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Supply Chain Insights

Addressing Excess Inventory with Off-price Strategies

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Written by: Mitch Bittermann, Executive Director Ecommerce at TMX

Many retailers are stuck with excess amounts of inventory meant for their stores over the pandemic. With the high seasonality of fashion products, retailers are being faced with ageing inventory and cash tied up in stock that is quickly becoming obsolete. This can potentially pose a great threat to a retailer’s or brand’s financial health, so alternative channels of distribution are increasingly sought after.

eCommerce rose to 30 per cent of a retailer’s total sales during the peak phases of the pandemic lockdown. But even if eCommerce remained at this level and all inventory was made available online, it would not absorb all the stock sitting in stores. To minimise the damage to the balance sheet, there is a significant opportunity for retailers to tap into the rapidly growing off-price segment and build new and complementary revenue streams.

Leveraging product lifecycles

Off-price channels should become a key part of ecommerce strategies, as it provides a platform to sell to many consumers, especially new ones from different segments. Many brands have a clear idea of their commercial operating model, which usually entails launching a new product or collection and seeing it gradually mature over time with a tactical merchandising and discounting approach.

There will always be some leftover inventory, but this can be leveraged into a major opportunity instead of becoming a burden, if played tactically with off-price channels. This will ensure their products have a life even after the original season ends and ageing inventory can be monetised in a smart way.

Protecting your brand through off-price

Traditionally the off-price segment focused on bargains and deals for consumers. Brands were hesitant to be associated with bargain hunting platforms and drastic price reductions, however, new platforms and shopping clubs target a more upscaled segment that consciously market the products in an appealing way.

The Outnet, a sister site to luxury platform Net-a-porter, is a perfect example of this. They stock high-end brands at up to 75 per cent discount and do so through high-quality imagery and content marketing, which does not diminish the brands associated with the platform. The product may not always be current season but flawless and high-quality, nevertheless.

Additionally, retailers can consider building their own shopping club, which shields discounted products from being visible to everyone online. This protects the image and price perception of the brands as high quality. Off-price segments no longer have to be cheap in appeal and can be a considerable business opportunity.

An off-price retail strategy can now be part of an overarching operating model to keep products moving. With more opportunities available from retailers, brands can ensure their image is protected, while building new revenue streams and de-risking their business.

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Supply Chain

bp and Uber sign Global Strategic Delivery Partnership

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  • bp and Uber sign a new global strategic convenience partnership aiming to make more than 3,000 retail locations available on Uber Eats by 2025.
  • The partnership extends current local arrangements in Australia, New Zealand, Poland, South Africa and the west coast of US, adding the UK and eastern US in 2022 and with plans to launch in other European markets from 2023.

Today, bp (NYSE: BP) and Uber Technologies, Inc. (NYSE: UBER) are announcing a new global strategic convenience delivery partnership, extending their existing local arrangements to reach more consumers across the world. Together, the partners will offer a huge range of quality convenience products, including fresh and prepared ranges, from select retail locations.

bp is the first convenience retailer to team up with Uber Eats on a global level and aims to have more than 3,000 retail locations available on the delivery platform over the next three years. The partnership supports bp’s goal of growing its access to customers and expanding its delivery footprint, in response to soaring demand for food, groceries and everyday essentials brought to the door.

The new partnership covers retail sites in Australia, New Zealand, Poland, South Africa and the west coast of US. Sites in the UK and eastern US will be added to the app for the first time this year, with plans to launch in other European markets from 2023.

“We’re thrilled to team up with Uber Eats globally giving us the opportunity to reach many more consumers online in addition to those who currently visit our retail sites. We’ve seen how the pandemic has accelerated customer demand for delivered convenience and this partnership will allow us to scale up quickly on the Uber platform. And for the first time, we will be able to offer delivery options to existing customers on our own BPme app by the end of 2023,” said Emma Delaney, executive vice president customers & products, bp.

With 20,500 bp retail sites across the world and 550 million customers living within 20 minutes of a bp retail site, the partners see enormous opportunities for growth. bp sites offer a range of products tailored to local markets which may include hot and cold drinks, food-for-now options as well as staple groceries, fresh produce and ready meals, plus wine, beer and flowers.

  • In the UK, customers will be able to access a range of Wild Bean Café, and other branded food and products via Uber Eats – with the first 120 sites due live on the platform by the end of June.
  • In the US, the offer will be made available to bp’s network of independently owned retail locations to support the growth of their businesses. The goal is to make it easy for these partners to sign up to the Uber Eats platform and access benefits based on bp’s scale.

bp will benefit from Uber’s global brand and operations footprint, best-in-class technology for dispatching orders, and more than 4.4 million drivers and couriers on the platform worldwide.

