European-Owned Apparel Stores Offer Grocers Supply Chain Inspiration

Jenny McTaggart
Contributing Editor
Jenny McTaggart profile picture

Fashion-forward European-owned clothing stores may be the last places that most supermarket executives would look to for inspiration. It turns out, however, that some of these retailers are right on point with their supply chains — especially in the areas of analytics, planning and ecommerce execution.

Two multinational clothing companies — Inditex, which owns the Zara brand, and H&M — were featured in the 2017 Supply Chain Top 25 list of retailers published earlier this year by Stamford, Conn.-based Gartner Inc. (Walmart and CVS were the only grocery-related companies to show up in the top 10). Spain-based Inditex was recognized for bringing product to market in as little as two weeks, as well as for its improved omnichannel demand-planning capabilities, while Sweden’s H&M was lauded for its embrace of automation and warehouse management technology.

Mike Griswold, a research VP at Gartner, tells Progressive Grocer that these clothing companies, as well as the other nonfood retailers that were recognized by Gartner, are doing several things that supermarkets can most definitely learn from. At the most basic level, the top performers have recognized that their supply chains are vehicles to support company growth. Beyond that commitment, though, there are other important areas on which they’ve focused.

Perhaps most importantly, these leading retailers are embracing the use of data to drive their decisions, notes Griswold. He urges food retailers to follow suit and “strive for advanced analytics capabilities” themselves.

“With the wealth of data that food retailers possess — POS transaction data, loyalty data, etc. — they are in a unique position to gain very granular understandings about their shoppers,” he says. “This can drive incredible opportunities in personalization of promotions, prices and assortments.”

Echoing Griswold, David Marcotte, SVP of retail insights at Boston-based Kantar Retail, says that he believes there’s an untapped amount of data that grocers could be taking advantage of, especially in relation to improving their business planning. “Understanding data flows and being able to correct triggers against it, which has been a big part of the last 20 years of supply chain management, definitively needs to step up again,” he advises.

In fact, Marcotte has been taking a page from the fashion industry himself, telling his grocery clients that they should be looking harder at what he refers to as “formalized merchandise planning.”

“Merchandise planning in the CPG context is seasonal,” notes Marcotte. “It means asking, ‘What are we going to do for Easter? We’ll spend X amount on candy, and at the end of the season, we’ll reduce the price, and then if it’s still on the shelf, we’re going to reduce the price by 90 percent.’ Merchandise planning in apparel goes all the way back to Bangladesh, to the type of fabric the manufacturer is using, the type of weave, the quality standards they’ve established — what’s called a bill of material.

“The reason I keep advising this as a supply chain alternative is because in a formalized merchandise-planning scenario, every step of the supply chain matches up directly to a line item in the actual budget of the company,” he continues. “In grocery, that linkage between an activity in the supply chain directly to the P&L doesn’t exist.”

Although he points out that merchandise planning is a skill typically taught in college retailing programs that have little to do with the grocery business, Marcotte says that supermarket operators would do well to think more along those lines.


H&M and Zara (at top) are ramping up their omnichannel strategies by letting customers pick up or return online purchases in-store, as well as accepting mobile payments.

Planning for Curveballs

One reason to be more closely focused on every step of the supply chain is that nowadays, business planning has become even more complex, notes Marcotte. In grocery distribution, it’s difficult enough to deal with unpredictable traffic snarls or a sudden summer storm that dampens a retailer’s promotions around July 4th cookout plans. Yet other factors that may not be on retailers’ radar — such as climate change and even politics — can really throw a curveball into short- and long-term planning, he says.

In these instances, a broader, global outlook (like the ones taken by multinational fashion chains) could benefit U.S.-based retailers, according to Marcotte. “The supply chain is not limited to the United States,” he observes. “Given the amount of product that comes in through seaboard and in container traffic … if companies don’t have some understanding of that, their ability to function properly is limited.”

Additionally, politics can play into trade agreements, as currently seems to be the case.

“Mexico has cut back on their futures orders for corn, meat and pork, not so much because they’re angry with the U.S., but because they can’t predict what 2018 is going to look like,” explains Marcotte. “A whole host of new trade agreements are being arranged, basically powered off of what’s going on in Mexico, that are changing how food product is moving globally. It’s serious.”

Politics also came up as a hot topic in Gartner’s top 25 ranking. Stan Aronow, a research VP at Gartner, noted in the accompanying report that “today’s supply chain leaders face a much different business environment than just 12 months ago. A general trend toward protectionism, as evidenced by Brexit and the policies of the current U.S. administration, have caused some companies to shift supply chain network design decisions and create contingency plans in anticipation of new trade policies. Continued investment in innovative supply chain capabilities will be required to meet this changing landscape.”


Omnichannel Execution

Aside from politics, omnichannel execution remains a key theme among the leading supply chain innovators. The chairman and CEO of Inditex, Pablo Isla, said earlier this year that his company seeks to have “full integration of the brick-and-mortar stores and online businesses, with store openings that are increasingly more relevant.” The company has chosen to close some of its smaller units and focus on flagship stores instead, and shoppers can easily return items purchased online in its stores or make online orders in-store with associates’ assistance.

Meanwhile, Gartner’s Griswold urges grocers to “ramp up their unified commerce execution capabilities at store level as quickly as possible.” Store-level fulfillment will continue to grow as retailers strive to shorten fulfillment windows and work toward more same-day and next-day capabilities, he asserts.

Last but not least, Griswold says that grocers need to figure out their talent requirements and move quickly to “fill the gaps. Food retailers would be smart to strengthen their partnerships with colleges and universities that have strong supply chain programs,” he advises, “and they need to recognize that as they look to build their analytics capabilities, they will need to rely on more data scientists and data engineers.”

Kantar Retail’s Marcotte concurs.

“You can use third parties for technology, data and the ability to create first-line analytics, but if you don’t have a skill inside the box that understands what that is, what that produces and what impact it has inside your company, you won’t get that from a third party,” he notes. “In the better retailers, executives sometimes notice that talent from within, and quickly move the right person from aisle A to the office.”