The BORIS Bounce
Why Retailers Need to Be Able to Count on Stock Being Available Post-Pandemic
In national political speak, the “Boris bounce” is a journalistic phrase that became synonymous with the Government’s poll ratings during the pandemic. As an ever-effusive prime minister attempted to steady concerns by talking up the UK as a stable union and island nation, the health crisis worsened on top of the growing concerns over Brexit and cross-border squabbles over independence with devolved powers in Scotland, Wales, and Northern Ireland. The prime minister’s personal popularity dipped following poor headlines, for example, around shortages of personal protective equipment, but his stock rapidly rose again, literally bouncing back to life, when he survived the ravages of COVID-19 and the UK became a lead nation in the coronavirus vaccine roll-out across the world.
In the world of retail, the BORIS bounce has similar connotations when it comes to the rise and fall of personal stock. In this context, the acronym BORIS refers to “buy online, return in-store.” This pre-pandemic phenomena emerged to make life easier for consumers operating in the omni-channel, the ether-like world where products can be purchased across multiple platforms, sent to multiple addresses (home, work, or collection points), and seamlessly return directly to the retailer at the customer’s nearest outlet.
While stock bounced around and eventually ended up in stores available for resale, customers and retailers were largely happy. That is until March 2020 when the pandemic struck and physical stores for non-essential goods were shuttered for what was believed to be a few weeks but resulted in a stuttering cycle of openings and closings over more than twelve months.
Many stores retrieved products back to distribution centres (DCs) to reduce the risk of burglaries in the mothballed outlets and to fulfil an explosion in online demand. However, the whereabouts of perpetual inventory became a major headache. Warehouses groaned under the weight of stock, much of it seasonal and destined for markdown, and an increasingly unclear picture of how to fulfil customer demand as product was literally “all over the shop,” to use the vernacular. It was like peak season with all of the Christmases coming together but not necessarily in a good way. In fact, the pandemic soon shone an unwelcome light on the limitations and readiness of many retailers to operate at the levels required for omni-channel fulfilment.
The Cost of Returns
In 2018, Loss Prevention Magazine Europe highlighted a report, Buy Online, Return In- Store: The Challenges and Opportunities of Product Returns in a Multi-Channel Environment, a study by Professor Lisa Jack, Dr. Regina Frei, and Dr. Sally-Ann Krzyzaniek of the University of Portsmouth Business School. Commissioned by the ECR Retail Loss Group and made possible by participating retailers and the ORIS Forums network, the report argued that the prevailing narrative had disproportionately focused upon the final mile of the customer journey and so-called friendly fraud where items go missing at the point of delivery with either the courier or the householder falling under suspicion. Its premise, which still holds true today, was that little has been written about reverse logistics, the mechanics and processes behind returning items purchased online, all of which has a profound knock-on effect to the circularity of stock and its re-availability for sale in order to realise its profit.
The authors painstakingly conducted a series of retailer interviews, reviewed open-source studies on online shopping and returns policies, as well as thresholds of delivery charges, to unpack what were (and probably still are in many cases) byzantine and circuitous return journeys. They looked at the costs associated with returns, including transport, storage, and order processing. There is also increased risk of potential loss due to damage or abuse, the trend of “wardrobing” for example, where the product is used once and then returned, often in a condition that precludes it from being resold.
According to Professor Jack, “Returns are complex and cost a lot of money in lost margin, and businesses need to generate a lot more sales to make up for the so-called ‘ghost economy’ losses—the hidden costs of inefficiency—which one US retail analyst report calculated to be around $1.75 trillion every year. We found in the research that many of the retailers we spoke to simply did not have the data to hand, and what we have at the moment is a multi-channel approach not an omni-channel one, because the systems were designed on the hoof and often do not talk to each other, which means that it costs more in both labour and error.”
On-Shelf Availability (OSA)
The report’s findings three years ago were prophetic and highlighted a lag between the demand for multi-channel delivery and the creation of lean returns policies in a world where the expectation is “click is quick” and “return is churn.” In brief, retailers lacked the transparency as to where the returns were, so it became difficult to measure the ability to realise the potential for profitability from resale.
“We are giving customers more and more choice and at the same time adding layers of complexity rather than value, for no good purpose,” said Professor Jack in 2018. The mushrooming demand of sales online, the researchers argued, has meant that returns policies have had to be designed “on the hoof” as choice as to where the item is returned creates a variable cost compared to the relatively fixed costs that have been established in the physical store world over many years.
