Why disruptive retail models must still implement good old-fashioned inventory management?
The worlds of sustainability and the circular supply chain are clashing headlong with traditional retail principles and processes. This new wave of businesses specialise in, and operate, a variety of models across renting and re-selling.
Some of these models still rely on a controlled supply-chain, and pre-ordering, however for many their product assortments exist and evolve through a combination of re-sellers, re-cyclers, donators and 3rd-party renters. This unpredictability is a fundamental asset of these businesses, and a major attraction for their customers.
Set against this ethos of spontaneity, and as a reaction against traditional supply-chain methodologies, it is tempting for disruptors to cast aside everything that was done before. But this is a dangerous route to take. Disciplines such as assortment planning and inventory management did not evolve to punish the environment, but to facilitate commercial performance and profit.
New businesses with different models still need to be commercially successful, even if those profits are re-invested or donated to good causes. They still need to be commercially successful, or they simply will not be.
Supply chains may well be revolutionising, but inventory management is an ever-present for all retail businesses. Because, whilst it is now important to ‘sell the back story – the ethical brand’ to be successful, it is also still essential to ‘sell the front story – the commercial product.’ Customers buy the back-story, but they cannot physically wear it, or use it. They wear and use the ‘front-story!’
Customers, even sustainable ones, will not wear or buy just anything, even to save the planet!
All retailers must therefore control the product assortment they present to the customer; across different criteria. A traditional retailer creates a commercial plan and assortment structure and buys it. For example, the structure will include a balance of categories, materials & fabrics, styles, colours, plain & pattern, sizes, and price points. It tries to sell what it thinks its customer, as a group, wants to buy.
Re-sell & rental specialists also have this level of control when their business is based on a curated collection. Their business model, with higher prices, allows them to be more selective. They act like a traditional retailer or wholesaler, without the complexities of a primary supply-chain.
In fact, all re-sell does always have a level of control in inventory management, as it can turn down unsuitable product. I worked with a charity in Ireland, and the day they began to turn product down, was the day that they stopped being operational stagnant, and became commercially liberated. What a success!
Re-sell also has the option, as all good charities do, of accepting all product donations but only putting what it wants up for re-sell. The remainder finds its way to a variety of re-cycling and re-use third parties. These are often valuable secondary income streams, to complement re-selling. The bottom line is that the customer sees and buys from an appropriate and attractive second-hand assortment that satisfies their needs and desires.
Where re-sell & rental is more volume orientated, and particularly when the ‘brand’ acts as a third-party facilitator, such as Depop and Loanhood, then it becomes much more complex to control the assortment because the supply chain is uncontrollable. Its suppliers are unreliable. Nonetheless, they must still be controlled.
Mass-market rental, of all the disruptive models, would seem to have less manoeuvre for control over its product proposition. However, by creating a strong brand proposition, and a clear manifesto for what product is OK, and what is not OK, assortment variations can be pre-empted and minimised. Equally by managing what the customers sees, through selected positioning of products across its landing pages and above-the-fold visibilities, and by intelligent AI product personalisation by customer, the assortment can be managed for everyone.
And rental, by third party, does have this advantage. That its stock is not its own investment. Clever curation of a virtual assortment simply means that inappropriate products remain in the owner’s wardrobes.
Commercial inventory management, and assortment curation, is more important than ever, across today’s many business models and touchpoints.
Real product buying and re-buying for resale or rental must still obey the familiar rules to avoid supply stagnation. Virtual assortments for resale or rental, must visually curate an attractive assortment, or run the risk of brand dilution, and diminished popularity.
In this extraordinary world of retail disruption, commercial and sustainable success is still built on bringing the right product to the right customer at the right time.