Flexing the stockroom for a ‘new’ future

By Louisa Hosegood, Digital and Strategy Director at Bis Henderson Consulting

Even before Coronavirus, bricks and mortar retailers were facing an existential crisis. Soaring business rates, rent reviews, and minimum wages were already putting pressure on the size and scale of physical shops. And against the increasing appeal of online shopping to a conscious, discriminating and tech-savvy market, the role of bricks versus clicks has long been in debate. The virus is accelerating trends that were already evident and now, as retailers resume trading, new opportunities emerge and existing challenges demand resolution.

But while attention is focused on how consumer behaviours are changing, little thought has been given to how ‘new normal’ consumerism impacts real retail supply chain operations. To see possible futures in microcosm, we only need to venture, if we dare, into the back-of-shop stockroom.

The stockroom is the vital interface between customer-facing sales operations and the rest of the supply chain. It is often also an embarrassment – under-planned, under-managed, a high-rent storage facility and a visibility black hole. It is time to reconsider and reimagine what a stockroom is actually for – it’s role, it’s shape, it’s size, and how it connects to the customer experience on the sales floor – indeed how blurred the line between front and back of house really needs to be now.

To meet COVID requirements while still accommodating a viable number of staff and customers requires extra space. Even before the virus, retailers were looking to entice customers into shops by creating experiences and easier shopping – demonstrations, events, wider aisles, places to relax and think about purchases – all needing more sales area, and often re-arranging store layouts to encroach on already brimming stockrooms.

Pressure for smaller stockrooms has pushed some backroom activities such as unpacking, hanging, promotions and ticketing back upstream to the distribution centre (DC), and with replenishment trending towards little and often, direct to the sales floor. But pushing activity back to the warehouse is not without its problems. There may not be the capacity – the UK is ‘under-warehoused’ even without steep online growth. Large storage and picking operations are not often set up with the space, skills or equipment for such pre-retailing activities. Smaller retailers are often at the mercy of larger suppliers for order quantities and delivery slots. Meanwhile, frequent replenishment does not necessarily come cheap, small quantities can lead to shipping fresh air, plus nowadays any deliveries will compete with online fulfilment for scarce resources of drivers, vehicles and road space.

Now meet the new kids on the block, Bopis and Boris. Buy Online Pickup In Store, the new name for Click and Collect, is increasingly attractive to consumers – all the advantages of online but without waiting at home for a delivery. Sourcing online orders from the shop itself is a huge opportunity to offer next or same day collections to impatient customers, as well as being a strong footfall driver across the threshold. But fulfilling from store requires the supply chain to enter into the shop world far more than ever before. Orders would probably be picked from shop floor stock but packing and storing for customers will need back of house space, not to mention systems akin to being in a warehouse environment.

And then there is Boris – Buy Online Return In Store. Returns already run at intolerable levels, particularly in the fashion sector. Returned products have to be stored and processed somewhere, and with the added new complication of 72 hours quarantine, another pressure on the stockroom. Making returns available for resale quickly is key, the challenge is guessing where that stock will sell best next time – in that shop, another shop nearby or online? Moving returns around or back to a DC adds time and is costly, so picking from returns stock for online customers could make sense – is this another new role for the stockroom?

So, far from minimising the stockroom space, some retailers may actually need to expand their back-of-store to accommodate all these new omni-channel activities. And that in itself brings all sorts of new challenges. There is of course no such thing as a ‘typical’ shop. The options for a listed building in a medieval town centre are far more limited than for a purpose-built retail park unit. Even small retail chains may have both. Many chains will not be physically able to apply identical solutions to different outlets, yet they have to offer a common experience.

Shop of the future technology like virtual fitting rooms, automated lockers for collection and returns, plus contactless everything, are on retailers’ IT wish lists, and for sure these new digital solutions will support a new world of frictionless customer experience. However, the real key is supply chain technology. Accurate real-time stock availability data or live order tracking – providing assurance to nervous customers that their trip to the shop will not be wasted; and giving shop staff the tools to do their new job; demand forecasting and order management tools that transcend the omni-channel world to really seize the opportunity that bricks and clicks offers for maximising sales.

The future of the stockroom is intimately connected to the way that retail supply chains and business models will be run. The immediate post-COVID environment and customer reaction is creating one set of challenges, but the future of retail is evolving again and so retailers must create as much flexibility as possible in their use of space – taking real advantage of blurring the lines between the front and back of shops.

At this critical point, retailers need to ask themselves some important questions: Does any of this resonate with you and your business direction? Are you actively re-considering the role of your shops and looking at the opportunities for in-store fulfilment of online orders? Where does your stockroom fit in your plan and is it ready? Are your systems omni-channel capable? Are your warehouse and transport operations set up to support such operations?

Perhaps it’s time to consider getting the support you need in rethinking the role of your supply chain in the new retail landscape? These may be big challenges, but they are also huge opportunities, and the time to act is now.

More on Bis Henderson Consulting at www.bis-hendersonconsulting.com