each cog of the machine, AI can provide accurate and optimized forecasting and recommendations as part of a unified and streamlined commerce strategy. Crucially, AI can make faster, more informed decisions and change direction quickly, allowing organizations to act with the agility and flexibility necessary in these uncertain times.
By supplementing the merchandiser’s day-to-day role and taking away some of the more manual elements, AI frees up precious time for teams to focus on strategy. At Peak, we call this Decision Intelligence.
Decision Intelligence accelerates the perfect amount of a particular product line to a specific store to take advantage of regional demand, or marks less popular lines down to the perfect price to achieve the desired rate of sale without losing margin. In essence, it’s about intelligent and real-time technology, amplifying the human elements of context, creativity and empathy.
AI, of course, could not have predicted Covid-19 nor helped retailers forecast its impact. However, what businesses can do is ensure they’re making the right decisions in response to it. AI enables retailers to rapidly and accurately leverage data to improve forecasting and optimize stock and allocation during this crucial juncture. This will ensure retailers are approaching reopening in the strongest position possible, simply by being able to extract every last drop of value from the masses of data currently scattered across the business.
As the economy approaches re-opening for non-essential retail, this is the perfect point to take a step back and evaluate. Retailers must be sure that they’re buying the right products, in the right quantities. It’s also vital that merchandising teams are positioned to react to changing customer behaviors in an agile way, and have time to focus on planning and strategizing.
Inventory optimization is directly linked to the overall success of the business by providing a decisive service for customers: convenience.
Convenience has become one of the most important driving factors for in-person and online sales, with retailers competing over who provides the easiest and most efficient payment, delivery, collection and return options. The last year has shown that despite the challenges, consumerism is alive and well. Customers are as keen as ever to go shopping, and continue to hold high expectations and standards from their retailers.
By keeping accurate stock levels in stores and warehouses, based on forecasting demand swings and geographical variation, customers can get their hands on products more quickly and with more reliability
When retailers compete for market share and value as the consumer boom begins, those who manage to secure and maintain it will be the businesses who deliver true convenience for the customer.
AI enables retailers to make intelligent decisions in regards to stock and merchandising, empowering them to work smarter, not harder.
Tom Summerfield, Director of Retail, Peak