The whole world was divided this week by a picture of a dress. To some, the garment appeared to be blue and black; to others it was white and gold. This issue sparked a global media debate, with the hash tag #TheDress trending internationally on Twitter.
But while the argument over color was solved when the manufacturer confirmed it was blue and black, the challenges for the creators of that dress were only beginning.
Coping with a huge spike in sales
You see, whenever an item receives unanticipated publicity, it sparks an unpredictable rise in demand. Common examples of this are a product being featured in a televisions show, or being worn by a celebrity; the Michael Kors dress Michelle Obama wore during the 2012 election sold out online in two days!
In the case of the black and blue dress that took the world by storm this week, the woman who started the debate bought the garment through Amazon. This has been a widely publicized part of the story, so naturally there is going to be a surge in interest to the online marketplace as a result.
However, this creates a situation in which the company selling the dress has to carefully balance its Amazon order management with demand through other channels.
Dealing with a dominant sales channel
With unexpected spikes in activity, often demand outstrips supplier abilities, and therefore careful decisions have to be made about where to allocate the limited volume of stock.
The easy option would be to focus on the channel providing the highest level of demand – in this case, Amazon. However, strategically, there is more at stake than profit margin on one product line. Successful order management means thinking not just about demand for the garment in question, but the overall value of each sales channel.
To explain, in this scenario, most of the orders for the dress are likely to have come through Amazon, as this is where the original item that was shared worldwide was purchased.
However, prior to this point, Amazon may not have been the most lucrative purchasing point for the designer. Therefore, if they suddenly start allocating the majority of their stock to the online marketplace in order to meet this demand, they risk starving stock for other channels.
By prioritizing Amazon inventory management over these stronger long-term channels, the retailer is likely to anger or disappoint high value customers. This can have a lasting impact, as many of the Amazon customers are unlikely to buy from them again once the story about the dress has died down – whereas the loyal customers will.
Short-term pain for long-term gain?
So this week’s event raises an interesting dilemma for ecommerce retailers. Do you look at inventory allocation as a short term ‘go where the money is’ game, or do you focus on building stronger customer relationships that may add up to greater sales revenue on a longer term basis? This is a dilemma that only sophisticated order management systems can solve.