STORES Magazine - July 2015 - 43
ed by the changing consumer, Hand says.
"In the past, there was a belief that if a product is out of stock, the customer would find
a substitute product," Hand says. "The consumer now feels like, 'If I've identified what I
want, there's no reason to trade for something
else. I should be able to get what I want even if
you can't give it to me.' Solving that situation
has as much to do with inventory visibility and
[enabling] people at a store or a call center to
help a consumer find what they're looking for
as it does managing the stock on the floor."
And sometimes there just isn't enough of a
"The baseline question is simple, although
the answer is probably complicated: How do
you incent buyers and re-buyers to buy differently?" Rosenblum says. "Of course it's helpful if you have better technology. Take Target
and its Lilly Pulitzer line: This was a problem
that demanded better demand forecasting.
This has happened often enough that it's become fairly obvious. ... You've got Target,
which clearly has a technology problem, but
you've got this other ... procedural problem.
Both things have to be taken into account."
Rosenblum sees it as a "flaw in compensation strategies. If you are compensating a merchant on turn at a category level, what you're
effectively encouraging them to do is to starve
product that's selling well because they have
other product that's not selling well. We're incenting bad behavior."
The North American issues are but a slice
of the challenges global retailers face. For
retailers who are considering international expansion, the devil can be in the details. Buzek
points to India, where 40 percent of the fresh
items sent to market spoil before reaching
store shelves due to lack of refrigeration and a
poor infrastructure which lengthens the time
to market. The same is true in "nearly every
culture where refrigeration and electricity is
sketchy," he says.
The North American market is a bright spot.
Buzek points to a $6 billion improvement in
forecasting since IHL last conducted a study
on the topic. "Outside of major countries
in Europe and a few in South America, very
few retailers have sophisticated forecasting
software yet," Buzek says. "So overstocks and
out-of-stocks in terms of overall percentage
of revenue are much higher. This is one of the
reasons why prices are so much higher for
similar goods in these countries and ultimately
sales are lower, because consumers can't afford
Buzek believes that some of what has been
learned in the North American market can
translate for companies expanding globally.
"The issues globally have more to do with
lack of systems sophistication and scale of
retail chains rather than the region in most
cases," he says. "A North American or European chain that has implemented these types
of solutions in home countries can certainly
enjoy similar benefits of the technologies overseas. The bigger problem by far is lack of scale."
Rosenblum sees the issue as much larger -
and more time-sensitive. "As companies go
global, are they responding quickly enough?
How do you get product from the point of supply to the point of demand? I'm not clear that
any of them have been all that effective. You really lose a certain amount of control when you
go global, but speed is the biggest issue."
If the "ghost economy" is simply the latest
name for an entrenched problem in retail, is
there a solution?
"The first thing is the retailer needs to be
able to connect the data they have," Sterneckert says. "In the last 10 years, I've never had
a retailer tell me they need more data. What
they need is to understand what to do about
the data that they have."
Hand agrees, citing the prevalence of software that can "guide us through the process
of identifying these margin leaks. It really does
require not just being reactive but being proactive in the way you manage and move inventory around the enterprise and the way you
proactively price it. It's all about data, analytics and using it better to better sell through
product at full price."
"I'm not knocking the study," Rosenblum
says. "It's good. But I would love to see us get
to the root cause. The study does a good job
of articulating the problem. The solution is
more complicated. If it was easy, it would have
been solved a long time ago."
the front end.
Sandy Smith grew up working in her family's grocery
store, where the only handheld was a pricemarker
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