Technology Retail vs. Apparel/Footwear Retail…How Different Can It Be?
As a retail consulting firm, Parker Avery takes pride in our collective deep understanding of the ‘ins and outs’ of retail. We are a firm of ‘seasoned’ (but please don’t read that as ‘old’.), high energy, experienced retailers with an enormous repertoire of skills and knowledge in all aspects of retail. Our client projects run the gamut of overall strategy, business process improvement, software selection, implementation roadmap development, change management, software implementation, and training development and delivery.
As a consultant, variety in work and the experience of going from project to project (state to state, time zone to time zone, coast to coast…you get the idea) is fantastic. There’s always something new and different, plus continuous opportunities for learning; and the relationships gained along the way are always one of the best parts of the consulting lifestyle.
Parker Avery’s client base typically includes large, well-known retailers in the department store, apparel/footwear, home décor, beauty, and value segments; however, this time around we secured one of the world’s largest technology retailers. You read that right: technology retailer. In this case, the client’s corporate offices are in the beautiful Pacific Northwest—and the opportunity to go to a region or city you’ve never been to or visit locations with such great beauty and new adventures is always a plus. Neither of us had spent much time in this spectacular part of the United States, and we truly cherished this new experience (despite some rainy and downright chilly weeks.).
Okay, back to the client…a technology retailer—makes you think of computers, laptops, mobile phones, flat-screen TVs, maybe even high-tech appliances, right? And all the many accessories that go along with these products. You’re close. This particular company has thousands of stores and third-party dealers, sells online and through wholesale channels, buys from vendors, ships product through a national supply chain, and is a multi-multi-billion-dollar company with an entire team dedicated to supply chain planning.
So how dissimilar could they be from our typical retail client?
While we always hear the expected statement, “Oh, we’re different” from our clients, we carefully assess the validity of this statement before prescribing an industry leading practice approach to managing the business, designing new processes, and selecting, then implementing, software. However, in this case, we can honestly attest that this client is truly a bit different—or maybe ‘unique’ is a better word. And it’s not necessarily this specific company, rather it’s the technology retail segment in general that possesses highly unique characteristics and requirements, as a compared to other retailers.
As we began the discovery phase of this client, we quickly learned that their current-state organization would demand an extensive amount of education on how a traditional retailer manages, operates, and performs business process and activities related to improving their planning and supply chain functions.
While there is a team dedicated to the supply chain, the job titles are not conventional, and duties are not typical when compared to other retail organizational structures—in this case, typical retail planning roles are split across multiple groups who each own a small sliver of the overall planning process.
Systems that are designed for use as a wholesaler or manufacturer are instead being utilized for managing the retail portion of the business—think supply and demand plans.
There is a severe lack in proper business-centric system functionality in the existing planning tools since their implementation, resulting in a myriad of manually created processes driven by spreadsheets (however, in our experience, this is fairly common.). This really posed challenges in defining what unique qualities we needed to preserve when designing the future-state requirements.
Multiple teams were performing similar tasks across the retail planning landscape, yet these teams were in completely different organizations with divergent structures, measurements, and processes. Additionally, these groups were split across product types.
Typical retail terminology was non-existent and traditional retail job functions were being performed but under a different guise. It took some time to translate the internal language into traditional retail dialect to ensure that our discussions and ideas were understood by all.
But one of the biggest differences really threw us for a loop (and with a collective 350+ years of retailing experience, we thought we’d seen it ALL). While the Parker Avery team was conducting interviews for a better understanding of this client’s current state, a very unexpected comment we heard repeatedly was, “We don’t really care what item we sell, we just need to get the subscription.” That one took a bit to sink into our traditional retail mindsets.
For most retailers, revenue typically involves the sale of an item/product. We’re all familiar with the common retail requirement: “Right product, right time, right place, right price.” However, for this retailer, product sales are actually secondary. The primary goal of the business is actually gaining new service subscriptions or plans. The sale of an item may or may not be a direct result of the sale of a service plan, since customers can use their existing device to sign up for a new service plan.
Another unique characteristic of this industry is that a consumer may buy ‘up or down’ on a product model depending on availability—and that an actual item is not typically required to close a deal. As such, specific item inventory is not their focus, although they did strive for high in-stocks of model families (multiple color and memory options) and were prudent with their buys.
Since the client’s main source of revenue and margin is predicated on securing new and/or retaining service plans and not by selling low-margin products, the focus on retail fundamentals gets challenged by the product’s secondary role in the purchase decision process. The length of the service commitment, the time before a customer returns the product, whether the device is bought outright or financed, whether the product is damaged while under warranty, or if insurance is purchased to cover for damages post-warranty (among a myriad of other scenarios), all affect the revenue stream during and throughout the service timeframe.
Also unique was that the teams weren’t held to the typical sales and gross margin goals as we’ve experienced with other retailers, rather, high-level retail in-stocks took precedence.
When you consider the typical foundational components of a retail business, as it relates to planning and supply chain execution, there are certain standards and best practices for all functions needed to forecast, plan, allocate, and replenish products. What we found at this client is the opposite of what we find at most other clients:
Over 10,000 physical locations (combination of stores and dealers)
But…only 1,000 active SKUs on average in each time period
This mix of SKU/locations offered a new challenge that we had to consider while selecting software solutions and designing business practices that are effective, streamlined, and as automated as possible.
On top of all the above distinctive nuances, in the technology retail segment, there is the concept of ‘reverse/return and repair’ planning. In order to continually satisfy customers, there is the need to plan multiple versions of many SKUs. There are ‘A-Stock SKUs’ (retail saleable) as well as ‘B Stock SKUs’ (certified, refurbished, pre-owned) versions of the same product. These variations are all planned in anticipation of ensuring cost-effective, ongoing support for customer equipment that becomes damaged or traded-in early or sometimes selling repaired items through other ‘forward’ channels like certified pre-owned programs. While product returns are commonly considered by traditional retailers, the forecasting and planning aspect of reverse planning is very different.
Although we experienced many unique differences and challenges with this client, the one consistency remains: it is still retail. It is the Parker Avery team’s job to ask the tough questions, uncover the real differences that should remain unique, and leverage other standard, more traditional best practice processes while we develop and define business capabilities needed to drive planning and supply chain execution and empower the client to achieve their long-range growth goals.
Overall, working with this client was truly a fantastic experience. It was a wonderful opportunity to develop lasting relationships, deepen our retail knowledge, and work together to make meaningful changes and improvements for the client. It also gave us the unique chance to venture into an unchartered (at least for us) part of the United States, as we enjoyed new restaurants & cuisines, and even carved out some ‘fun’ time by attending the city’s holiday parade—complete with bands, St. Nick, festive floats, and falling ‘snow’ (aka soap bubbles) that runs nightly between November and January.