As retailers (and brands) struggle in this devastating retail environment, SBT has emerged as a possible retailer & supplier deep collaboration, counter-strategy that ties the fate of the multi-brand retailer with the success of the anchor brands that make up the retailer’s core assortment. Scan based trading has been around for a long time and recognised under various pseudonyms such as: vendor managed inventory, pay-per-scan, consignment and others. It shifts the risk of replenishment management and inventory cost to the brand, while the retailer is on the hook for real estate, marketing and sales.
The difference between SBT and older models such as VMI is mostly on the heavier reliance on data sharing technology to enable the listing, sales, replenishment and supply chain process collaboration between retailer and brand. Most of this technology is adequately powered by well- established Electronic Data Interchange (EDI) orchestrations and modern web technology for visibility.
In the previous decades, before the full-on onslaught of Amazon, I saw SBT being utilized by retailers for peripheral categories that were deemed “too difficult to manage.” These categories usually had a plethora of SKUs with extremely fast sales/replenishment cycles, or were simply non-core assortment items. Categories ranged from confectionary, newsprint, greeting cards, snacks & soda, to seasonal items such as gardening.
Retailers were slowly beginning to wake up to its potential in major categories. In the early part of last decade, just before its sunset, Blockbuster Canada partnered with the major studios to bring DVDs to market in an SBT model. The initial results in Canada were very strong. Unfortunately, gains from SBT at the country branch were simply not enough to help the parent in the face of streaming.
Today, we are seeing a resurgence of retailers across North America partnering with anchor global brands for SBT. We are seeing programs ranging from classic vendor managed inventory (VMI) to highly branded “shop in shop” models .
In fact, we are now helping new national retailers launch with nearly 80% consignment merchandise from major brands. All modern forms of SBT leverage sophisticated technology, for both customer-facing (clienteling) technology and for backend integration & collaboration.
Several global, forward-thinking brands have expressed an interest to participate in SBT programs with retailers. Global brands are often far bigger and with more IT & operational resources than smaller, local, yet vitally important retailers. Their ability to run a sophisticated demand forecasting and supply chain replenishment program at the local country-level usually outpaces the comparable ability of the smaller retailer. By offering such a program, the brand wins by increasing market-share and sales. The retailer focuses on its core competencies – lease management and omni channel sales & marketing. Retailer and brand also collaborate for online sales, where the brand’s online sales can be directed to retailer’s store for pick-up or store-managed delivery. Drop ship orders already require the brand to carry inventory on behalf of the retailer.
SBT and virtual retail establish a virtuous cycle of profits for both partners.
Core EDI data feeds continue to form the backbone of much of the retailer-supplier data integration and process enablement for SBT. Sales & inventory collaboration is aided by modern, cloud-based web technology. SBT prescribes that brands get paid only when an items sells at point of sale (POS). Retailers provide granular, daily sales data to brands, which allows brands to recognize sales and get paid through corresponding invoices. This sales and inventory information allows brands to maintain replenishment programs and feed their demand forecasting engines. Replenishment is often managed through “reverse purchase orders,” from the brand to the retailer, while receiving is automated through Advanced Ship Notices (ASN). Payment is reconciled with detailed Remittance Advise data from the retailer to the supplier, matching up to the point of sale activity and adjusted for returns. Electronic catalogue data, with retail price points from the brand and high-quality images, make it easier for the retailer to quickly list items for sale in the ERP, POS and in the web store. Promotion calendars are synchronized so that the retailer’s promotions are honored, along with the brand’s.
Several variations of these processes exist, depending on the retailer and brands involved. Retailers that react to one-off SBT demands from a speciality category brand are better off understanding the strategic importance of the program. To get real value from SBT, retailers should standardise the program and bring in more key category vendors to participate. SBT programs should be developed in a playbook, by retailers and brand, so that these can be executed quickly and efficiently with multiple Trading Partners.
Contact us to learn how SPICE can help with scan-based trading.
About the Author
Neel has held senior roles at various technology firms and is currently a Partner at SPICE Technology Group, Inc. Neel is a well-recognized technologist within the North American Manufacturing, Retail & Distribution sectors. Amongst the early pioneers in the “cloud” computing market, Neel has been working since the nineties with customers across the globe to achieve technology-driven, quick-time-to-market capabilities for modern commerce and complex supply chains. He brings expertise in digital commerce, supply chain, analytics and in emerging information technologies that are propelling organizations towards new business models. Some of these technologies and their modern applications include “Internet of Things (IoT),” “The API Economy,” “The Sharing Economy” and collectively: “Industry 4.0”
Neel is the Program Chair & Board Member of the Council of Supply Chain Management Professionals (CSCMP – Toronto Roundtable). He is also the Chairperson of the Program Advisory Committee for Business Process Management at Sheridan Institute of Technology and Advanced Learning.