To grow profitably, retailers need either more customers or more products to sell to existing customers. We believe the latter is critical.
Every retailer needs a product range which will allow a customer to shop 12 times a year. Most consumers will not download a retailer's mobile app, if they do not have that level of engagement. It's a vicious circle, infrequent shopping, means no engagement, no engagement means you cannot sell more to your customers.
Too many brands then become dependent on driving growth based on new customer acquisitions. But how can retailers increase product range without increasing stock investment, stock risk, and increased cash requirements? The answer is marketplaces.
As sales have moved online, many of them are being served from central warehouses, so retailers do not need as much stock in stores. Stores are starting to look empty or over-stocked. If space is released, product ranges can be increased, but that is expensive. We are seeing a change in the nature of stock management.
Marketplaces mean retailers can increase ranges without the corresponding stock investments.
Two stock models are emerging based on digital supplier collaboration. They are:
1. Consignment stock
2. Drop ship stock