In the world of mobile shopping, customers expect to go into store, walk out and on the way home purchase the product they have just seen on their mobile phone. This is a challenge that all retailers have risen to, racing to release in-store wifi, cutting edge mobile apps, click and collect or same or next day delivery faster than their rivals. This new way of shopping has far reaching implications, not only on our online and fulfilment strategies but on our merchandise and assortment planning strategies too.
The online channel has become our shop window to showcase our full product ranges. Not only does the customer expect that everything in store will be available online too, it is also the outlet in which new products are trialled, and in which old options remain until we have traded out of surplus stocks. In a retail world where we are constrained by physical store space, the online channel is temptingly boundary-free and our online offers are now larger than ever.
The online strategy of “everything available online” works well if our objective is to be utmost customer-centric. But it doesn’t always make sound merchandising sense. With online sales growing in significance (in Europe as a whole, online retailers in 2015 are expanding 14.2 times faster than conventional outlets, is now the time to look at our online assortments and say enough is enough?
Online, the bottomless pit?
It is not unusual for online to be considered a financial bottomless pit able to support an endless option count just as it can support endless product images. Target option counts are derived optimistically and based on the retail option count plus some online exclusives – “We need 5 leggings in store, but let’s have 20 online!”
By offering such width of choice, online budgets are spread too thin, bestsellers are under stocked as poor sellers are overstocked. In a store based model, these slow options would be dropped and swapped for faster lines to potentialise sales by space but we are rarely this disciplined in our online planning or trading. Slow options remain online, because we can, and we end up in a perpetual cycle with a growing tail of poor selling options.
This might not ring true for all, but in my experience there are many large retailers finding themselves in this position. So how can retailers avoid some of these online planning pitfalls?
1. Build clear channel assortment strategies
Rather than just offering the online customer everything they can get in stores, plus more, plan, build and buy your channel offers based on channel level sales. This is simple stuff, yet merchandising functions in many of the largest UK retailers continue to merge their online and store assortment strategies or, even worse, fail to set a clear online strategy in the first place.
Only in very limited cases are channel differences fully understood and assortment decisions made based on the needs of all channels. If the online customer trades up on price, offer them a more premium range online. Not only does that better meet their demand but it also means we can reap the benefit of increased sales. Are there key seasonal differences in sales between online and stores? Phase online launches to meet requirements and potentialise sales across both channels.
2. Know your online costs and margin
An option that is profitable in stores is not always profitable online and this needs to be considered. There are examples of retailers selling product online in the name of market share or customer centricity that they cannot profitably fulfil.
Retailers offering a £6 T-shirt when the cost of marketing and handling means it makes 0% margin. Leading retailers selling rolls of wrapping at Christmas which is unprofitable to distribute and causes chaos in an already stretched DC in peak trading weeks. These are all assortment decisions that have been made with the customer rather than the business in mind.
3. Trade online space as if it is as precious as physical space
Regularly assess the performance of online options and react as you would in retail. If a product is not "worthy" of being in store at what point is it worthy of being online? Those range extensions which make up 30% of online options but 10% sales are almost certainly taking up a disproportionate amount of stock, cash, margin, time and warehousing capacity based on their sales. By planning more targeted online offers and trading out of poor sellers in a timely manner you could stock bestsellers deeper and improve overall sales and margin and ease warehouse pressures.
In a world where the customer is king and social media outreach is high it may feel like a risky strategy to offer tailored online and store assortments. That customer, who went into store, saw a £6 T-shirt that she didn’t purchase, and then went online to buy it might not find it. She might however find the £10 one that you planned online because you know she will trade up and you know it will make you more profit. And then, tomorrow, she might go back into store and buy the original item as well. Who knows? But it might just be worth the risk.