Retail businesses are dead. We all need to change our product development definition because everything in the future will.be sold online. Well, ok, maybe not. However, I think that we can all agree that online sales are becoming a bigger and bigger part of just about every company and what you’ve done to help make this happen needs to be a part of your product manager resume. Product managers know this and so if their company has not been very active online in the past, they are the ones who are responsible for managing the move into the online world. The challenge here is that it can be done badly…
What Went Wrong At The Finish Line
Athletic retailer Finish Line decided that they wanted to make more sales of their athletic products online. In order to make this happen, their product managers embarked on an ambitious plan to install new infrastructure to support their new online model. However, they failed. They are now going to be closing 150 of their stores after their new warehouse management system failed to process orders fast enough.
The new online systems had been scheduled to be in place before the holiday season got into full gear. However, because of shortcomings in the system, they believe that they missed out on US$32M in lost sales at the peak of the buying season. What Finish Line discovered was that their customers had very little tolerance for any delays in getting the products that they have ordered. Instant gratification is what they have come to expect.
One of the things that retailers like the Finish Line need to realize is that online sales often come with smaller profit margins than in-store sales. No company out there has solved this problem yet. What Finish Line was trying to do was to continue to capture customers in their 600+ stores while at the same time starting to drive customers to their online site where they could get access to more customers who might not visit their retail stores.
Lessons Learned From The Finish Line’s Move
The first step in trying to shift a business to being an online business is to revamp how the company’s warehouse is run. This means changing its model from sending a few large packages to limited set of stores to instead sending a lot of smaller packages to individual customers. The key to doing this successfully is to install sophisticated software to run the warehouse. This is where the Finish Line failed.
There are additional things that a product manager can do to help his or her company grow the online side of their business. Things such as offering in-store pick-up and free returns can really set the store apart. The supply chain that a store uses to service its customers can start to spread out more and more. As this happens, both technology and labor costs will start to rise for the retailer.
Another thing that product managers need to work out is just exactly how the company’s online and retail operations are going to work together. Will customers use the online store to research what products are available? Will they then be willing to drive to the retail store in order to check the product out? For that matter, how far will the customers be willing to drive? In order to properly balance the level of investment that the company needs to make into these two sides of the business, product managers need to come up with answers to these questions.
What All Of This Means For You
In the brave new world that we live in, companies are realizing that they can’t just be a company that owns a collection of stores. Instead, they also need to develop an online presence.
The move from real-world to online is something that a product manager needs to be responsible for even if it’s not a part of our product manager job description. However, as the Finish Line has shown, this can be a dangerous thing to do.
The Finish Line wanted to expand their online presence so that they could make more sales. In order to do this, they invested heavily in new warehouse automation tools just before the start of the holiday season. However, the software untimely failed to deliver what they were expecting. Orders were being processed too slowly and customers became dissatisfied and went elsewhere. Product managers need to carefully manage the automation of the warehouse and add services such as in-store delivery and free returns. Additionally, product managers need to balance their retail operations and their online operations.
We all understand that online sales can be a big part of any company. The challenge that we’re facing is that it’s not completely clear how to move from a retail model to an online model. Product managers need to carefully monitor these programs and make sure that they deliver what they are promising. If done correctly, then perhaps your company can become the next Amazon…!
– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™
Question For You: What do you think a product manager should do if a warehouse automation project starts to go wrong?
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What We’ll Be Talking About Next Time
You would think that being a product manager who works for Amazon would be a pretty cushy job right? The company operates one of the largest online stores and they don’t seem to have to generate a profit and investors still seem to love their stock. However, all of this success may hid a key product management fact – Amazon product managers always have to be looking for ways to update their product development definition and grow the business. Right now what this seems to be leading to is the opening of retail stores. What’s up with this?