Merchant Innovation

The New 3-To-1 Rule In Retail

Out of stock can sometimes lead to “out of favor” for retailers whose inability to track inventory results in a dissatisfied customer. Intel’s Director of Retail Analytics Daniel Gutwein tells MPD CEO Karen Webster how IoT technology has shown that for every 3 percent uplift in inventory management, retailers can expect a 1 percent increase in sales. Just ask Levi’s.

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Out of stock can sometimes lead to “out of favor” for retailers whose inability to track inventory results in a dissatisfied customer. Intel’s Director of Retail Analytics Daniel Gutwein tells MPD CEO Karen Webster how IoT technology has shown that for every 3 percent uplift in inventory management, retailers can expect a 1 percent increase in sales. Just ask Levi’s.

For brick-and-mortar retailers, getting customers in the door is really half the battle. Once shoppers are there, the challenge arises of making sure shoppers have access to the exact product they are looking for exactly when they want it. But a lack of inventory insight remains a major roadblock and creates the “out of stock” problem that consumers find themselves facing all too often.

It’s a problem that has many dimensions to it.

A retailer may show that they have a particular item in a particular size available in-store, but when it comes to actually presenting it to the shopper, both retailers and consumers often embark on the Great American Retail Treasure Hunt. The item could just be located on the wrong sales rack, tucked away somewhere in the stock room or has already been sold and is out of the store entirely.

Not only does the situation result in a dissatisfied customer, but the retailer also immediately misses out on what could be a guaranteed sale.

While the problem is far from uncommon, it’s also costing retailers big time. According to Gutwein, the industry-wide snags of items being out of stock, overstocked or misplaced entirely is causing retailers to lose out on anywhere from several hundreds or millions to over a trillion dollars.

“We’ve lost that visualization of what happens in the store,” Gutwein explained, noting that this ongoing issue is what leads to the discrepancy between what the inventory systems say is available and what shoppers can realistically purchase in-store.

OPTIMIZING INVENTORY

To help address the issue, many larger-scale retailers are turning to different tools and technology that help ensure inventory numbers are correct.

“You can call it inventory accuracy, but it’s just really on-shelf availability and customer satisfaction,” Gutwein explained.

Many merchants are tackling this problem by using handheld wand solutions and typically taking inventory every 30 days. While Gutwein admits this is a better option than physically counting each item and comes with its fair share of advantages, there is still a great deal of labor and room for human error involved.

Rather than simply approaching inventory from a place of counting, Intel sought use the resurgence of RFID to find a better solution to an age-old retail problem.

By using integrated RFID tags on every piece of inventory and feeding that data through cloud-based analytics engines, Intel’s platform provides merchants with the ability to actually track and analyze how consumers and products are moving throughout the shopping floor.

Whether a certain item of clothing is left in the fitting room by shoppers time and time again, which items are being considered for purchase or even if a product is simply moved to the wrong section of the store, Intel’s sensors that are “always on, always broadcasting at full power and always listening” pick up the movement.

"The theory behind it is that as long as that store is being shopped or even when a sales associate goes to fluff a stack of jeans, we’ll see them all instantly because they move,” Gutwein added.

"We can tell you what’s in the store and what needs to be in-store, as well as what should be in the back of stock versus front of stock. We can also tell you when you don’t have all of the sizes out in the store and when you should,” he continued.

THE RETAIL HOLY GRAIL

Access to this type of data opens the door to a variety of applications that may enable retailers to not only improve the customer experience, but also maintain a better understanding of their merchandise.

Through the platform, retailers can be notified if items are misplaced throughout the store and even have item-level detail about size, style and color of the products catching the attention of shoppers or being overlooked. Providing a shopper with the ability to request a size up or down without leaving the fitting room can help retailers to capitalize on the valuable time shoppers spend trying on clothes.

“Because we all know the value of someone going into the fitting room and we know the devalue when they leave the fitting room and don’t purchase,” Gutwein explained.

One of the most eye-opening applications of inventory accuracy may be the ability to reveal the actual costs retailers face when carrying excess inventory.

"It’s all this ghost stock or safety stock that they are putting in so that they can fulfill this online pick up in-store and online ship from store. Many leaders in the omnichannel space simply throw in extra inventory in-store just incase someone wants them,” Gutwein said.

But as Webster explained, it’s a phenomenon retailers are eager to get right because when consumers purchase online and pick up in-store, they tend to spend more money, making it imperative that merchants create a good in-store shopping experience so that customers will use that capability.

This level of accuracy also lends itself to boosted revenues. As Gutwein pointed out, industry statistics for years have shown that for every 3 percent of accurate inventory uplift a retailer achieves, they can see as much as a 1 percent uplift in sales.

BRINGING IT TO THE FIELD

Intel has already deployed a proof of concept at one of Levi’s storefronts in San Francisco and Gutwein said that after the first day they received 87 percent read rates on all of the tags inside the store.

The trend in retailers seeking to understand how consumers behave in-store and how merchandise moves, can also be used to initiate other real-world applications.

Intel is testing this theory by working to improve fan engagement and satisfaction at Levi’s Stadium, where Super Bowl 50 will be held in just a couple months. Technology is being used in a variety of ways to incentivize fans to get actively involved in the games and make the entire experience more fun. Experimenting with customer engagement efforts in the stadium, such as using opt-in promotions for a piece of merchandise that isn’t selling to boost real-time sales, also has the potential to reveal applications that can work in other verticals like retail and hospitality.

Gutwein admits that the biggest challenge in deploying an inventory management system of this capacity is change management, as well as the investment needed to ensure the technology is rolled out appropriately.

But both Gutwein and Webster agree it’s important for a retailer look at what not understanding their inventory is truly costing them. As the lines continue to blur between the online and in-store channels, retailers that do not maintain accuracy in their inventory may be unable to keep up with those that do.

"Online has a lot of advantages and I firmly believe you can have those same advantages in brick-and-mortar store, but it is going to take an investment,” Gutwein said. “Those retailers that don’t understand their inventory are in for a world of shock.”

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