This is the third article in our series based on a research report JustEnough (now Mi9 Retail) recently sponsored with Boston Retail Partners into the current state of the industry around Merchandise Planning and Allocation. In this article, we’ll explore the components necessary to create a strong foundation for implementing a unified commerce strategy.

Here is part three:

To keep up with best-of-breed competitors, most organizations are working towards offering a seamless customer experience across all sales channels. However, the survey results further confirm BRP’s industry observations that because this is such a large undertaking, most retailers are still in the process of implementing a complete unified commerce solution. According to the survey, 69% of retailers are planning on expanding their unified commerce capabilities within the next three years.

In the meantime, while retailers are working towards a unified commerce platform, they are dealing with the pain of working with different and separate silos of data to try to offer their customers a holistic shopping experience across any channel. One-third of retailers indicated that different silos of data are the biggest pain point within the organization.

Separate Channel Assortments

There are several components necessary to create a strong foundation for the implementation of a unified commerce strategy. The survey touched on six of the most vital elements, including:

Unified planning
Flexible allocations
Real-time inventory visibility
Inventory accuracy
Expanded coordination with vendors
Modified internal incentives

A retailer’s success is dependent upon their ability to implement robust capabilities in these arenas. Creating a unified plan is paramount to executing on a unified commerce strategy, and many retailers still have a long way to go. Surprisingly, only 8% of respondents have a working cross-channel forecasting method, 24% implemented but still need improvement and the remaining 49% plan to implement in the next 3 years. Once fully operational, retailers can leverage inventory across channels to decrease overall investment and improve inventory turn, margin and gross margin return on investment (GMROI).

Flexible allocations grant a retailer the ability to use real-time inventory information to determine the locational need for goods. Today’s best-of-breed solutions promote the transfer of inventory where it is needed when it is needed, serving as an important foundation to the unified commerce process. Despite the existence of technology to support flexible allocations, the retailers surveyed are still fairly siloed with 42% allocating to a single channel.

Real-time inventory visibility across the enterprise is another key piece to implementing a unified commerce strategy. Though most retailers can presently account for goods in the distribution center (DC), precise tracking of in-store inventory presents a bigger challenge. Unified commerce requires retail stores to know exactly where an item is located in order to meet customer demands for real-time fulfillment across all channels.

The majority of respondents indicated having some cross-channel inventory visibility, but only 26% have reached real-time visibility. We expect to see these numbers grow drastically as more retailers begin to fully adopt unified commerce best practices.

Like real-time inventory visibility, increased inventory accuracy is fundamental to a unified commerce strategy. Today, retailers have a difficult time maintaining accurate inventory figures due to the infrequency of full cycle counts. The emergence of radio-frequency identification (RFID) technology is changing the retail landscape, bringing precision to inventory counts and eliminating the business disruptions caused by full cycle counts. In the coming years, we anticipate many retailers will join the likes of Inditex, Saks 5th Avenue, Chico’s and Neiman Marcus in deploying RFID technology.

Sharing the burden of inventory ownership with suppliers decreases inventory risk, frees up capital and allows retailers to offer customers extended choices via an “endless aisle.” Retailers are finding value in this practice, with 37% offering an order online/ship from vendor option and 41% a buy in store/ship from vendor. This practice will continue to grow, particularly as retailers actualize on the financial benefits derived from reduced inventory costs.

The last critical piece in the puzzle is the ability to compensate and effectively incentivize in-store retail employees. This is a challenge for even the most basic, single channel retailer. Throw in multiple channels of acquisition and fulfillment and the process becomes significantly more complex. In order for the unified commerce strategy to gain full support, employees must be incentivized to act in alignment with business strategy. With 49% of retailers giving credit where the sale originated and 31% where the sale was fulfilled, approaches need to be reevaluated to ensure full employee buy-in. This piece will be a challenge to solve, with retailers expected to go through many iterations before getting it right.