As part of the agreement, Uber Eats and bp will work to introduce delivery options onto bp’s own app, BPme – initially planned to be available in the UK, US and Australia by the end of 2023 – powered by Uber Direct. This new offer will allow bp to directly connect its customers to delivery riders, making Uber Eats the trusted partner in fulfilling these orders. Since 2019, bp has seen a three-fold increase in users of the BPme app, with 16 million active loyalty users worldwide.

“With more than 20,500 locations around the world, bp’s reach is enormous—making them critical partners as we pursue our ambitions of helping consumers across the world get what they need delivered to their doorsteps,” said Pierre Dimitri Gore-Coty, Uber’s SVP of Global Delivery. “We are proud to support this next phase of the company’s convenience growth through this delivery partnership and look forward to deeper collaboration in the future.”

bp and Uber already work together in mobility with bp providing electric vehicle charging for Uber’s ride-hail drivers. The companies will explore other areas for future cooperation in convenience, including opportunities to utilize low carbon delivery methods to fulfill orders from bp sites.

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Supply Chain Insights

Officeworks to own and control Distribution Network.

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Officeworks invests in supply chain capabilities, will own and run it’s distribution centre.

Officeworks has changed its supply chain strategy in the wake of COVID-19 issues, with a view to owning and controlling a network of distribution centres across the country.

“When I joined we had a different strategy around our supply chain,” Officeworks managing director Sarah Hunter told The Australian, referring to the company’s previous outsourcing strategy.

“So we’ve worked really hard now to build our supply chain capability. We were in the process of outsourcing it, we are now in the process of building that capability.

Officeworks recently opened Australia’s first solar-powered robotic distribution centre in Derrimut, Victoria.

“We started in Victoria, and we have had approval to build, now board approval to invest, and we are building a new, similar (distribution centre) operation in Western Australia. That’s exciting,” she said.

“Looking at our capital expenditure three, four, or five years ago it’s a material step up in our investment in our supply chain.

“Most importantly for us as a business is that every team member who worked at the old facility has been completely retrained,” she said. “We have 120 team members who are now fully trained in how to work in an automated state-of-the-art environment.”

The need to control its own distribution became clear during the pandemic.

By December, Officeworks saw 46 per cent of its business come from online, including click and collect. Now it needs to move to retain this growth at a cost effective scale.

“We have created a facility that’s not only more productive, it’s going to enable our online business to grow in Victoria and into NSW at the rate that we expect our online business will grow.

“So now we have the capacity, the cost per pick is materially lower because it’s much more productive. It’s a win-win scenario for us. We’ve kept everyone employed with really great job security. We’ve scaled them up to work in the supply chain of the future.

“And on top of that, we now have the capacity for growth in Victoria that frankly we were struggling with through COVID.”

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Business Continuity

Skills shortage puts SAP projects on hold

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Business demand creates double whammy on recruitment pressure

Skills-related issues have hit a quarter of SAP users, in some cases putting projects on hold, according to a survey of companies in the Americas.

Research released by the Americas’ SAP Users’ Group (ASUG) shows that 26 per cent of organisations see skills in supporting, developing, and upgrading SAP systems as their number one challenge in working with the technology.

A quarter of users loyal to the German vendor said skills problems were holding up projects.

Geoff Scott, ASUG CEO, told a webinar last week that the combination of skills shortages in businesses and their technology teams created a vicious cycle of driving the demand for new tools and technologies.

“Business functions come and say, ‘Hey, I need to have all these things done.’ And technology teams say, ‘Well, I don’t have the same skills I used to have.’ And I think it creates a major disruption inside many of our member companies,” he said.

Skills were also a major issue for SAP users looking either to migrate to or support S/4HANA, the latest version of the tech giant’s ERP software based on an in-memory database.

“We are going to feel the pinch of that skill gap. My word of caution is that as you think about moving to S/4 if you have not already, the ability for you to plan that migration may hit some turbulence related to skill gaps with your external partners. That’s something that you absolutely positively should consider,” he said.

While technology issues were the greatest concern in the research overall, broken down, only integration problems were more cited than staff turnover and maintaining knowledgeable staff.

Of those with integration problems, 28 per cent said they were causing data errors to spread, 17 per cent said they were affecting the compatibility between SAP and other applications, and 17 per cent said it meant they were unable to keep up with new technologies.

One respondent said: “Changes made in SAP and Salesforce that do not get reflected in the other system are causing data inconsistencies.”

Overall, the majority of SAP users were increasing their spending on the technology. Fifty-two per cent said they were increasing spending, up from 46 per cent last year.

However, the proportion of users saying they were cutting spending on SAP also rose from 5 per cent last year to 8 per cent in 2022. The number of organisations making the same level of investment fell, according to the ASUG research.

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