"It is impossible to imagine that shoes and suits will ever be bought online" was said in 2006, and in the same year, online sales of clothing and shoes in Germany were still around 2.8 billion euros. Now, a few years later, online sales in Germany are about 21.2 billion euros. Compared to the previous year, sales in this segment have increased by around 13%. I guess that proves that statement wrong.
Where are the opportunities and what are the challenges? Find out in this blog:
These days it is hard to imagine that there ever has been a shopping life that was purely offline. Now you can buy all the clothes, shoes, food, anything you want sitting on your sofa in your pajamas. And if any industry has embraced eCommerce until its fullest, it is the fashion industry. New technologies allow you to try on sneakers at home using augmented reality or customize clothing as much as you like taking 'special editions' to the next level.
"It is impossible to imagine that shoes and suits will ever be bought online" was said in 2006, and in the same year, online sales of clothing and shoes in Germany were still around 2.8 billion euros. Now, a few years later, online sales in Germany are about 21.2 billion euros. Compared to the previous year, sales in this segment have increased by around 13%. I guess that proves that statement wrong.
I think it would be safe to say that it looks like eCommerce is making its way to the top, and quite frankly, the chances of it ever dropping to an irrelevant level are very slim. Time to get acquainted with it then! Don't worry, we will show you how to optimize inventory management in this complex environment.
Our first experience
When it comes down to eCommerce strategy and optimal inventory management, we share our first experiences with our customers, Triumph, and adidas. The goal was to have optimal inventory for each eCommerce (eCom) channel without creating excess inventory and minimal effort.
The challenge we faced together was big. Our client used over 46 different inventory categories distributed over 12 different warehouses. Nowadays, European drop shipping requirements need to be met, where unbalanced inventory results in high costs. At the same time, complex reservation functions for multi-channel warehouses, huge block orders from platforms lead to drastically reduced availability, many overstocks, lower margins, and high manual effort in inventory management and analytics. Where to start? Well, nothing that a few cups of coffee, knowledge, and dedication to the industry can't fix.
The consumer is king!
You can imagine the high level of effort in inventory management and allocation to multiple online channels, sometimes even from various warehouses and inventory categories. To top that off, consumers also share high expectations when it comes down to online buying. If you cannot deliver within 1 to 3 days (so-called drop shipping), consumers will likely check out other brands that can deliver within this timeframe. It is necessary to always give your a-game. Customers would like to press order, and in an ideal world, have that same order magically appear on the table that instant. But when you find that genie in a bottle, let us know.
It means that inventory needs to be distributed to the areas that need to be reached intelligently without drastically reducing overall availability to the remaining regions. It is almost impossible to predict buying behavior with absolute certainty and thus distribute inventory quantities optimally across warehouses, channels, and categories. Fast and daily response for inventory management has become an essential requirement.
Excess inventory is often very costly. Think about high storage costs or low availability leading to lost sales in other channels. Breaking this down into thousands of different articles, colors, and size combinations becomes impossible with manual labor. So why not optimize your inventory management in eCom.
That's why we at Chainbalance specialized in eCommerce a few years ago and further developed our solution for wholesale, outlets, and retail for eCom requirements as well. The result is a fully automated inventory optimization solution for eCom.
Meeting eComs' needs
Our solution offers several logics for this to make the optimal and according to individual consumption necessary products available in stock worldwide. For this, we use the ring-fencing method, which prioritizes the availability of other channels according to, e.g. margins, to allocate the optimal supplies per DC, channel, and category.
These priorities can be conveniently displayed and changed in our solution.
As a result, we achieve higher inventory turns for customers such as Floris Van Bommel, adidas, or Triumph and relieve employees of time-consuming and often manual processes, freeing them up for creative work and decision-making.
So how does it work?
In eCom, the sell-out speed can be skyrocketing, which makes sense because multiple people can buy the same items online at the same time. Simultaneously, other items may fully undersell their expectations. All this data needs to be analyzed and decisions based on these analyzes need to be entered into ERP and logistics, which requires more time and effort. If it's a single DC stock, some processes need to be set up in the background, such as a reservation, which means even more effort for the brand’s IT department.
A good example is our customer Floris van Bommel. They stored all retail and eCom inventory in one warehouse. To avoid mixing merchandise between the two channels, they needed to separate the physical inventory and develop a reservation process. Two days per week they were busy calculating and shifting goods in the warehouse. When working with Chainbalance, they started optimizing the entire retail inventory and later took over the eCom area. Since Chainbalance was responsible for Retail and eCom, there was no longer a need for a complex reservation process and physical separation of inventory. Chainbalance was able to take over the entire process and reserved the required available inventory for eCom automatically making sure retail replenishment would never touch these reservations: our ring-fencing method.
To further control the distribution of inventory in eCom and thus optimize sales, Chainbalance also receives the returned items information to calculate reservations using net sales and excluding the returned goods (14 days return policy in distance selling).
Another challenge was eCom and the overwhelming sales across platforms. Often a platform demands huge block orders that affect the overall availability and increases the risk of end-of-season overstock and deep discounts. Additional functionality had to be created. One of these functions allows to set up a limit on the inventory at the channel, POS, and even SKU level, to protect from these huge block orders.
The complexity of eCom increases with rising sales and, according to the experts in the fashion & sports industry, we have not yet reached the end of eCom growth. To control inventory management daily, without manual effort, we need proven solutions that can react dynamically to consumption.
Have we made you curious to learn more about Chainbalance? Then we are looking forward to your contact details!
Have a look: https://www.chainbalance.com/contact