Omni channel brings vendor managed inventory & scan-based trading back in fashion

Consignment and vendor managed inventory (VMI) relationships have been in place within traditional retail since time immemorial.  The past decade and half saw the rise in popularity of scan-based trading (SBT) or “pay per scan” in popularity and it replaced traditional, “manual” VMI with a more automated model between retailer and vendor.

With the growth of e-commerce and Omni-channel, modern commerce is seeing a rejuvenation of this business practice between retailers & big brand vendors.  Just as interestingly, specialty retailers and big box retailers are leveraging marketplace and store-within-a-store models – using many of the principles of VMI/SBT for managing processes and data.  Macy’s deal with Sunglass Hut, JC Penny’s partnering with Sephora are just but a few among the many recent announcements which include Nordstrom, Best Buy and others.

The Store within a Store concept has also been around for a while, but executed mostly in the traditional VMI type of model.  In this model, few retailers offered a seamless experience to a customer.  With the focus now on the Omni-channel customer, these expectations have changed.  Brands and retailers engaging in these business models are taking a larger view of the common customer.

The level of process and systems integration required between these partnering entities has now increased substantially.  With new partnering announcements happening every month, the need-for-speed in enabling these new channels and business models has also increased dramatically.

The modern day retailer and brand can enter into a relationship where the ownership of customer & inventory, responsibility of replenishment & order fulfillment, liability of shrink & returns and freedom to set prices, run promotions & manage markdowns can be shared in any manner.  With so many variables – and the overarching mandate to keep the Omni channel consumer’s experience seamless, the complexities of harmonizing process and integrating operational data (such as forecasts, sales, inventory and customer data) is significant.