Retailers: Need to Fix Inventory Issues? Develop Full-Stack Merchants

Recent headlines make excess inventory at major retailers sound like an issue that leadership should’ve seen coming. The reality, as is often the case with the headlines, is far more nuanced. There are many reasons at play for the excess of inventory, ranging from diminishing customer demand as COVID-19 restrictions ended and people shifted their spend to services, all the way to retailers not being able to cancel their outstanding purchase orders in time.

This inventory crisis has made it clear that retailers still don't have the agility required to respond to trends quickly enough. The main reason behind this is the number of people and touches that are required to make decisions at retail organizations. Planners need to talk to analysts, merchants, sourcing and finance to be able to make a single decision, which causes delays in decision making. Not only that, but many companies are also using antiquated systems which make access to data and insights — and the ability to react — very cumbersome.

Given that inventory is a retailer’s biggest asset, it’s time to rethink solutions, borrowing from what works in other industries and disciplines. Retail needs full-stack merchants who can do more with less, react faster, and be accountable for end-to-end decisions, similar to how the software industry needs full-stack developers.

How We Got Here 

Historically, the retail landscape looked a lot different than it does today. Merchants and sellers who managed mom-and-pop stores were one and the same, and they stayed in tune with their customers because they knew them firsthand. But as the big-box model became dominant, retailers had to rely more on data in order to find out what their customers were interested in. Fast-forward to today, and merchandising and selling are separate functions, which has created problems. Namely, there’s a lack of accountability and no one who has a full understanding of the business.

Maximizing Retail’s Most Valuable Asset 

This is where becoming a full-stack merchant comes in. Just as a full-stack developer handles the front end and back end of an application, a full-stack merchant must have visibility into data and information throughout the entire operations of the business. They should be able to use quantitative data effectively, understand market trends, and have access to financial performance.

With better tooling, better platforming and more automation, they can run their business end-to-end more successfully — with fewer people. This takes them from operating in a silo to being a true orchestrator between technology, data, product and customers. The ultimate result? Your most valuable asset, inventory, is protected and maximized.

The Importance of the Right Tool

Looking at the status quo, retail has always included a lot of manual activities that aren’t adding value. Big-box retailers had to employ a planner, an associate planner and a junior planner just because their data and processes were so ineffective and manual. Everything was on paper and disconnected, making it impossible for just one person to handle the job.

By using merchandise planning software, this all changes. Data gets centralized and one person can make faster, more informed decisions based on that data. Of course, gut feeling and human judgment are still key to making retail decisions. However, with the right tech, these factors can be incorporated alongside rich data insights that paint a better picture of customers’ needs and wants. 

Getting Started 

So, you like the sound of optimizing your retail operations and becoming a full-stack merchant. But how do you even begin? First, you need a solid data infrastructure in place. This includes hiring a retail operations person to establish a data warehouse that centralizes all the critical data in the company at a single location and layers in a business intelligence piece on top of that. This person is the owner of all data in the company. They intimately understand the reporting needs of different stakeholders and train the organization on how to access and use data.

Once all of your data is centralized, the next step is to operationalize it. For this, you need a merchandising platform. Such technology allows you to leverage the data at your fingertips to make decisions on forecasting, ordering and inventory movements, and be able to make business decisions from a single platform. Only after you have centralized data and a merchandising platform can you hire or develop full-stack merchants, who can command larger areas of your business and make decisions confidently and efficiently from a single place.

Retail has gone through numerous changes over time, and must now mirror some of the strategies other industries have employed to modernize operations and achieve greater success. By understanding the problems that come from siloed merchandising and selling and antiquated paper-based record-keeping, retailers can get the right tools, improve their data infrastructure and become a full-stack merchant. When they do, you can expect just as much of a transformation as there was when full-stack developers disrupted the engineering scene.

Eytan Daniyalzade is the co-founder and CEO of Toolio, a cloud-based merchandise planning platform to help next-generation retailers make faster, data-driven decisions on their most important asset — inventory.