Connected Inventory 2021: The Future of Retail is Already Here

Brick-and-mortar stores were already evolving before the global pandemic accelerated the shift to e-commerce. More than ever, customers know what they need and are going directly to a store that has it, either to buy it or pick it up having ordered online. This consumer behavior makes inventory visibility more important than ever for retailers.

Retailers can keep the flow of goods moving using a combination of integration platforms, Internet of Things (IoT) technology, and carefully managed processes. When any retail employee can see where any given item is, they can grab it quickly and trigger auto replenishment, which is many times quicker and more accurate than manual re-ordering. As consumers utilize brick-and-mortar stores for pickup services, inventory requests on the same stock items will come from multiple channels. This makes effective management essential.

In a "normal" situation, real-time inventory visibility would allow in-store salespeople to know if they have a certain item and exactly where it’s located in the store. It speeds up the process of making the customer happy. This capability takes on added importance with buy online and pick up in-store (BOPIS). These orders are increasingly fulfilled from the store to allow customers to get their items within as little as two hours of the purchase. In-store salespeople are now in charge of finding those items and preparing them for collection as well. They have more items to find, and less time to do it.

$222.7 billion is lost in revenue each year because of the inability to synchronize inventory data. Real-time inventory visibility helps solve this. Synchronization across stores, online and other channels allows promises to be made, even if it means deploying the inventory from another channel. This information can be put in the hands of any employee throughout the organization to make sure the customer gets what they want, when they want it.

It’s important that employees can access all the right information through simple interfaces, often handheld. This means combining ERP and purchasing data with in-store sensor-generated data. Those individuals need to be able to tell a customer, “yes, I have that item and can get it ready for you” — whether that customer is physically in front of them or behind a computer screen 50 miles away.

Lack of visibility isn't the only challenge. An additional $1.1 trillion in revenue is lost annually due to overselling or out-of-stock issues. This can be a result of slow replenishment cycles. The combination of near real-time synchronization of inventory data with in-store input of shelf and point-of-sale "transactions" ensure stock levels are accurately reflected. You don’t have to wait for update cycles to find something’s out of stock — or worse, you’ve oversold it. When done well, the outcome for the customer is an “endless aisle” of product choices.

The Loyalty Challenge

Brand switching tended to increase during 2020 as consumers chose brands or retailers that could give them what they want, when and where they need it. As a result, promises of next- and same-day delivery are requiring stores to evolve into operational hubs, integrating requests from across all customers channels and enabling rapid fulfillment to any location. In time, new trends will test customer loyalty.

As real-time inventory becomes more common and more understood, retailers will use technology to revamp their brick-and-mortar stores. For example, Staples is already finding new ways to reinvent the typical physical store experience by accepting returns from other merchants in-store.

Real-time inventory will also help stores to become multipurpose hubs. Stores' proximity to population centers make them ideal pickup locations. They can also be cost-effective distribution hubs because delivery times can be reduced down to hours. And they can still operate as stores. Retailers that are flexible in this way can give their customers more choice.

IoT technology can help reinvent stores to focus on a new customer experience. In the medium term, social distancing can be aided through monitoring and alerting. Customers can reduce time in-store if in-store technology makes it easier to find the products they need. In the longer term, the ability to connect and orchestrate inventory and experiences will allow retailers to out-innovate competition and delight customers.

Physical stores aren't going away, but the way people shop is evolving so stores need to evolve with them. Operational hubs are the future and technology sits at their heart — from the IoT networks that ingest real-time data, to the integration platforms that allow visibility of the whole enterprise. Getting the complete picture is essential. Connecting the different pieces of the puzzle together may take time. In the meantime, don’t be surprised if you find yourself in a big-box store and see salespeople, tablet in hand, ready to help you find what you need. That’s the retailer investing in your experience as a customer, and the work is just getting started.

Oliver Guy is the global industry director, retail at Software AG, specializing in retail digital transformation and omnichannel technology strategy.