What Traditional Retailers Can Learn From Amazon About Inventory Management and Technology Adoption

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Many traditional brick-and-mortar retailers are not using updated technology solutions for inventory management and other back-office processes despite growing demand to do so.

Consumers are becoming more savvy, using technology and mobile devices and demanding omnichannel experiences. For example, they want a higher level of product information and are checking a retailer’s website to see if a specific item is available at a nearby store. Yet a new report from AGC Partners that identifies top trends as well as disruptors in the retail industry shows traditional retailers are falling behind in consumer demand and may be able to learn a thing or two from specialty online retailers and online marketplaces like Amazon that appeal more to customers’ shopping habits.

According to the report, “The Retail Industry Disruptors: Specialty Online Retailers and Marketplaces Take Center Stage,” the majority of consumers want in-store mobile technology that allows them to order a product online if it is not in stock at the store. Additionally, 64% of consumers say they are more likely to shop at stores that offer such technology, and 73% believe it provides a “superior” customer experience.

However, few retailers are able to respond to these demands. Just 12% of retailers allow customers to scan a product in store and have it shipped to their homes, according to the report. And, just a third of retailers are able to order out-of-stock products via a mobile device. Many retailers are also unable to check product inventory at other store locations.

Marketplaces, such as Amazon and eBay, are beating traditional retailers when it comes to responding to consumer demands. These companies are changing the way consumers shop and remaining successful in the industry. A key reason for the success, according to AGC, is better inventory management, personalized and targeted customer offers and strong omnichannel offerings.  

Online retailers rely on marketplaces, too. According to the report, 36% of online retailers say they use marketplaces to manage order fulfillment and 72% use Amazon to sell their products.

Ongoing Challenges

The AGC report also identified online challenges traditional retailers continue to face in today’s market. These include added price pressures to offer the lowest price as more consumers are actively doing price comparisons while shopping. This pressure can lead to declining margins for a company and a need for more efficient, leaner inventory management, the report said.

However, the outdated and complex back-office systems many traditional retailers have in place is making it hard for companies to manage inventory. Retailers are largely unable to check product inventory at other store locations, according to the report.

Marketplaces and specialty online retailers are more likely to be using “highly selective inventory and advances back office management and supply chain technology” that saves them time and money, the report stated. Online retailers also have the advantage of offering a larger selection of production without physical space and stock constraints.

As consumers, especially millennials, demand an omnichannel shopping experience, retailers have a major opportunity to disrupt traditional practices and gain more marketshare. U.S. online sales represent just 7% of total retail sales within the industry, but that is expected to grow to 10% in 2019. Worldwide, online sales are predictive to go from representing 7.4% of all retail sales to 12.8% in the next several years. Retailers can look to major market disruptors like Amazon for how to successfully adopt advanced technologies and respond to changing consumer demands, according to AGC.

First Voice

  1. Cogent. Accountants for IT contractors:

    Amazon becomes the number one online e-commerce organization in the world. And many new organizations follow it and come into online. And Believe almost all retailer will come also.

    Thanks for your research.

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