From Lapland to App-land
Achieving the Peaky Blinder Effect
By John Wilson, Executive Editor
Peaky Blinders is a box-set blockbuster about post World War I Birmingham gangsters whose infamous signature was to mete out summary justice with razor blades concealed in the peaks of their flat caps. This gritty series was also the number one box-set seller last Christmas and achieved a record 60 million downloads from streaming services over the Christmas period.
Many retailers would give a lot to recapture this different kind of peak performance as they get ready for what many forecasters predict will be an uncertain 2019 festive period. But speaking too soon about planned success could result in peaking too soon.
This is because most retailers know from experience that chasing peak is rather like believing in Father Christmas. No matter how many trips to Lapland you organise in the run-up to December 25, the inevitable reality gap remains in terms of achieving your dreams because so much is dependent on too many other moving parts controlled by other parties in the supply chain. That, however, does not stop retailers chasing the ultimate in what experts in a previous issue of LP Magazine Europe (Winter 2017) referred to as “peakonomics”—the optimisation of the supply chain in the build-up to the busiest time of the year.
But, as this article will highlight, the success of counting down the days to Christmas depends very much on the accurate counting down of the much-hyped pre-Christmas stock. But this year is proving more challenging. In what should be retail’s most profitable time of year, seeds of doubt have been sown as phrases such as “retail apocalypse” have entered the lexicon. This is due in part to many retailers having had bulging distribution centres (DCs) for many months more than anticipated at the beginning of 2019 because of fears over Brexit and what no-deal could mean for not being able to deliver a bumper Christmas because of delivery challenges. As one retailer told us, “Our DCs have looked like Christmas peak for most of the year because we’ve had to carry extra stock because of the uncertainty of Brexit.”
In addition, even when all of Santa’s helpers in buying, merchandising, marketing, retail operations, and supply chain are working their magic, the ghost of Christmas past can visit Christmas present and future to ruin the feasting frenzy with the up-front promise of a New Year loss hangover to come. This is because the sheer volumes involved in enticing and keeping eager customers in store or online requires so much focus that standard loss prevention protocols can, and have, been relaxed to ensure a smoother customer experience with, in some cases, fewer security checks. In some cases, online fraud protection tools, such as 3D Secure, have been turned off during this period. Indeed, many heads of LP are encouraged not to visit stores during the build-up to peak so as not to distract store teams from their focus on sales.
This building New Year storm is compounded by the fact that the high street continues to be under the weather as gathering black clouds, including the uncertainty of Brexit and the slowing of online growth, according to the latest Confederation of British Industry (CBI) report, make for grim reading across the daily business pages. The CBI report, published in July 2019, said UK retail sales volumes fell at their fastest pace since the financial crisis of 2009 in the year to June, and Internet sales were broadly flat on a year ago (up 3 per cent), following strong growth in the previous month (up 38 per cent). Despite this, on a year-on-year basis, e-commerce was facing similar challenges to the sector as a whole, with Internet sales stalling in the year to June, marking the weakest growth since the question was first introduced to the CBI survey of almost 100 retailers ten years ago.
But every cloud has a silver lining. This usual ray of sunshine tends to peek out of the clouds at this time of year as retailers prepare for the annual orgy of spending that is the Christmas seasonal peak. Leading fashion magazine Drapers holds a planning-for-peak round table every year, which last year focused on retailer app innovations that can replace the black clouds with optimisation or, more appropriately, “app-timisation” of mobile sales around Black Friday and Cyber Monday.
According to research for the magazine, apps are more millennial friendly than social media platforms, including Instagram, because they are designed to create brand loyalty in an ever-crowded omni-marketplace and are holding their own, despite the impact of slower online sales. Last year, app revenue as a percentage of mobile growth, accounted for 22 per cent of revenue on and around Black Friday and Cyber Monday, while November app revenues grew by 134 per cent year-on-year as shoppers spent an average of 3.6 times more through shopping apps than on retail mobile websites.
But, as we alluded to earlier, apps or no apps, Black Fridays and Cyber Mondays—now stretching over more than a week in many retail businesses to boost pre-Christmas sales—can only continue to succeed if the supply chain is agile rather than fragile. This is because business performance at peak needs to be exactly that: peak. Supply chains, after all, are only as strong as their weakest link. This could be the final mile execution, or it is more likely to be even farther upstream in the all-important planning stage.
