Hyper-local inventory is also community.

The sales that stores lose when they fail to meet local demand are astronomical. As of 2015, retailers have been losing $1.75 trillion per year to out-of-stocks, overstocks and returns.

One of the main problems? Customers view local stores as carbon copies of the central, flagship model—replicas that mirror each other’s inventory. Yes, there will always be plenty of inventory overlap across a retailer’s national and even global footprint, but each store needs to appeal directly to the surrounding community on a timely basis. Each store is unique to itself and should feature localized assortment. While retailers are aware of this, there are ways they can go much deeper.

How can you truly meet local customer demand?

First, do you know your local data?

While localized inventory can and should account for unique items specific to a certain region, the main concern is carrying the right sizes, colors, cuts, and prints by store.

Amazon may have the power of speed when it comes to fulfillment by delivery, but what if customers want something now, in the moment, and don’t want to wait for the item to ship? Tourists, for example, aren’t going to look to Amazon for local items they need today. Here, brick-and-mortar holds the advantage.

Technology that provides 3rd party, hyper-local data (such as weather and neighborhood demographics) can be combined with a retailer’s own product, transaction and local data. This allows them to not only meet local needs but to anticipate and plan for them. And with spikes in demand, the “multiplier effect” means that the reward for stocking local shelves with the right product is that much greater.

A hyper-localized plan will take these into account:

  • Town/neighborhood events and specifics (school colors, seasonal festivals, town fairs, rivalry games, etc.)
  • Regional demographics (down to body types, ethnicity, and income)
  • Seasonal demand, for locals and/or tourists
  • Lifestyle stages, from urban professionals and “Metro Parents” to “Hard Chargers” and “Thrifty Elders.
  • Trends (and micro-trends) gleaned through 3rd party data sources like social media

What are the challenges of local inventory?

A huge byproduct of localized assortment is minimizing working capital, meaning the money that has gone towards stocking product sits in purgatory until customers make a purchase. And just as retailers plan for fulfillment on a local level, they need to understand working capital as it relates to each and every store.

To that end, retailers need to know how to strike a balance between standardization and localization. Customers who see inventory online will expect to have access to it in-store and, for that matter, in most if not all stores.

There are also barriers to localizing operations like buying and delivery, because a standard, consolidated model tends to be more cost-effective (for the moment). It will be interesting to see if and how retailers work to change this.

How can retailers localize at scale without disrupting their whole system?

Aside from mining customer data (both 3rd party and store-native), brands continue to find creative ways to satisfy local need and demonstrate their connection to communities.

Here are a few tactics retailers are undertaking:

  • Testing via e-commerce. Before committing to the time and expense required to change out shelf stock in-store, retailers can pilot local assortment online and monitor customer response.
  • Setting the right proportions of local and standard. Certain brands have started following the “5 percent rule,” which empowers store managers to choose 5 percent of the products for their store, making them local ambassadors.
  • Engaging with the local community. In Santa Monica, West Elm’s new store will promote products by 26 local designers. It will also offer flex spaces where local artists can participate in a residency program, honing their products and even offering workshops.

Going hyper-local is like a firm handshake.

Retailers should also see localized assortment as localized customer engagement. That is, while sales associates already develop relationships with their local customers, they’re enabled to truly back it up when the assortment speaks to their customers on an equally local/regional basis. Localized assortment is essentially brand diplomacy, allowing retailers to maintain overall brand equity (and standardized product offerings) while showing deep knowledge of specific communities.

The more stores tie their inventory to their local audience, the more they become a genuine part of the community.

What is the biggest challenge you face in implementing tech that speaks to your local audiences?

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Updated Jan 18, 2019 | Originally published July 2018