5 Pillars for Retail & CPG Digital Strategy: Supply Management | DMA

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5 Pillars for Retail & CPG Digital Strategy: Supply Management

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This is the third part in a series on the 5 pillars that retail and CPG organizations should use when introducing or revising their digital strategies:

1. A seamless and hyper-personalized experience.

2. Additive complimentary services.

3. Content curation.

4. Platform play.

5. Data-driven supply chain (rather than one led by merchandising).

In my previous blog posts, I covered the first two initiatives that impact the demand. This part covers supply management in detail, with a focus on content curation, platform play and leveraging data for managing supply chain.

Content curation leverages ‘people power’

In the context of retailers and CPGs, the concept of content curation refers to having the customers or associates promote products for their aspirational value to prospective shoppers. Take beauty care brands as an example: for customers to truly understand if a certain product is right for them, they will gravitate towards user reviews more than the product attributes. These reviews shouldn't be limited to text, but retailers and CPGs should allow their customers to upload videos/pictures of applying the products and the corresponding results. The shoppers will definitely be more engaged with this format while the retailers and CPGs can also benefit. Retailers can create processes to constantly promote favorable reviewed products and diagnose issues with unfavorable comments to ensure they don't overstock.

Another great example of content curation is from SalesFloor. They provide a channel for retail associates to manage a dedicated page for curated content, where they can upload entire style guides and highly recommend products based on personal references. The page can also feature endorsements from celebrities, social media influencers, or premier customers to make an impact with ‘the best of the best chosen by the best of the best.’ Just like in fashion, beauty, or décor magazines, stylists can curate entire collections that customers can purchase online with a single click. This setup also allows retailers to promote overstock inventory as part of an overall style. Creating processes to create, manage and curate content from customers, associates and even experts can be immensely beneficial for keeping a real-time pulse on the product's market acceptability.

Platform play cashes out on ‘the long tail’

Successful ecommerce retailers have invested millions of dollars to build infrastructure, teams, brand awareness and processes for processing billions of dollars of annual transactions. The next iteration should be a platform to remove the ceiling of sellable SKUs. Since ecommerce is not limited by the physical constraints of a store, why set upper bounds on the capacity of SKUs

Retailers are only restricted because of their internal inertia to not evolve. Through automation, open APIs and dedicated 3rd party management teams, retailers can leverage their assets for selling goods that do not conflict with their core 'hits' offerings in order to avoid conflict. Yet another benefit is shipping these SKUs directly from the manufacturer, which reduces risk for the retailer to own and manage inventory.

Becoming a platform player is fairly well documented, so unfamiliarity shouldn't be much of a concern. One key KPI retailers must be aware of is that embracing ‘the long tail’ will cumulatively will drive higher profits, versus managing individual SKU level performance. This is quite a mind shift from the status quo, but Amazon has built a powerhouse leveraging this model.

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Source: Thelongtail.com

The data-driven supply chain continuously optimizes merchandising

Traditionally, it was challenging for retailers and manufactures to understand customers’ intent, such as why certain products were being looked over at brick-and-mortar stores. For this reason, merchandisers became solely dependent on yearly forecasts based on previous performance and interpretation of future trends in order to achieve their targets. Now, with the influx of sensors and online funnel view, retailers can diagnose abandonment at each stage of path to purchase (Discover, Select/Try, Purchase & Delivery). These tools make it possible to understand if the issue is in discoverability, fit/usage or price/promotion. Now that live data is available, retailers can procure inventory in smaller batches while optimizing the 4Ps within the path to purchase. This will reduce the risks of retaining high level of inventory while procuring the right products and sizes for their customers.

To ensure continuous optimization, retailers must be transparent with manufactures about the data they are capturing within the path to purchase. It is the retailer's responsibility to appropriately capture the needed dataset. For example, at physical stores, each product can be tagged with RFID, so that when a product is taken to a dressing room, it logs the selection intent. Fit/usage and price sensitivity can be noted by competitive comparison or analyzing customer reviews.

Determine the right mix of capabilities for your business

Digital capabilities can have significant impact on how we market our merchandise, how we sell products without owning the inventory, and how we should manage our inventory procurement. We spend a lot of time discussing the customer experience, yet predominately focus on solutions for creating demand. Supply is equally an important aspect of the customer experience, and understanding how to use digital solutions to make better buying decisions will maintain a harmonious supply and demand equation for retailers.

I hope that this series has conveyed the importance of maintaining an up-to-date digital strategy. With the drastic changes seen by the Retail and CPG industries in recent years, it is more crucial than ever before to embrace current and up-and-coming technologies. Please get in touch with me if you would like to know how Wipro Digital can help you create your digital strategy within these 5 pillars.

Originally posted on Wipro Digital, an innovation-led, digital transformation partner built for today’s digital challenges.

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