Counting on Peak
In other words, digital delivery counts for very little if businesses have not counted properly in the first place. Good old-fashioned stock file accuracy is key to success in the same way that warehouse software and logistics systems are still built around a dependency on the humble wooden pallet to deliver the products from manufacturers to retailers and even to our front doors. In this respect, stock file accuracy—the building blocks of a true availability landscape—is the one staple and dependable diviner of peak success. Everything else is tinsel and baubles.
Have we moved so far away from the fundamentals of business in terms of customer experience and their “journey” that we lose sight of getting the basics right? Will achieving this holy grail provide the platform that will delight that same consumer with the right product in the right place at the right time and at the right price? At peak, this is your start point, particularly in the periodic inventory methodology still favoured by many retailers where stock is counted before peak and then analysed post the event. If the stock file is accurate at this point, the customer journey should be relatively smooth and losses manageable.
But many retailers today are dealing with physical and digital sales and, in some cases, trading in the omni-sphere where they use the multiple platforms described earlier. This means that stock accuracy is under continual pressure as retailers often pick from store rather than a distribution centre (DC) in order to fulfil customer orders. Here, with the growing popularity and affordability of RFID as a more-effective solution, retailers are opting for perpetual inventory (PI) to monitor stock and ensure no “out of stocks” and, therefore, what is ordered is delivered.
PI keeps track of inventory levels continuously, with updates to stock files made automatically whenever a product is received or sold. Purchases and returns are immediately recorded in the inventory account. As long as there is no theft or damage, the inventory account balance should be accurate. PI systems use digital technology to track inventory in real time using updates sent electronically to central databases.
Many fashion retailers are working with both RFID and, by definition, PI, including preppy brand Jack Wills. LP Magazine Europe followed the Jack Wills journey towards stock file accuracy over two features. The back story here was the fact that the desirable pheasant-logoed brand had become a game target for thieves.
Gary Tattersall, Jack Wills’s director of asset protection and risk management and an advocate of Professor Adrian Beck’s Total Retail Loss model developed in conjunction with the ECR Community, took a “back-to-basics and belt-and-braces” approach to capturing accurate data. This in turn was an updated version of “total inventory integrity” espoused by Phil Wrigley, former New Look chief executive and chairman of Majestic Wines who told LP Europe Magazine in 2014, “There is no board of any merit that is not focused on stock availability and file accuracy in a moving and mobile world. If you get those figures wrong, you have lost your stock and lost your customer.”
Gary told LP Magazine Europe in Spring 2017, “When I started this journey, I was coming at the issue of RFID from a completely different angle. Of course, I wanted to reduce losses, but the business also wanted to increase sales in order to improve the bottom line. What was keeping me awake at night was our poor stock accuracy, so the question for me was how we can hit sales figures if we do not have the right stock in place. Also, if I don’t know where stock is, how can I go and investigate?” In one store involved in the RFID trial, Gary uncovered 300 items of clothing the staff did not know it was carrying, products that could have been sold in that store or another branch.
Although many other businesses are now working with RFID towards a form of PI nirvana, the majority of retailers are still wedded, largely for cost purposes, to periodic counts either carried out themselves or outsourced to third-party providers. In the world of “out for the count” suppliers, there are few that have the heritage of Orridge, which counts many high street brands in its extensive portfolio across the retail and pharmacy sectors. Orridge has the capability to carry out stocktakes in stores without disrupting trade on a national and international scale.
“Like the goods themselves, our staff need to be in the right place at the right time. And at this time of year, that is critical in terms of understanding what stock is physically present against what is listed on the system, the difference between which needs to be reset before peak trading begins,” said Peter Davies, Orridge sales director.
Nowhere would this be tested more than Claire’s Accessories, where today Orridge undertakes a full rolling inventory programme throughout the year covering 900 stores across the UK and Europe. Alan Fox, European loss prevention director for Claire’s, who has been using Orridge since 2016, said stock accuracy is important for the entire business: “The bespoke reports that Orridge produces are great because I am able to share data across the business with buyers, merchandisers, and the CEO, and my loss prevention team are able to tap into the reports to see what is delivered to each store against existing stock and where it is located.”
