August RTG Newsletter

From the Principal’s Office

Much has happened in the industry since our May Newsletter.  We decided to discuss a topic near and dear to many retailers; Omni-channel retailing from the systems perspective.  Many retailers, retail publications and CIOs talk about Omni-channel retailing as a necessity.  Omni-channel Systems simply provide the customer a consistent brand experience for any product, anytime and in any channel of distribution; yet few who wish to implement it understand, or care to understand, the complexities inherent in the design of a complete system and its underlying architecture.  In this issue of our Quarterly Newsletter, we set out to list the required features of a system that can truly support today’s hot initiative.  Enjoy!

Bob Amster – Principal, RTG

The Intricate Basics of Omni-Channel Systems

Until the advent of eCommerce, retail information systems consisted basically of a merchandise management system, a POS system and, if you wish, financial systems rounded out by payroll and HR.  Then, eCommerce became a promising channel, but it occupied its own silo.  The evolution of the industry made way for omni-channel retailing and, most recently, a need for unified commerce.

Omni-channel retailing and Unified Commerce are both getting a lot of print and have become de rigueur for many retailers.  But how many realize the complexity of the transactions and interactions that enable Omni-channel retail and Unified Commerce to work in a seamless retail environment?

In brief, here are the pieces of functionality that have to work together to create the complete environment.  The system architecture that brings all these together in a cohesive, timely way in many instances is still being developed.  Most Enterprise Merchandise Management systems are not there yet.  We have listed in this paper, those terms and functions that are an addition to the function of the systems of old, resulting in an overall suite that is more complex and powerful than its recent predecessors.

Distributed Order Management (DOM) – This is the engine that sits in the middle of the process.  After the customer visits the retailer through one of the many channel portals, DOM conducts the search for available inventory among the channels, in a pre-determined sequence, and determines how (from what sources) an order will be fulfilled, according to the business rules pre-defined by the retailer (this is akin to ‘endless aisle’ functionality).  These rules include whether or not to split shipments.  From then on, it tracks the status of each order.  Finally, it provides the analytics with which the retailer determines whether it is efficient or deficient in its omni-channel execution.

Fulfillment Threshold/Safety Stock – One component of DOM required in order to deliver on the promise that ‘the product will be waiting there for you when you arrive’, is the ability for the retailer to define a threshold of inventory that must be on hand in any one location in order for the automated system to ‘reserve’ the product for a customer, especially for in-store pick-up.  For example, if the threshold for a SKU is set at 2 units, then the system will be able to reserve one unit of that SKU ordered, for each unit of inventory above 2.  And, once ‘reserved’ or ‘promised’, that unit can no longer be available for sale until the order is canceled (automatically or otherwise).

Order anywhere – Unified Commerce says that the purchase, cart and payment customer-facing screens should be the same for all channels (except mail order; some companies are still printing catalogs successfully).  This means that a customer should be able to begin an eCommerce transaction on a PC, suspend it, continue the transaction on mCommerce on a smartphone while on a bus on the way to the store, keep what’s in the ‘cart’, and buy something else in that store and pay for all the products in the cart at the last stop.  The same applies to all other channels.

Ship from anywhere – A proficient order management engine will ensure that as long as product is available in sufficient numbers, and the inventory quantities and location meet the retailer’s user-defined criteria, the product will ship and the customer will be charged.  To add to the potential complexity of a comprehensive omni-channel system, consider the concept of vendor drop-ship, whereby the retailer is directing the supplier to ship one of the items to the customer directly.  This type of transaction begets the need for the retailer to issue (or not) a PO, and pay for every item delivered by the vendor upon confirmation.

Pick-up Anywhere – To satisfy this particular convenience, the system must ensure that the inventory either exists in the store of choice (if requested by the customer), or can be shipped to the store of choice for timely customer pick-up, and then reserved for that customer for a pre-defined period of time so that the item doesn’t get sold from under the customer’s nose.

Ship-to-Store for Pick-up – This is another nuance of omni-channel retailing and beneficial to the retailer in that it can save shipping costs.  It can be equally convenient to the customer in that he/she can opt to stop by and pick-up the product on the way, or shop at other stores in the same mall or center.

Return Anywhere – The customer needs to feel that product can be returned to the most convenient retailer’s location irrespective of the channel through which the product was purchased.  The system has to support the retrieval of the original purchase transaction so that the customer can get an RA Number on the eCommerce site and return to a Returns-processing location, or return in a store, or other drop-off location, and receive appropriate credit, while the retailer returns product in saleable condition back into inventory.

