Today's customers no longer make significant distinctions between different retail channels. They simply want the products they want, when and where they want them. Many retailers have recognized this seismic shift, but Urban Outfitters is one of the few that have made the changes needed to adapt to it – and even profit from it.
"From a customer perspective, there's no such thing now as a retail inventory or a direct inventory," said Urban Outfitters CIO Calvin Hollinger at an analyst day presentation last month. He was reporting on the retailer's investments in systems that provide a single SKU across the company's retail (store) and direct channels; combine inventory across these channels; and provide "real-time visibility to where product is throughout the enterprise at any given point in time," whether it's coming into a distribution center, within one of its four DCs, on the way to a store or in a store.
"So with that capability, we can take an order from the website, from the call center, from a customer's mobile device or from an out-of-stock situation in the store, and we can fulfill that order from any point we have inventory," said Hollinger. "A store doesn't only sell inventory within its four walls. A store now has access to inventory across the enterprise, all the other stores' inventory and the Web inventory. The websites have access to the Web inventory and all the stores' inventory. By exposing more inventory, we see an increase in demand."
The results include increased sales, "and the reason for that is we now can have total inventory," he added.
Faster Recycling of Returns
Omni-channel inventory visibility is an impressive achievement, but Urban Outfitters has gone even further, applying a series of flexible business rules that speed fulfillment and improve customer service. For example, Web exclusive items that are returned to brick-and-mortar stores previously went back to the East Coast fulfillment center in Trenton, SC.
"Not only was there cost involved, it could take us days or weeks to get the product back and make it available for sale," Hollinger reported. "With this new rule, if a Web exclusive comes back into the store, it immediately becomes available for sale again, and the very next order that comes in will pull a Web exclusive and fulfill it from that store."
Urban Outfitters is also moving to reduce markdowns with a sales velocity business rule, scheduled to go live this month, to fulfill orders from stores or regions where sales of an item have been slow.
Hollinger explained how it will work. "We'll have product selling well online. We have product selling well in certain stores. But if that product isn't turning fast in a certain store or a certain region, like the Pacific Northwest, we can now direct the very next order to pick that product from a store which isn't turning."
Pooling formerly separate inventories and optimizing fulfillment could bring even more significant benefits. "As we turn inventory more efficiently, we will also expect to see a reduction in weeks of supply, and by reducing the weeks of supply, we can begin strategically looking at total inventory levels. Can we reduce total inventory?" Hollinger asked the analysts. "This gives us a strategic opportunity to look into that. As all of you know, inventory carrying costs are the biggest line item in a P&L."
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