Reimagining Retail Planning for the ‘New Normal’

It’s safe to say that 2020 was a difficult year for retail. But what were the top challenges that planners and merchants faced, and what can we learn from them?

In our quest to learn from the many complexities that COVID-19 presented, we asked a number of retailers, thought leaders and Aptos experts what they have had to overcome since the pandemic began. The top five challenges that they identified can be summed up as follows:

• Predicting unpredictable demand: The pandemic made historical data and year-to-year comparisons simply unusable. One of the most significant obstacles was in the area of demand forecasting. Determining which items faced stockouts or became irrelevant, and ultimately the impact on assortments, remains among the greatest criticalities planners face.
• Managing unsold inventory: Due to lockdowns and store closures, cancelled orders and a contraction in demand for many nonessential categories, retailers found themselves with vast quantities of unsold products to manage. 
• Lack of supply chain agility: Local restrictions, as well as customers’ desires to pick up and receive products ‘anytime, anywhere’ put enormous stress on global supply chains, which were often too rigid to service changing demand and delivery models.
• Managing the increase in returns: Many retailers lacked inventory visibility and a clear omnichannel inventory strategy. “One lesser-known consequence of e-commerce growth was the increased level of returns, which has become a major cost and detriment to retailers,” noted Aptos’ David Sheekey. By some estimates, retailers have been seeing return rates as high as 40%.
• Changing the role and number of stores: With online sales accelerating, retailers had to start rethinking the role of stores to become showrooms and fulfilment centres. One study conducted by IHL Group found that close to 90% of all orders in 2021 are expected to be fulfilled by local stores.

Many retailers were not well prepared to meet these challenges. Many were not close enough to the consumer. Others were locked into planning too many months in advance. And still others were unable to shift their orders and inventory to the categories and channels that were selling the most.

The ones that did fare the best during the crisis, Sheekey commented, were the ones that already had a solid omnichannel planning strategy in place.

“Retailers that thrived during the darkest days of 2020 were those that had an unsevered connection to their customers, were better equipped to capture omnichannel demand signals and could respond to those demand signals in-season,” he said.

Sheekey recommended that planning functions and solutions transform to meet omnichannel behaviours and expectations.

“These new retail requirements cannot be managed by older planning processes and tools,” he said. “With all the shifts that retailers are experiencing, understanding omnichannel demand, where to place inventory, how much inventory to make available across locations and adapting quickly to changing consumer behaviours is absolutely crucial.”

Omnichannel Planning for the Future

The coming months will provide myriad opportunities to recoup lost sales, particularly for retailers that were hit the hardest by the mandatory store closures. The return to offices and the resurgence of social events, staycations, back-to-school shopping and the festive season will create a perfect storm of demand. The major issue here is ensuring that retailers have the right inventory on hand in the right places to meet omnichannel demand.

According to Sheekey, as retailers look to retool their planning strategies for the new normal, there are several best practices and recommendations to consider: 

• Remove channel silos – buying strategies and inventory for e-commerce, the franchise and the store need to be shared.
• Move from store to geospatial planning – instead of planning by store, plan by geography to include the total impact of demand, spanning both in-store and online.  
• Develop stronger in-season capabilities – In order to be more responsive to demand fluctuations, retailers can leverage technologies such as AI, machine learning and analytics to capture demand signals and respond in-season.
• Shorten supply chains and planning lead times – There are many ways to achieve this, including investing in predictive analytics, reorganising the vendor list for nearer shores and closer collaboration with suppliers of materials and components.
• Reorganise planning teams towards the customer – Reimagine the roles and responsibilities of the planning team for the omnichannel era in a way that puts the customer first – through data-driven insights – in all decisions.

Planning Insights from AW LAB and Marcolin

We asked a couple of planning experts to share their experiences with omnichannel planning and why maturity in this area is especially critical during times of disruption.

“Omnichannel in no longer a service to promise, but is a must that customers require as normality,” said Andrea Tonello, Head of Planning at sportswear leader AW LAB. “Looking at our business, all actual figures are now mixing up between each channel: digital, direct and franchising stores. Having a solid planning and processes solution in place allowed us to rapidly adjust to new conditions and prepare a new financial, store and merchandising plan, with a new mindset, new KPIs and a new assortment clustering, which is more digitally oriented. We managed to change in a quick, agile way.”

“Thanks to the ability to execute just-in-time replenishments, we have optimally supported the needs of our customers over this very unique period,” said Alberto Fratantonio, the Marcolin Order Replenishment Evolution (MORE) Project Leader at Marcolin, a leading worldwide eyewear company. “We have been able to dynamically adjust our replenishments every week, matching the continuous swings in demand generated by variations in the epidemic curve and the resulting social and business restrictions.”  

To learn how Aptos is supporting its customers with retail planning software for the omnichannel era, read our Marcolin case study.