Today, the pandemic has magnified this divide to the point where on-shelf availability (OSA)—the ability to 100 per cent confidently promise an online customer that the item they want in the size and colour they want it is in stock—has become the holy grail, a form of restart button over which retailers need total transparency. To achieve this, however, they must have absolute confidence in their stock file accuracy at all times.
Traditionally, retailers have had physical counts once or perhaps twice each year, but this has largely been to comply with the auditing requirements demanded of public-owned retailers so that shareholders know where their money is being invested. The counts are also a key performance indicator of stock variance to highlight issues of shrinkage and where loss prevention needs to shine a more forensic light on poorly performing stores.
Today, physical counts are carried out across the estate including “upstream” at the distribution centres where fast-moving products are more regularly checked to ensure they are indeed in the right part of the supply chain to fulfil store requirements and the burgeoning online demand. All of the stocktaking businesses serving the retail sector have experienced the demand for more regular inventory analysis as part of a “more and often” approach to avoid the potential for brand-damaging non-availability.
Peter Davies, sales director at Orridge, one of the oldest stocktaking companies in the world, said, “Retail brands have always carried out counts, but today it is more about the bigger picture that generates greater intelligence and more information about on-shelf availability. Online sales are through the roof at the moment, and because of the pandemic, there is even greater emphasis upon click and collect. They need to be sure that the stock is in the right place at the right time throughout the supply chain to ensure the greater customer experience.
“At DC level we are constantly requested to target the deliveries to stores and regularly report back to make sure that they are correct at dispatch. Any pick error can have a profound effect. Where this does happen, the count can highlight opportunities for retraining of staff. It’s a form of triage, which we do every month for certain clients as part of the audit. This could be in the DC or at store level where we can carry out a store manager audit where they know we are coming, which can itself trigger a positive change in behaviour that drives better compliance.”
Founded in the 1840s, Orridge works nationally and internationally for many of the large supermarkets and provided a COVID-safe protocol for external counting to aid those trading throughout the various lockdowns. Peter said, “There is a major difference between the essential and non-essential stores, but for both, on-shelf availability is crucial.” In the essential stores, the business is engaged with the practice of “good faith receiving,” a sampling of available stock in receipt so that thousands of smaller suppliers get their invoices settled in a more-timely fashion. The perpetual inventory approach means greater certainty and a familiarity that has not been possible in the stores that were forced to closed.
Peter continued, “Whereas the essential stores understand the pattern, it has been more challenging for the businesses that have been closed. Some have been using stores to fulfil orders and as a way of optimizing their online fulfilment, but it is all about getting the right products to the right people at the right time to guarantee the right outcome and customer experience.”
In the physical and online world, different practices by different retailers can drive results that are at odds with reality and even false positives—the suggestion that the stock is available when it isn’t or, indeed, proves to be the opposite. This, Peter claims, can happen with products that are not put out on display but stored in what is known as the “understock” (often the drawers underneath the display for the purposes of replenishment) or in the stockroom, meaning it is available but not obvious to the browsing customer.
Counting companies often also use gap checks, the counting of shelf edges or hanging displays where there is absent stock, to bring a clearer picture to the head office in order to drive better practice. “Having this information more regularly can drive better behaviours to make sure stock is constantly replenished and avoid situations of lost sales leading to lost customers,” Peter added.
The Roles of Technology and Staff
Most businesses use a combination of external counters for independence and their own staff to build a regular and often greater picture of their stock file. With staff counts, retailers use hired plug-and-play barcode scanning technology that proved invaluable to many lockdown stores as the kit arrived in a pre-sanitised form to allow colleagues to easily and safely conduct counts.
Patricia Lacey, stock accuracy expert for Zebra SmartCount, one such business specialising in staff-empowered technology, said, “Using their own staff was COVID compliant, eliminating the need for external personnel. Real-time reporting and getting their stock count file immediately after closing proved invaluable for visibility and stock file accuracy, with less reconciliation post count. Managers and staff have more ownership and accountability, and their SmartCount events have helped drive better outcomes using actionable data.”
The business recently conducted a survey of 500 retail staff in conjunction with Retail Week magazine. Prashanth Palukurthi, the former CEO of Reflexis workforce management solutions, now part of Zebra, said, “Technology of all descriptions is playing a greater role in how staff across retail work, and that is particularly relevant in shops. However, according to RWRC’s exclusive survey, just 51 per cent of staff believe they have access to the tech needed to do their job effectively often or all the time. The biggest area where staff members believe they would benefit from additional technology is in stock availability and ordering, with 24 per cent of all store colleagues citing this as their top tech priority. It is easy to understand why. Stock availability is a big bugbear for shoppers—nobody wants to make the trip to a store only to find what they wanted is out of stock—and searching for items in the stockroom is time-consuming for shop floor workers.”
