In a time of record-breaking online sales, now is the perfect time to evaluate online retail sales strategies. However, online shopping is obviously not new and certain customer expectations must be met. If your online retail store isn’t measuring up to expectations, online consumers will shop elsewhere for the products they want. Here are three ways you can increase profits from your online sales.
Improve Your Omni-Channel Experience
Today’s online shoppers are more tech-savvy than in the past. They research products and compare prices using multiple sources before making a purchase. In a recent blog post, we discuss how more consumers than ever are using online shopping and they don’t plan to switch back to traditional methods any time soon. To capitalize on this major shift, your online offerings must be accurate, up to date, and ready to ship.
Regardless of the channel used to access your store, there should be a seamless transition for the customer. If you have a product advertised on your social media pages, the consumer should see the same product with the same details and pricing on your online store pages and apps. This starts by having an inventory management system in place that is based on profit optimization and customer experience.
Brick and mortar retailers know that inventory management is complex, especially when dealing with multiple stores and DC locations. Inventory challenges also greatly impact online retail stores. What exactly is inventory management? One definition is “the act of keeping track of your ecommerce company’s stocked goods and monitoring their weight, dimensions, amounts, and location.” The goal of inventory management is essentially to reduce inventory carrying costs by replenishing products at the right time.
Using a centralized inventory management system is helpful and necessary, especially for online retailers. If implemented correctly, you can consolidate information, improve operational efficiencies, and make better, more accurate decisions for your eCommerce sites or online retail store. A strong replenishment solution will help you maximize profitability by determining the right inventory levels for every item every week.
Keep Up with Demand by Improving Replenishment
While internet retailers typically don’t have to worry about stocking physical shelves, it doesn’t make competition any less fierce. Items offered online must be ready to ship. If an online shopper is looking for a product that is out of stock on your store, you will lose sales to someone else. It is imperative for online stores to keep high demand products in stock as often as possible. Brick & mortar stores have greater complexity if they offer ship from store or BOPIS (Buy Online Pick Up In Store).
Many online retailers’ inventory is held at one or more warehouses and DCs (distribution centers) or is being listed by other sellers. Yet, knowing which items to restock and when to have that inventory shipped to the DC is still a challenge. Internet retailers need to have enough inventory on-hand at their DCs to satisfy omnichannel orders without being overstocked.
To determine how much inventory to hold at a DC, you need to know the true demand on that DC. This is where a strong forecasting method comes into play. Traditional forecasting approaches often miss key data, resulting in less than optimal results. State of the art DC replenishment solutions use machine learning and AI. This enables the replenishment solution to incorporate product seasonality and promotional responses, as well as demand variability for every product when determining the level of inventory needed at the DC.
The risk of overstocking isn’t limited to brick and mortar stores. Overstocked DCs can be the tipping point between profit and loss. This is for the obvious reason that a store may overstock 20 of one SKU, while a DC may overstock that same SKU by 5,000. Demand Planning solutions based on machine learning provide a better, more accurate forecast that is based on the inventory currently on-hand and what expected future demand on the DC will be.
Shipping from the Right Place
Retailers can increase profit if they had a better system to more closely match demand location and fulfillment location. Simply put, items in brick and mortar stores and DCs are often in the wrong demand location. Demand may come from a shopper in Florida, but the fulfillment comes from Colorado and needs to be shipped a longer distance. It hurts the customer experience and reduces profitability for the retailer. The customer may find the product she wants elsewhere or be frustrated over a longer than expected shipping time. Having the item fulfilled as close to the demand as possible prevents out of control shipping costs. This requires knowing which SKUs to replenish, how many of each, how often, and in which demand location, whether DCs or brick and mortar.
Most retailers have a good grasp of their customer demographics. The challenge is understanding and acting on the deeper data. A retailer may sell 18,000 of a particular SKU of watches but it’s a poor assumption that those watches should be evenly distributed between 8 DCS and 400 stores. Customer demand for a particular SKU varies by region and by each location. A customer in Cleveland may find the watch he wants is out of stock in all local stores, while the retailer’s Atlanta stores are overstocked with watches they can’t move. Replenishing your DCs and stores with the right SKUs in the right quantities directly impacts profit.
An optimized supply chain comes from having the Right product, in the Right place, and at the Right time. These bring the Right profit and are the foundational principles of 4R. Shipping from the right place is key to profitability, whether a retailer is online only, or a brick & mortar that offers ship from store or BOPIS. This is only possible when the solutions use machine learning and AI. Machine learning does the hard work for you, and reduces inventory risk better than any human. Relying on a merchandiser’s gut instinct for complex supply chain decisions is an even greater risk to profit. Machine learning solutions should be able to tell you—in advance of using the solution and with reasonable accuracy—just how much profit can be increased. 4R’s solutions do.
Grow Your Online Store Today
The current retail landscape is facing many changes. At 4R Systems, we know the challenges you are up against and we want to help. Our solutions are designed to assist all retailers improve profitability and grow their businesses. For more information on how we can help you, contact us today for a free consultation.