Forrester Research Inc. says that about 10% of retail store sales are lost due to items being out of stock. Customers will look to your competitors, online, or other stores to find the item they want.
To combat this problems, retailers like Macy’s and Wal-Mart are turning to technology to make sure that they always seemingly have items “in-stock.” They’re leveraging “endless aisle” strategies.
Implementing an endless aisle program for retail isn’t easy. In this article, we’ll discuss some of the common challenge retailers run into when deploying an endless aisle strategy.
What is Endless Aisle?
You may have heard a few different terms regarding endless aisle such as drop shipping and virtual merchandising. All of these terms refer to a retailer’s ability to sell items to customers that are out-of-stock in-store, but not kept in local inventory.
Retailers instead make the sale possible by selling inventory kept by external suppliers. To the customer though, it appears as if you sold the item.
When a customer orders an item from you that appears out-of-stock in-store, you actually place the order with a supplier. The supplier then ships the product directly to the customer from their own inventory.
The best part is that the supplier is completely invisible to the customer. It appears then you have an endless supply, or aisle, of products and are never truly “out-of-stock.”
Endless aisle is made possible through suppliers through the process of “drop shipping.” Learn more about drop shipping through this introductory guide of drop shipping.
Retailers today are now using endless aisle strategies to combat lost sales due to out-of-stock items and instead incrementally increase sales.
Endless Aisle Combats Otherwise Lost Sales
With consumers now in the driver’s seat with high expectations, retailers much choose to invest in technology for endless aisle or face the reality of lost sales.
When items are out-of-stock, customers are given a reason to look elsewhere for the product. Surveyed U.S. online adults have said that when they find an item out-of-stock, they would:
- 17% would use their mobile device to make an immediate purchase at a competitor’s site
- 37% would buy that item from an online retailer when they get home
- 35% would go to a different store to buy it
An endless aisle strategy helps retailers avoid these situations and secure the otherwise lost sales. You can provide customers with a seamless shopping experience that leads to an overall better customer experience.
But, it’s not easy for retailers to make this type of strategy a reality. You must be committed to investing in the technology, hardware, and the people needed.
Challenges of a Retail Endless Aisle Strategy
Endless aisle capabilities require integration of your technology and coordination of your processes and people.
Here are some of the common challenges you need to be aware of when considering an endless aisle retail strategy:
Keeping Inventory Updated in Real-Time
First and foremost, retailers must know when stock is available and where. Otherwise, you won’t be able to order an item with confidence for your customer.
Retailers from the Forrester report mentioned above recommended that inventory levels be 98% accurate. This means that inventory levels across your sales channels must be updated in real-time.
Inventory is going to change constantly across all your sales channels if you sell online on Amazon or your own site, sell in-store, and place drop ship orders with suppliers.
To truly know how much inventory you have on-hand and where it is, you’ll have to integrate your systems. This way all inventory levels are updated whenever an order is placed.
It’s not enough to just make sure that inventory levels are correct. Staff also must have easy access to be able to see inventory levels.
Your staff is who is communicating with your customer. For them to be able to provide customers with the best experience, staff must be able to ensure that they are placing an order that can be fulfilled.
This means that the present inventory availability must be within the shopper’s order screen, a cashier’s point-of-sale screen, or an inside-sales rep’s ERP order. You must have a system with these capabilities.
For inventory to be tracked and updated across all your sales channels, all orders must be also be managed in a centralized location.
With orders being placed across channels, it’s inefficient to manage orders by channel separately. You won’t be able to easily track order status and inventory levels across all your sale channels.
This can easily run you into problems when fulfilling in-store orders with drop shippers or via your online channel.
To solve this problem, retailers need a single place to manage and track all orders.
Working With Suppliers
The biggest challenge of endless aisle is arguably managing order processes with the suppliers you are drop shipping with.
Retailers must have a three-way match process in place. But, this is usually the downfall of many retailers.
Three-way match involves the vendor’s invoice for the order, the purchase order by the retailer, and the receiving report by the retailer. This process helps avoid paying any incorrect or fraudulent invoices.
When working with a drop shippers, you must ensure that vendors are accurately invoiced for items ordered, at the cost you expected, and track that the items were actually shipped to the customer.
This is a lot to handle and track when you don’t have physical possession of the product. This process will have to be thoroughly developed before thinking about selling products via drop shipping.
Communicating Order Status with Customer
Placing an order for a seemingly out-of-stock item in-store for a customer is just the first part of the customer experience. The second step is keeping the customer informed about that the status of their order. Retailers who did this provide a complete customer experience.
Unlike when an item is purchased in-store, the customer isn’t going to be able to walk out with their product in-hand as they originally planned. They have to trust you to deliver as promised.
Retailers must keep customers informed of when they can expect to receive their item and when it is shipped. You don’t want to keep your customers in the dark throughout the process.
When shipping status notifications comes from the supplier, it can be hard to track and communicate it with the customer. Your software has to be able to do it though to keep your customer informed.
What to Do Next
An endless aisle strategy is going to be important for all retailers going forward in today’s world of retail. It’ll help you recapture sales in-store that you would have otherwise lost. It’s all part of providing the best customer experience that you can.
But, endless aisle isn’t easy to pull off for retailers. You can see that there are many challenges that must be considered before starting an endless aisle process.
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