Inventory Accuracy – Again, in order to fulfill the promise to the customer, the retailer must rely on inventory accuracy at all locations.  RFID on all products is a ‘must’ technology in order to reach very high inventory accuracy, if not 100%.  Yet, most retailers have not implemented RFID.  In the case of Vendor-drop-ship, a truly integrated system would have visibility into vendors’ inventory by SKU, in real-time.  That places the added responsibility to maintain an accurate, real-time inventory availability for sale on the Vendor.

Real Time vs. Near-Real-Time – In an omni-channel environment real-time information is critical because the customer is online with the retailer in real time and needs accurate answers in real time.  If communication between systems (POS, Inventory Management, eCommerce, mCommerce, WMS and Vendor) is trickle or near-real-time, then the chances for disappointing the customer increase, or the thresholds mentioned above have to increase at the retailer’s cost.

Normalization of Data/ The Unified Data Model – While the concept of normalization of data has been around for as long as databases have been around, normalization or ‘one version of the truth’, as it has come to be called, is of particular relevance in unified commerce.  The Unified Data Model requires keeping a single view of Customer Information, Customer Purchase History, Sales Transaction History, Product, and On-Hand Inventory Data across the enterprise, and all of the processes listed here query and update those same databases.

In-Store Process Changes – A good system will enable the retailer to determine if stores can be fulfillment locations, and if so, which stores.  In an Omni-channel world, there are new functions that store associates have to perform.  As a result of the buy-anywhere/pick-up-anywhere/return-anywhere nature of true omni-channel retailing, stores assume new responsibilities and implement new processes.   For example, stores have to have a will-call/pick-up location in which reserved inventory is not mixed with available-for-sale inventory.  Merchandise has to labeled by Customer Name and Transaction Number.  Store associates now have to check for fulfillment requests for their store (or pushed notifications onto some in-store mobile device) on a periodic basis.  Then, associates have to be able to quickly identify the product on the floor, retrieve it, tag it for the customer, and place it in the will-call/pick-up location.  Last, they have to confirm to the system that they put the item(s) away for in-store pick-up, or not, or shipped it as requested.

Customer Notification/Confirmation – The system should be able to confirm to the online customer as soon as the order (or part thereof) either is ready for pick-up, or has been shipped.

RTS – The system should provide the retailer with the ability to allow an order to expire if it is not picked up within a retailer-defined number of days, but immediately notify the customer when it has, and then, the items returned to stock (RTS).

Order Cancellations – A well-architected, fully-integrated system should enable the retailer’s Customer Service function to cancel an order that hasn’t passed a logical point-of-no-return in the system.  To do that, every order has to reflect its current status and must provide a vehicle to notify the process in question of the cancelation.

Uniformity of Packing Slips – The packing slips that the customer sees when she receives shipments should look the same, irrespective of the channel of origin.  This could include shipments from: stores, company-owned fulfillment centers, 3PL fulfillment centers, and suppliers.

Outsourced Fulfillment – If the retailer outsources fulfillment to a 3PL, the interfaces can be more complex or restricted, depending on the sophistication of the third-party.  Systems that support APIs have the advantage because ideally, information should be communicated in real time.

Compensation for Sales Performance – This topic has been kicking around since ‘omni-channel’ retailing began, and with it, complaints by store managers and associates who now found themselves doing work for which they were not rewarded (other than getting paid their hourly wages), or taking a hit to the top line for accepting returns on behalf of the ‘selling’ channel.  On this topic, the fact is that it is not incumbent on the system to determine how to apportion multi-channel sales efforts.  This can be done outside the retail management system by an ancillary system, using the transaction data extracted from the retail management system, and changed and manipulated as desired by the retailer’s top financial management.

What are we seeing?

Consolidation continues

Bain-Capital-owned Gymboree is looking at closing a “significant” number of its 1,200 + stores and filed for Chapter XI in mid-June.

One-time pure-play flash sales retailer Jack Threads threw in the towel with e ‘farewell sale.’

Rue 21 was the newest bankruptcy in May.  The company is shuttering 400 stores but continuing to operate under bankruptcy laws.

Bebe begins closing all its brick-and-mortar operations.

Michael Kors to shutter up to 125 stores.

True Religion Jeans filed for bankruptcy protection in early July.

Starbucks announced that it will shutter the Teavana stores operation.

Bebe has agreed to a sale, closing all stores.

Mergers & Acquisitions

Right after our May Newsletter, Coach announced it was going to acquire Kate Spade.  Consolidation continues…

Michael Kors is acquiring Jimmy Choo for $1.3 B…

Emerging Technology

AI for Beauty is being deployed.  The software recognizes facial features and movements on iOS and Android devices.