Independence and “not marking your own homework” have become the watch words of Orridge, which provides both planned and unplanned visits to keep staff on their toes. Founded in 1846 and one of the oldest stock-counting businesses in the world, Orridge has been able to monitor and benchmark customer behaviour over many years. As such, the business is well qualified to sponsor the retail knowledge stock risk survey to be released at the Retail Fraud Awards in October.
Peter said retailers are pushing stock counts further into peak—September, October, and even as late as November, and in some cases December itself—to ensure the stock file is accurate. This is because with click and collect, more retailers are picking from stores, and although the systems may say the items are there, this masks a reality and can create a false positive.
“It is all down to store standards, Peter said. “We can tell from the look of the store when we enter what we will find in terms of accuracy. If, for example, stock is all over the place, we would know it will not reflect well because of poor prepping for a stock count. We can act rather like an Ofsted inspector, and we grade stores through our portal on their levels of preparedness for our visit.”
Tidiness is therefore an important factor in a store. Staff can be disciplined for poor processes and unkempt stock rooms. Although harsh, in a busy peak period where it is all hands on deck to secure that all-important sale, an untidy stock room can skew the results of a count with items marked down as loss, whereas in reality, they have simply been unintentionally misplaced or hidden in plain sight. A lost item is a lost sale and a lost opportunity, especially in the best-case scenario, when it is eventually found and has to be heavily discounted.
Stocktake in a Box
When retailers talk about peak, it is assumed they are talking about the snow globe craziness of Black Friday, Cyber Monday, and Christmas itself. But what about the twin peak of spring? Many DIY retailers and larger out-of-town retailers have to deal with different counts of different items at different times of year. The DIY businesses are selling drills, Christmas trees, and lights at this time of year, but in spring, it is all about garden furniture, barbecues, and bedding plants. To achieve this flexibility cost-effectively, it cannot always be about paper counts by external auditors or stocktakers.
For many smaller retailers, large annualised or twice-yearly stocktakes don’t work on a practical day-to-day basis, particularly in the run-up to peak. Staff are therefore engaged to carry out the counts, with some preferring the bite-size-chunk approach by cycle counting monthly, weekly, or even daily by selecting specific sections of the store and making that the priority for the count period. This can be a paper-based process, although there are issues of duplication and double-entry when it comes to reconciling the count with what is logged in the computer.
Some use inventory management software linked to their point-of-sale systems that allow for multiple technological devices to be deployed in order to count faster. RFID is the next step in this process, as is now the case with businesses such as Jack Wills, but cost is still an issue for many small- to medium-sized retailers.
This has led to a need for a hybrid system that allows staff to carry out the count using external equipment, but it is parachuted into the business at specific times, such as peak. Known as the so-called “stocktake in a box” solution, it involves a rental of equipment from the solution provider, of which there are a number in the stock-counting market.
The retail staff, who are familiar with the store layout and the stock, carry out the count while the system automatically populates the data so as to avoid the opportunity for collusion by potentially dishonest team members. Once completed, the equipment is then simply sent back to the supplier until the next time.
Alison Allen, asset protection manager at Eason, Ireland’s premier book and stationery retailer, has recently piloted one such count in the run-up to peak. “We received twenty-two handsets and a software pack, which allowed our staff to go around and carry out a very cost-effective count and upload it to an Excel spreadsheet. It came with training and was very simple to use. This stock counting in a box seems to be the latest way of doing things. It’s quick and cost-effective as you are using your own staff who know the stores.” There is also the argument of more-invested staff, but it could equally be argued that the investment is misplaced if they are engaged in staff dishonesty.
Retailers are counting on peak to make up for sluggish sales for the rest of the year in challenged high streets, slowing online sales, and the uncertainly of a no-deal Brexit, which will not be resolved until at least the end of October. However, whatever the trading conditions, retailers will continue to be agnostic to the prevailing and opposing top-line political posturing as they focus on the bottom-line figures. In this respect, peak success counts on accuracy to increase sales before the starting pistol on this annual feeding frenzy has been fired. Failure to recognise this basic truth can only result in a countdown to poor sales, or worse.
Retailers wanting to capture the success of Peaky Blinders cannot themselves be blind to the perils of peak. As stated earlier, to play a blinder in this numbers game, they must transcend the world of false positives that is too often created in the chaos of peak. Most importantly, they must ultimately avoid being that retailer that lost not only their stock but also their customers in the pre-Christmas bargain.