Holiday season trading is big business for retailers. According to National Retail Federation (NRF) data, sales in November and December account for about 20% of a retailer’s annual sales. The outlook is especially positive for this year, with sales forecast to grow between 8,5 and 10,5% compared to the past holiday season.
As retailers up their efforts to draw in more shoppers and take full advantage of “the most wonderful time of the year,” it pays off to be prepared. In the US, NRF expects retailers to hire between 500,000 and 665,000 temporary workers during the holiday season, and to spend millions of dollars on window displays and marketing. While the outlook is good, several other factors will define whether this will be a profitable or a loss-making season. One such critical factor is the status of each retailer’s technology.
Slow e-commerce sites. Out-of-stock scenarios. POS that crash during peak sales time. Items sold that can’t be found in the ledger. Does any of these sound familiar? Here are some disastrous but all-too-common seasonal-related problems that retailers face, what causes them, and what you can do to prevent them.
Issue #1: Your technology can’t sustain the high volume of transactions
The cause: Tech outages can be extremely costly – but for many retailers, they are a familiar nightmare. A study by LogicMonitor found that 96% of organizations have experienced IT-related disruptions, and 10% of organizations have had 10 or more outages in a three-year period. Common causes of down systems include network failure, spikes in usage, human error, software malfunction, hardware failure and third-party outages. An increasingly common cause of outages are disconnected legacy software systems.
“One of the issues for some retailers is the fact that systems are, in fact, a patchwork of different technologies and functions added over time,” Neil Saunders, managing director of GlobalData, said to RetailWire. “As the demand put on them increases, they occasionally fall over. For others, it can be about capacity – which is why a lot of retailers have failures at peak times such as Black Friday.”
The solution: Retailers should look to replace their technology siloes, which are complex to maintain and costly to support, with a single retail system. A unified system covers the whole business, so there is no risk of disruptions due to miscommunication between separate solutions. On top of that, the technology is delivered by a single provider, which means full support, and simpler and quicker management and upgrades.
“The solution is unified commerce, one version of software servicing all channels,” RetailWire advises. “Until retailers wake up and embrace this vision, we will continue to see these types of outages as it is almost impossible to keep this multi-tiered Frankenstein’s Monster running without more people or less complexity.”
Issue #2: Part of your system goes down, and you can’t promptly pinpoint which part, or you don’t have the resources to fix it quickly
The cause: Again, the cause can be found in ageing, disconnected systems unable to communicate with each other, and which are often so old they can only work with now-unsupported hardware. Outdated tech will complicate the day-to-day running of your organization and put a strain on your resources. On top of that, if a part of the IT stack fails, it can be extremely hard to identify where your system is down. Without knowing what to fix or when the disconnection happened, how can you get your system back up and running, and minimize disruption to your business?
One of our clients, discount fashion retailer Gallo Clothing, faced this exact scenario one Christmas eve – its busiest sales day of the year. The store was full of shoppers when suddenly the cash registers stopped working. Gallo’s systems had stopped communicating with each other, but where had the glitch happened? The company couldn’t identify and fix the problem straight away, so managers instructed staff to process all transactions manually. With cashiers forced to write every item and price and calculate the total for every single shopper down, each sales transaction became painfully slow, and the queues grew longer and longer. Customers began to complain, and others left the store to shop elsewhere. Some never returned, unwilling to give the business another chance.
The solution: Retailers no longer need to put up with unreliable, outdated software systems that threaten the smooth running of the business. But they must be willing to invest in their future, instead of patching up old systems and hoping the software and hardware won’t fail when they need them most.
“Retailers have spent years not spending enough on technology and building a robust future-proof architecture,” roundtable panelist Oliver Guy said to RetailWire.
The good news is that modern, unified commerce technology platforms aren’t as expensive as retailers may think, and they can also deliver a fast return on investment. Gallo Clothing now uses LS Retail technology as the foundation for its businesses. Not only has the company not experienced any issues since the implementation of the solution – they have also achieved record profits. The company says it’s because the system is so fast and efficient. Gallo’s president told us: “In the years since implementing the LS Retail software, we’ve seen more customers, sold more products and had much shorter lines.”
Issue #3: You can’t react fast enough to customer demand, and end up disappointing customers with out-of-stock items
The cause: Out of stock items are one of consumers’ biggest gripes. They’re also hugely damaging to a retailer’s bottom line. A study by global research and advisory firm IHL Group found that retailers are missing out on nearly US$1 trillion in sales because of out-of-stock items. And almost a third of shoppers ended up turning to Amazon when the product they wanted wasn’t in stock at their local store.
Many retailers admit that they experience out-of-stock scenarios because of poor or outdated technology. The main three culprits of out of stocks seem to be
- Only having a partial view of inventory
- Unreliable data
- Lacking tools to analyze data and make accurate forecasts.
The solution: You can no longer get by with running weekly (or even daily) reports to keep track of your business. Today, especially during busy trading periods, you need a real-time view of your data, so you can see the status of your sales, customers, and stock, across all your retail chain at any time.
The Al-Batool fashion chain in the Kingdom of Saudi Arabia gained this visibility when they upgraded their financial, admin, warehouse management, buying & merchandising, CRM and POS systems to a single software environment.
For years, Al-Batool had managed its businesses using disconnected systems. To plan inventory, employees used Excel sheets to analyze the previous 4-5 months, and then manually predicted sales for the upcoming months. If any holiday was coming up, they’d have to guess how sales might change based on past experiences. This process was complex, extremely time consuming, required lots of manual work – and was, unfortunately, largely ineffective, often leading to stockouts and overstocks.
Today, Al-Batool uses unified commerce platform LS Central. They can track sales, stock, and productivity in real time across all locations, and the automated replenishment uses historical data to predict demand, fast and accurately. “Replenishment, which used to take few days, has been brought down to a few minutes,” a representative from the company said.
Issue #4: You can’t easily accept returns across channels
The cause: While many retailers claim to have a true omnichannel strategy, the reality for most is that they operate their physical stores and e-commerce as separate entities. This siloed approach never works in an omni-channel world, as it inevitably leads to a disconnected customer experience, lack of visibility across the organization, and an inaccurate view of inventory.
When a customer who bought an item in your online store wants to exchange or refund it in store, your systems may be holding you back even if you’d like to facilitate the transaction. Perhaps the customer has paid online using PayPal, and your in-store staff can’t see the transaction, or don’t know how to issue a refund. Or you can’t accept items bought elsewhere because you have no way to register them in your system, so they’d end up lost. And how often do shoppers come in specifically to swap an item, only to find that the size or color they are looking for is out of stock? All of these issues are caused by a disconnect between retailers’ online and in-store systems.
“The underlying issue is making sure that systems can talk to each other in near real time, which is needed to ensure that transactions and inventory can be fully reconciled, and that the business and its customers have reliable information on their accounts,” the ECR Community said in its report “Buy online, return in store”.
The solution: When you manage all channels using a single system and database, each customer account can be kept updated and aligned in near real time. And because inventory, logistics, sales and returns systems are linked through individual product identification and customer accounts, each item can be traced and located at any point in time. The result is that you’re able to work at speed, minimize product losses and ensure all transactions are reconciled.
Importantly, regardless of the channel they use to browse and shop, customers won’t be disappointed by out-of-stock scenarios as your online store draws from the general ledger to pull up real-time stock information.
If you want to find out more about how we can help you prepare your business for the festive season with future-proof, scalable IT, please get in touch.