As the coronavirus pandemic raged, 2020 marked a year of dramatic increase in e-commerce, with online sales surging 27.6% worldwide.
While 2021 won’t quite replicate that growth, e-commerce will remain on an upward trajectory, with forecasters at eMarketer predicting growth of 14.3% this year alone.
In this new, increasingly omnichannel landscape, retailers have had to strengthen their fulfillment, distribution, and delivery methods. But inventory management has proven uniquely challenging. Whereas in the past retailers were able to easily measure inventory and product performance across brick-and-mortar locations, they have struggled to obtain the same level of insight online, posing problems for both proper inventory management and profitability.
With 39% of consumers reporting that they’ve left a brick-and-mortar retail store without making any purchases due to out-of-stock items, and 30% saying that they’ll abandon their carts online for the same reason, the need for enhanced inventory management is a matter of competitive survival in today’s retail climate.
But within this challenge lies opportunity. By turning to local fulfillment, harnessing automation, and gathering better insights into product allocation, retailers can more effectively manage their inventory and boost their bottom lines.
Out-of-stocks: A trigger to do more, not less
Faced with out-of-stock products, many retailers respond by removing those product listings from their site until they are able to restock. This is a big mistake. Leaving out-of-stock items on the website can yield vital insights into shadow demand that can then help retailers optimize inventory management and improve sales going forward. The key to optimization is to know where consumer demand stands.
How can retailers measure demand? This is where local inventory hubs with real-time data flows come into play. While retailers often spread inventory equally across major distribution centers and manage inventory based on sales that have already been made, this method doesn’t take into account real time demand and risks leaving the door open to costly supply mistakes – including both overstocks in some regions and stockouts in others.
Let’s imagine a scenario where there is a local event - say the California State Fair in Sacramento, that causes a rush on a particular product type - say sunscreen. We’re all familiar with how the story goes without local inventory hubs and data analytics: there’s a sudden rush for the product and retailers only become aware of the spike in demand once they’re out of stock, losing out on potential sales.
With local inventory hubs and real-time data analytics, retailers will know that the velocity of sales of sunscreen - the demand curve - is accelerating steeply in Sacramento, and will be able to allocate more inventory to that local area before running out of stock.
Local inventory hubs can help retailers better understand where there are supply and demand gaps in their supply chain, and by combining this knowledge with AI-driven insights, can empower retailers to maximize revenues by having their inventory allocated in the right quantities, to the right places, at the right time.
Navigating the New Competitive Landscape
Automated fulfillment solutions can equip retailers with the tools they need not only to efficiently fulfill orders, but also to track inventory with real-time insights into stock availability – which enable retailers to let shoppers know exactly when sought after products will again be available and even prevent out-of-stocks by generating proactive alerts about products that are running low.
Localized fulfillment centers unlock these benefits while also providing a much more granular snapshot of inventory, thereby making it possible to optimally distribute supply based on location-specific needs. Among the major players to embrace this model is Walmart, which has forged partnerships to build local fulfillment centers in a move that is spurring other retailers to deploy automated, localized fulfillment solutions to stay competitive.
As the economy gains steam and shopping picks up both on and offline, now is the time for retailers to ensure that they have the infrastructure needed to properly manage inventory and keep customers happy – lest they lose out to retailers who have adopted a more tech-savvy approach.
In the post-COVID-19 economy, consumers will place a higher premium than ever on seamless customer experiences – and that requires retailers to place a premium on efficiency in all aspects of their operations. With the help of technology and local fulfillment the basic tenant of retail can now be where there is demand, there is supply.
Elram Goren is CEO & co-founder, Fabric.