Virtual Inventory • 28 October 2008 • The SnowBlog

Virtual Inventory

I've got a few thoughts of my own to add to Em's on the subject of merchandising. In case you haven't come across these terms, 'ranging' is deciding which products to sell in a particular store, 'stockholding' considers the quantities of those items you might keep on hand, and 'merchandising' concerns itself with how to arrange those products on shelves. In an old-fashioned general store, there might be very little merchandising; there might be a counter and a man in a brown coat who fetched whatever you requested from the back room. Car parts were still sold that way when I was a nipper and woe betide you if you didn't sound like you knew what you were asking for (c.f. The Two Ronnies, Fork Handles for an illustration of the format.) Modern shops, though, put a lot of their stock out on shelves. Stock is there both as an advert and as a product you can put in your basket. We don't really use the term, but most stores now are 'self-service'. And places like B&Q warehouses are sort of the ultimate in self-service in that they've turned the back room into the shop floor. Palettes of stock stacked to the ceiling constitute the 'display', such as it is. And the dominance of the self-service format is why we've all heard the expression "We've only got what you see on display". If you want to site a product in two places in a store you need two lots of it, so dual siting increases your stockholding requirements. It also makes it much trickier to calculate the effectiveness of your merchandising because when you ring up a purchase, you don't know at first glance which location in the store it came from. A dual sited product will have the same barcode whichever shelf it came off. But in an internet setting, the display item is just a picture, it's not the product itself. And you can put pictures all over the place without running out of shelf space, or stockholding budget, or getting confused over which parts of your website are generating sales and which aren't. Which is basically what Em was saying. I just wanted to point out another possibility exploited by Amazon and others: that of virtual inventory. Because the item on display is a picture, you don't need to have any stock on hand in order to offer something for sale, whereas a traditional shop with bare shelves is a bit of a turn-off. If you're something of a rotter, you could be temporarily out of stock and still accept orders over the web anyway. In fact, in the days when websites were just bolted onto the side of existing retail operations, there was no way to tell the customer what was in stock. It takes a lot of integration between warehouse and website to have live, up-to-the-minute stock information. These days it's only small operations with basic IT or those who favour sharp practices who take orders for out of stock items without warning you first. Really slick retailers have wired things up so that their website not only has visibility of what's in their warehouse, they also know what's in the warehouses of their suppliers and how long it will take to get it sent over - which allows them to show you an estimated delivery date even for a product they've run out of. Amazon do this and it's a fabulous system that, speaking purely from personal experience, never seems to work properly. But nevertheless, the possibility exists (assuming you had no scruples at all) to advertise for sale anything you could think of using only a picture of it on the website, and then wait for the order to come in before you tried to source some stock of it. Imagine a virtual competitor to Harrods, accepting orders for emus and vintage Steinways and truffle-flavoured dental floss, despite having no stock on hand of anything. And only once they'd got a firm order (and payment up front) would they set out in search of a supplier. With a really good sourcing operation it might even work. To translate that into Two Ronnies terms, the man in the brown coat disappears to the back room and is gone for a suspiciously long time before reappearing, perhaps stamping snow from his boots, with the item in question. (Though sadly the Two Ronnies retail model is not sustainable because inevitably a humorous misunderstanding has resulted in the wrong product being fetched.) But in an era of print-on-demand or manufacture-to-order, virtual inventory might become an established trend. And to return to Em's original point, the merchandising display for every customer might be different, tailored to their previous purchase history and known interests. Or at least that's the sort of thing people said was going to happen back in the late Nineties when you could become a billionaire just by sounding convincing on the subject of the web. Ahhh, billionaires. Remember them?


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