As we head into the tail end of 2024, store labor costs continue to erode retained margins across both sales channels, keeping digital profitability out of reach. The labor demands of store omnichannel efficacy dictated by the continued use of perpetual inventory, where shelf availability requires a visual check by personnel. The alternatives being deployment of in-aisle cameras, or a transition to smart shelves with RFID product tagging, with each creating an unaffordable capex when the chains struggle to realize 2% of sales to operating profit, this within a sector vendor funded.
The sector is accused of price gouging due to rising sales revenues, but this is not reflected in operating profits. Sure, sales may be up, but in dollar terms, not in product units. Shoppers are just paying more for less due to the pressures of costs inflation. Lower unit sales impact the suppliers who must look to higher unit wholesale pricing to cover the loss from lower unit sales, while also absorbing the compliance costs imposed by an ever-increasing raft of regulatory requirements.
Amongst this turmoil remains the problem of high store labor costs coincidental with an emerging view of local stores being no longer fit for purpose if they cannot assure purchase availability for local shoppers when the pure-play eCommerce vendors increasingly offer this promise. This threat cannot be ignored when Amazon’s commitment to same day deliveries of food perishables is on public record.
Within this context, it is logical to explore how the local stores networks might deliver the competitive advantage over the eCommerce threat. This needs a store workforce management able to halve labor costs and ensure continuous omnichannel purchase availability where pricing and quality are consistent.
The outcome is a solution enabling local store omnichannel adoption by having the store function as local warehouse combining salesfloor and backstock to provide ‘just-in-time’ purchase availability for local shoppers, however they shop. Each local warehouse operates as a component of the supply chain with the local shopper’s purchase fulfilment being the supply recipient, rather than the store being the recipient from distribution center or supplier deliveries. Each store functions as a warehouse where all products, wherever they are stored, are in an ‘on-sale-available’ state that ensures shopper purchase fulfilments, regardless of the channel chosen. This warehousing transition needs no physical changes to the store beyond a more granular addressability of backstock to increase space utilization.
Workforce management is now applied to optimize labor utilization for every type of inventory movement into, within the store, through to point of purchase by a local shopper. With location-centric SIM’s precision addressability of all product storage, the workforce management processes manually replicating an automated warehouse, where personnel move inventory under system control.
Ensuring continuous omnichannel purchase availability also restores the point-of-sale transaction data as an accurate guide to demand and with that added benefit forward demand planning can progressively eliminate overstocks and consequent waste and markdown losses. Make the local stores supply chain assets and the traditional chains are true competitors with the eCommerce operators.
The alternative is to default to large, remote, automated warehouses dedicated to delivering digital purchases, a model, regardless of whether it can be afforded, putting the retailers in the cross hairs of Amazon, who pioneered automated warehousing and evolved it into a powerhouse able to meet and defeat anyone choosing to go head-to-head while mirroring the same operational model.