Several retailers have now rolled out technology that democratises the count so that every level of the team instantaneously knows the exact stock levels in store. It is no longer the sole preserve of the management but the responsibility of all. Many major brands provide staff with devices that arm them with product information, from style recommendations to availability levels. In the future, some plan to use artificial intelligence to track, manage, and replenish stock levels, which will send a notification to the stockroom as soon as an item is running low on the shop floor. One fashion brand already puts the power in its customers’ hands when it comes to identifying stock levels through an app where they can scan a QR code on the product label and find out how many items are in stock and in which sizes.
Patricia Lacey, who looks after the Europe, Middle East, and Africa (EMEA) region for Zebra, said, “Technology is a way of taking back control of stock inventory wherever businesses are replenishing from to drive accuracy and minimise the risk of brand damage from items being out of stock. Since Christmas, a lot of businesses have not been able to trade physically, and it has been click and collect that has kept them going. Many people have got used to online but still enjoy the bricks-and-mortar experience when they can. Many stores have not been able to get external counters in, so their stock files have not been as reliable as they would prefer.”
Patricia, who has worked in the inventory control arena for many years, added, “The pictures of people standing outside stores after restrictions were lifted was a positive image, but once they got inside, was the stock there for them to buy? Retailers must get this right with better visibility of their stock files. It’s key to survival of the high street.
“I see a blended approach going forward rather than a binary online versus physical store experience. It is putting the energy into the right areas and having the technology to allow retail to do more to delight the customer. Coming out of lockdown, the high street has to get it right and counter what could be a perfect storm of people not returning to physical stores if they do not receive the experience they are expecting.
“Colleagues are a retailer’s greatest asset, and we need to empower them to carry out more regular counts, especially on the high-impact lines, as part of their daily routine and transforming what can be a messy stock file into something approaching zero failures.”
Herb Billings, vice president for technology strategy at Datascan, another self-scan provider operating in multiple territories, said, “The bottom line is that retailers simply have to locate stock and manage inventory record accuracy more effectively, and the only way they can achieve this is to count it more regularly, particularly the high-velocity items. Some retailers are already doing this constant counting, so they are always aware of its inventory.”
He said that those who do not follow this approach will struggle in the unforgiving world of omni-channel sales where many businesses operate a safety stock strategy in the digital sales channels, a term referring to the number of units below which an item becomes unavailable. This approach is aimed at avoiding disappointing customers because of either inaccurate inventory records or multiple channels simultaneously vying for the same article.
“We are seeing more retailers move from annual full counts to more frequent category counts [that] support omni-channel,” continued Herb. “This could be seasonal counts to take advantage of peak performance and transforming the count process from a cost function to drive greater profitability. It’s taking a different business approach. It’s no longer simply about getting a count done when stocks are at their lowest levels but looking at counting as a way to maximising profitability.”
Datascan, like Zebra, leases its scanning equipment but during COVID noticed a new emerging trend with longer lease times being recorded.
Herb concluded, “It’s a really interesting time and has made us rethink our business model. Retailers are counting more often on a schedule that benefits their selling seasons because they see the value of an accurate stock record. To achieve this, they are keeping our kits rather than returning them. Third-party counters will remain part of the retail ecosystem, but post-COVID, many retailers are looking to self-scan models to help realise their business aspirations.”
Whereas the UK has BORIS, the rest of the world also have their fair share of stock consolidation acronyms. In the US, click and collect is referred to as BOPUS, or buy online pick up in-store, which encounters exactly the same challenges as all retailers who seek to provide a seamless experiential journey for their customers but depend upon a clean stock file and on-shelf availability to deliver on the promise.
There is an old saying that a week is a long time in the world of politics, but in the cut-throat world of retail where many brands have fallen by the wayside because they failed to future-proof their enterprises for the challenges of COVID-19, a week can seem like a lifetime. The BORIS bounce, the ability to reinvent yourself in the face of adversity, only works through a consensus and collaborative approach to give the people what they want by the creation of a shared vision of the future or an experience worth voting for. Failure to recognise this fact could result in the very people you count on, your constituents and your customers, voting with their feet.