I’ve spent my entire career in the retail industry, in various roles, both working directly for retailers and as a consultant. These experiences gave me an opportunity to view the retail industry through a number of different lenses. As a result, I’m often asked what is on a retail CEO’s mind in today’s current business climate, to which I typically answer, with certainty, one thing: inventory.
Inventory optimization, inventory effectiveness, how to improve inventory decisions in an omni-channel world. Inventory remains the top challenge for most retailers, as seen from the $1.4 trillion inventory problem stemming from lost sales and excessive markdowns. New realities force the need for a new approach. While customer expectations have changed and retail operations and execution have changed, inventory decision-making (for the most part) has not.
The fact of the matter is that inventory is a complex problem and complex problems do not have simple answers.
A Proven Approach to Using Celect
The work we’re doing at Celect, and the inventory optimization technology we offer, is purpose-built for retailers to solve the very problems keeping their CEOs and management teams up at night. However, having the best technology isn’t enough; the right implementation methodology is key to ensuring success.
As anyone with any experience in retail knows, every retailer (be it wholesaler, vertical retailer, department store, etc.) is nuanced. These nuances can be rooted in a number of different things, such as its value proposition to its customer, its operating model, or its brand DNA, to name a few. At Celect, we use a three-phased approach that allows us to configure our inventory optimization solutions to best meet the needs of our clients. It’s broken out in the following steps:
- Solution Definition – Collaboratively define the technical, business and data requirements and perform validation
- Solution Build – Conduct iterative process of data integration, build and modeling, testing and acceptance
- Go-Live – Drive adoption through training, monitoring, measuring and review of results
In support of our three-phased methodology, a collaborative approach is essential. This collaborative approach needs to be at both an executive level and working team level.
When it comes to implementing technology and software, strong processes are the foundation to success. We work closely with our customers to understand their current processes, constraints and metrics, then work together to define new ones. In order to optimize the ROI of Celect’s solutions and technology, it’s crucial for us to define new ways of working (which are done through on-site, full-day workshops). It is often in these workshops when the Celect team must challenge how the client teams are doing things today. By demonstrating the ‘art of the possible’ for new ways of working, Celect can demonstrate to our customers what the future can look like, along with any associated benefits.
Change Management & Measuring Success
This is the start of the change management process. At this point, the support of the retailer’s executive team is imperative and essential to any sort of transformative change (such as new technology adoption) within an organization.
Measuring success is another key piece of a Celect engagement. Celect works with our clients to identify and align on the key metrics to measure the success of Celect solutions, while also monitoring the impact on sales and profitability to the business. Improved gross margin, full-price sell through and inventory turns are a few key metrics most often tracked. On average, Celect customers see a range of benefits, including:
- 2-5% increases in full price sell through
- 6-8% reductions in lost sales
- 25-50% fewer markdowns
- 10-15% lower fulfillment, inventory, and labor costs
- 1-5% margin improvements
Additionally, success metrics help drive continued change management support, increased adoption, and executive level support. In the end, retailers can benefit from Celect’s patented inventory optimization suite to understand true demand prediction and gain unparalleled insight into what customers actually want. Enhancing your existing inventory approach with Celect will help answer the age-old questions of retail – what to buy, how much to buy, and where should it go—while exceeding customer expectations and increasing gross margins.