Walmart filed a patent for a device similar to Amazon’s Dash Button.  It’s the same, but different.  The technology is not new but the application of the technology is.

Target is enhancing its Computer-generated imagery (CGI) and promises more to come.  The concept is around a 360º view of a room or surroundings, while shopping online.

Lowe’s is piloting a robotic suit to assist with moving product around: Chain Store Age.

The announcement on Amazon’s Alexa-enabled Echo Look came out just after we published the may Newsletter.  Basically, Echo Look has a camera that takes the customer’s picture and then helps that customer search through look books looking and ‘fitting’ on clothing before purchasing.  Caveat emptor, your privacy could have been compromised.

Bon-Ton stores are implementing RFID technology to manage inventory accuracy.  According to Chain Store Age, RFID technology will be used to compare items on display to inventory on hand to identify items that should be on the selling floor.  In addition RFID will be used to receive product into each store so it can placed on display immediately after it is received.

Wait and See

Amazon unveiled Echo Look, a device that enables users to log favorites in a ‘look book’ and get recommendations for apparel.  Millennials may take to it.  Wait and see…

Walmart will be experiment with facial-recognition technology to help associates identify customer-service issues, according to Chain Store Age.  This is definitely a ‘wait and see.’  Pushing the envelope?

On the bright side

“Sephora is thriving amid retail crisis” – New York Times.  Well, there are many retailers doing well.  Yet the failures seem to make bigger headlines than the successes.  That’s sensationalism.

Nordstrom announced increased earnings for Q1.  Not all is lost in retail…
“Home Depot shines amid gloomy earnings from other retailers”: Retail Dive.  So, as many have been saying, there are sectors of retail and individual operators that are doing and will do just fine in what naysayers call the end of brick-and-mortar retail.

Duluth Trading showed strong results for Q1.  Now operating retail stores in addition to its eCommerce.

Printed Catalogs are making a comeback!  And you thought they were dead (Bonobos, Todd Snyder & Tommy Bahama) …

  1. Jill reported a 9.9% Q1comparable sales gain, outpacing many other apparel retailers and bucking recent trends.

Useful application of existing technology – Best Buy is testing Assured Living whereby the Geek Squad installs a Smart Home capability for caregivers to check in on their aging parents.

Subway using technology as part of a makeover (CSA News).  Interesting to see how some not-complicated features can enhance the service level.

What’s new with us?

Visual Retailing – We are actively looking for retailers to pilot this visual merchandising software application.  This SaaS solution enables retailers to deliver concise and consistent standards to their stores to ensure that the brand image and the nuances of the product offerings are accurately represented in every store. The software can be used as early in the process as design, to planning and buying, through merchandising to operations, to develop these concepts and then to communicate clear visual merchandising directives to every store under the company umbrella.  The software has been successfully deployed at mark & Spencer, VF, Preca Brummel, Italy and others.  We would be happy to work with you.  Contact us regarding your interest.

We are working with Overheer Systems, an ITL company, to run item-level RFID proof-of-concept projects.  Overheer offers a unique suite of SaaS applications – Reflect RFID – to deploy RFID and reap the benefits of this technology with minimal impact on existing system and processes.  In today’s omni-channel environment, inventory accuracy is paramount in maintaining customer satisfaction and RFID delivers that and more.  Through its association with ITL, Overheer Systems is now also able to deliver RFID tags in addition to the software, RFID scanners, and RFID printers/encoders.  The proof of concept can be implemented at a single store with a limited range of product, in order to validate assumptions built into the business case.  We are excited to have the opportunity to work with retailers wishing to develop and prove the case for RFID and are actively seeking retailers who want to engage in a proof of concept.

We continue to be enthusiastic about Theatro.  The Theatro Communicator is a wearable, hands-free, voice-activated, Wi-F-based device designed with the hourly retail employee in mind.  This smaller-than-a-credit-card device enables store-operations personnel to use a voice-controlled interface to call for back-up, check inventory, locate a manager, or simply communicate with a team member – enabling them to do more, heads-up/hands-free.  The Product is already fully deployed at Cabela’s and The Container Store, rolling out at Fry Electronics, and being piloted at numerous other well-known retailers.  As evidenced by Google’s Home, Amazon’s Echo and Alexa, and on-board automobile technology, voice activation is an effective, emerging technology.  Call us to discuss how we can help you pilot this unparalleled product.

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…and would like to discuss it with us, please contact us at the number below.  We would be happy to review with you how we can help you.

The Retail Technology Group:
is located at:
761 Rock Rimmon Road
Stamford, CT 06903-1216
Telephone 203-329-2621