How department stores are closing the gap between CX and inventory mix
With department store sales essentially flat in recent years, retailers have gotten endlessly creative when approaching sparking customer growth.
Despite the decline and closure of several department stores, retail foot traffic overall is on an upward trend. Brands are jumping on this increase in traffic by pivoting and opening hundreds of smaller-format, hyperlocal locations, such as Bloomingdale’s Bloomie’s boutique storefronts. Strategic partnerships help tap into new customer bases, through additional product categories and digital touchpoints — as seen in Kohl’s newest collaborations with Babies R Us and Instacart or Macy’s third-party marketplace.
Industry data back up these headlines that omnichannel is here to stay: online and offline channels are equally important. According to NuORDER by Lightspeed’s latest survey, Decoding Department Stores: Research & Insights Report, as many as 62% of retailers are investing in new store concepts and 40% are driving growth through online marketplaces and partnerships.
However, this shift toward a multifaceted retail strategy also creates new challenges in how department stores manage inventory. As much as retailers want to focus on customer experience, they are often restricted by back-end operational blind spots.
Retail forecasts use a mix of customer data and technology for optimal results
Department stores remain the most sophisticated customer gurus by employing a mix of art and science, data and intuition to navigate decades of volatile market shifts. Both legacy and emerging brands still rely on retailers and their ability to provide exceptional customer experiences that foster growth and loyalty.
When developing forecasts, planning and merchandising, leaders use a range of insights. Quantitative analysis, used by 65% of retailers, evaluates hard data like historical sales and macroeconomic indicators to predict demand. Qualitative analysis, used by 20%, taps into expert opinions and customer surveys to anticipate trends not yet reflected in the data.
“Merchants are continually testing out new brands, products and categories to give fresh, updated assortments to their customers,” said Ashley Collins, retail client director at NuORDER by Lightspeed. “They are always reevaluating and utilizing data and, in doing so, trying to make educated decisions for their customers’ needs.”
While AI-based methods are a newer innovation, used in just 11% of retail forecasts, these technologies help pull from various historical and real-time data sources to optimize inventory selection and predict consumer behavior with higher precision.
Profitability is tied up in inventory and supply chains
Delivering a great customer experience depends on some hidden, back-end magic in managing product inventory and supply chain risk. Even the most accurate demand forecasts will fall short if a department store can’t translate those insights into well-executed assortments on the shelf.
The critical role of inventory is reflected in NuORDER’s recent survey: 65% of retailers said optimizing brand-product mix was their primary tactic in boosting profitability. This often involves cutting low-performing products or categories, with 69% of retailers routinely pruning product lines to reduce carrying costs and test new items. The next most common tactics are diversifying offerings across sales channels (56%) and finding new brands with whom to partner (35%).
Collaboration is key to all these tactics, yet B2B buying remains a highly manual, time-consuming process. For example, retail leaders alluded to outdated Excel files and last year’s info being used to optimize for this year. Without industry standardization of product data, many retailers duplicate the same arduous buying and merchandising processes, ingesting and scrubbing millions of the same data points. Additionally, an overall lack of end-to-end data on inventory needs makes it hard for department stores to get real-time insights and adapt to market conditions or optimize assortments.
“Many retailers rely on legacy systems requiring a lot of manual input, which compromises data quality,” said Danielle Fairfield, vp and head of retail at NuORDER by Lightspeed. “As a result, they often don’t have the clean data needed to power their analytics tools effectively.”
Operational realities pose challenges for delivering on customer-centric goals
Consumers expect fast product access in the digital era, making inventory availability key to any CX strategy. In the survey, supply chain innovation (31%) ranked as having the biggest impact on future department store profitability, higher than even omnichannel (27%) or personalization (22%) strategies.
The top obstacles in inventory management include inaccurate demand forecasting due to poor data, complex supply chain and lead time challenges resulting in more stockouts and legacy technology combined with a lack of advanced systems leading to slow ordering processes.
Even when retailers have a clear vision of the CX they want to deliver, one of these challenges can disrupt product availability and prevent them from executing effectively.
Many retailers know that a technology upgrade is in order, but digital transformations can be a heavy lift, spanning 12- to 18-month timelines.
“The challenge lies in how expensive and labor-intensive it is to change an entire infrastructure,” Fairfield said. “Back-end systems [often] fall off the roadmap to prioritize items that drive immediate ROI.”
But, as the survey shows, those back-end systems are key to successful inventory strategies — as well as greater scalability, increased profitability and cost savings and the ease of making necessary market pivots — and, therefore, customer satisfaction and revenue growth. A lack of investment in streamlined operations thwarts potential profitability gains, as teams squander time on inconvenient processes rather than customer innovation.
Investing in B2B infrastructure that scales leads to sustainable growth
These findings serve as a wake-up call for department stores. Retail leaders must evaluate their infrastructure roadmap and find the bandwidth to update legacy systems to truly unlock profitable growth. Hidden, back-end bottlenecks have become a make-or-break issue in optimizing product inventory mix and delivering a strong experience. It’s not a matter of whether to address these tech gaps, but when and how.
While there’s no one-size-fits-all solution, modern B2B commerce tools can help streamline back-end operations across assortments, procurement, payments and much more, helping retailers reclaim valuable time lost to data wrangling and investigation. These solutions can also mandate data standardization, a win-win that helps brands and retailers increase visibility into duplicate buys and optimal assortments with the highest sell-through rates.
As the retail landscape evolves, those who bridge the gap between customer-centric aspirations and operational realities will be best positioned for success. By staying informed about industry benchmarks, retail leaders can make strategic investments that remove inventory constraints and chart a course for sustainable growth. Fixing operational inefficiencies isn’t just a matter of solving inventory challenges for better CX, it’s also about improving overall business profitability.
Sponsored by NuORDER by Lightspeed