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Introduction
Recently I spoke at the National Retail Federation[1] in the center of retail: New York City!
The big buzz this year, no surprise, was about RFID.
Since much of the current activity has been focused on logistics—a clear winner as a starting point—we are missing the dialogue on the consumer side of the retail equation—merchandising, and most important, the customer experience. I was pleased to be given a small sliver of time to talk about this at such a huge and buzzing conference.
There are a bunch of misconceptions about RFID in retail that were front and center in our discussion—poor ROI, reluctant consumers, over investing, overly "well-honed" processes—instead of attacking the huge delta of lost sales and waste still in the retail supply chain.
Replenishment—Making it Smart
First, I want to take issue with the whole concept of POS, telling the whole story about replenishment. I have really come full circle on this issue, watching the actual behavior of customers. I used to think, "who needs smart shelves," because replenishment signals are only valid based on POS. True enough. It is not what is happening at POS that is the real issue! It is at the shelf.
No doubt there are issues around replenishment of stock items. And fine tuning accuracy of demand of stock items is always good. But, you have to wonder why we spend so much money on fine tuning what's not broken. There are known technologies and processes for replenishment, what I call dumb replenishment. Because in reality, it does not show you what the customer was looking for, or what they contemplated. (That's why so much effort has been put into web technologies that shadow the customer's moves—more on that later.) What happens when the customer is looking for items you do not have? Do you have any way of collecting this information? And when the customers substitute (here is where the dumb replenishment comes in), even though the customer wants something else, your system says to replenish that item.
Frequently, though customers might substitute once, they may not a second time. They move on to another retailer, possibly returning the original item when they find what they really want. Now it costs you more money to serve the customer. There is a huge delta in understanding what should be on the shelf (aka: unforecasted demand or forecasted but not available).
So intelligence at the shelf does matter, a great deal in fact. For so many stores, there is stock near by, but the sales people don't know it. So if you are lucky enough to have a customer ask, there is little chance that the store sales person will be able to fulfill the need. Most retail stores (other than the Saks and Talbots of the worlds) have very poor connectivity (drug stores are notoriously bad) with no inventory locating systems in the store or across the network.
More investment needs to be focused on the zone of uncertainty—understanding the issues and how technology can help improve sales and the customer experience.
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