E-Tailers Invest in Inventory Planning
I mentioned in a recent post that there are growing signs that 2011 could be the year internet retailers invest in back-end systems to increase their operations and inventory efficiencies. Here’s some hard evidence to support that argument:
In her keynote address at the NEMOA Spring 2011 Conference, Bernadine Wu, CEO of FitForCommerce, described the shift from investment in marketing support systems to back-end operational systems. Wu cited Forrester’s 2011 Online Retail Technology Investment Outlook, which reported that 62 percent of e-tailers planned to increase or significantly increase their technology budget in 2011.
Of those Forrester respondents, 63.5 percent indicated that integration of back-end systems would likely be a focus for increased investment in 2011, compared to only 31.6 percent in 2010.
I also saw evidence of this trend firsthand at the recent Internet Retail Conference & Exhibition in San Diego. In past years at the conference, visitors to Direct Tech's booth showed little interest in our inventory planning systems. Instead, they were sharply focused on front-end systems that would help drive traffic to their websites and grow top-line sales.
That all shifted this year. We had numerous conversations with e-tailers and cross-channel retailers who expressed serious interest in improving their inventory forecasting and scheduling. Now that they had the traffic they sought, these retailers wanted to maximize sales from site visitors and, of course, maximize profits from those sales.
A CEO of an online retailer that sells sporting goods told us, “It’s great that someone has the tools available to help me manage my single largest expense.” Likewise, the North American general manager of a large multinational wholesale brand with a burgeoning direct-to-consumer internet business sought us out to discuss his company's challenges with inventory planning and scheduling.
These conversations simply weren’t happening even two years ago. As mentioned, everyone’s attention at that time was on marketing, and that’s where the investment strategies were focused. Time for a change.
Increasing investment in back-end systems is a natural and predictable trend for the maturing internet retail industry. That investment will help push internet sales higher while simultaneously increasing operations and inventory efficiencies, resulting in higher profits.
Joe is Vice President of Product Solutions at Software Paradigms International (SPI), an award-winning provider of technology solutions, including merchandise planning applications, mobile applications, eCommerce development and hosting and integration services, to retailers for more than 20 years.
Joe is a 34-year veteran of the retail industry with hands-on experience in marketing, merchandising, inventory management and business development at multichannel retail companies including Lands’ End, LifeSketch.com, Nordstrom.com and Duluth Trading Company. At SPI, Joe uses his experience to help customers and prospects understand how to improve sales and profits through applying industry best practices in merchandise planning and inventory management systems and processes.