Right now, merchants, CFOs, and CEOs are grappling with many questions: “When should I reopen stores?,” “Which ones should I open first?,” and “What product assortment do I put in each store?” For answers, retailers have to evolve to more detailed location planning that includes both product mix and weekly sales plans. With stores closed and an abundance of inventory piling up, a detailed location plan can provide retailer leaders the intelligence and agility to react county-by-county and understand the impact of their decisions.
County-to-state geographic hierarchies do not drive retailers’ systems at the store level; instead, they are driven by DC-to-store distribution schedules, which often cross state and county lines. These plans will need the ability to quickly model new distribution paths for stores and their weekly opening schedules.
As with any planned opening, there is an associated risk of store operations cost versus sales if the opening date is not met. The location plan needs to exist to help management understand schedule changes outside of their control. The CFO needs to understand the shortfalls that will be created when stores can’t open as planned and where opportunities exist to make-up sales and gross margin by re-directing stock.
Historically, retailers review inbound receipts and recent sales history to build inventory flows and sales plans. With stores closed down, however, there’s no insight from recent history — there’s no true north to guide the business. The only way to make an informed decision is through the location plan with a combination of data science and analytics, based upon an optimal and adjusted set of reference data. This advanced use of retail science gives retailers the confidence to proceed with the plan.
Of course, this analysis should include sales via digital channels. However, for retailers whose sales have suddenly gone from stores to digital-only, the product mix has almost certainly changed. As such, it is a dangerous assumption solely to use the digital product mix to reopen stores.
With optimized history, a modern retail planning platform solution can analyze and correct data for historical anomalies created by store and warehouse shutdowns to ensure that the location plans’ foundation is accurate and trustworthy.
Now more than ever, agility is paramount, and success hinges on finding creative ways to speed cash flow and gross margin return on investment. An actionable plan with a hyper-focus on gross margin return on investment (GMROI) to help determine the best way to manage the excess inventory is essential. Modifying the location strategy can help determine where inventory needs to be shuffled to ensure the right products are in the right stores when retailers are ready to reopen the doors.