Who: $2.5B omnichannel fashion retailer with 40% of revenue from online
Challenge: Optimize the revenue from in-season clearance across all channels for all brands
Solution: Replace manually-intensive Excel tool with AI-powered markdown optimization solution
Overcome multichannel inventory management challenges to optimize in-season sales
With growing e-commerce channels and increased online shopping behavior, omnichannel retailers are grappling with the increased complexity brought on, in part, by the combination of possibilities for direct and in-store fulfillment. Siloed decisions around allocation, promotions, in-season pricing, and especially, inventory transfers fail to capture the opportunity for margin improvement that lies in the interconnectedness of online and stores.
Today’s in-season inventory management needs a more holistic view, taking into consideration the entwined dynamics of demand behavior across channels, including buy online, pick up in store (BOPUS) and delivery from store. Without a holistic view of pricing to drive in-season clearance, this retailer’s efforts to manage for inventory understock and overstock was becoming even more challenging.
Complexity beyond the ability for Excel to handle
Without an automated way to optimally incorporate optimized price recommendations into in-season fulfillment decisions, this retailer’s fulfillment planners were restricted by Excel tools that couldn’t see the forest for the trees. These spreadsheets were limited to prices based on rules-based forecasts, required cumbersome manual data entry and evaluation, and operated at the chain level only. As a result, in addition to reduced revenue from sub-optimal clearance cadences, fulfillment decisions based on shipping distance alone caused understocking in areas of high demand. Inaccuracies in pricing and fulfillment also caused pain downstream, for example, when stores were called on to fulfill due to unpredicted stockouts, causing the store’s P&L to be adversely impacted by the unplanned higher labor costs.
The retailer engaged antuit.ai to help replace aging Excel-based tools with a markdown optimization solution that would advise all aspects of in-season clearance, including fulfillment across channels. The retailer was seeking a solution that would go beyond a siloed view of markdowns alone to one that supported all aspects of inventory management over time.
Omnichannel inventory optimization -- interconnected decisions driven by AI algorithms
Antuit.ai’s omnichannel inventory optimization solution suite synchronizes key allocation, promotion, markdown and transfer decisions around a core omnichannel predictive engine in order to create full store presentations with less risk of markdown and to fulfill web and store orders with consideration of predicted net margin.
As a first step, antuit.ai began with the markdown optimization component, which includes the capabilities to:
- Drive to 95% sell through by the exit date,
- Expedite fulfilment of web orders from slow turning stores,
- Prioritize shipping before markdown pricing is executed,
- Plan for any additional store labor as fulfillment shifts from the DC,
- Transfer inventory between stores when geographically feasible,
- Transfer inventory to outlets from specialty stores, where appropriate, and
- Ensure that most inventory is allocated before clearance.
Starting with a pilot for two season codes, the antuit.ai team implemented and deployed optimized clearance pricing recommendations at the store level and at the channel level across the online webstore and the additional stores. The solution delivered easy-to-use presentation and manipulation for speedy adoption and also met the data requirements for smooth and automatic integration into the retailer’s existing order management system (OMS).
The pilot was implemented, and delivered significantly improved results, in roughly four months. The retailer is now is the process of expanding application to all products, as well as expanding the use of other optimization components in antuit.ai’s omnichannel inventory optimization suite.
Results: In-season clearance and fulfillment optimized with AI-driven pricing recommendations:
· 80% increase in week-to-week sales for a pilot using two season codes. Non-pilot codes experienced 28% decline over the same period.
· 250% improvement in turns without sacrificing margins.
· Pilot implementation delivered in under 4 months.