According to Retail Systems Research (RSR), 65 per cent of retailers report that customers who shop across multiple channels are more profitable and have a greater lifetime value than single-channel shoppers. In order to attract and retain these high-value customers, retailers must be capable of fulfilling orders according to the expectations of today’s tech-savvy shopper.
However, in its benchmark report titled “Omni-Channel Fulfilment and the Future of Retail Supply Chain,” RSR says: “Even the simplest questions in cross-channel fulfilment lead to a Pandora’s Box of challenges. Take the most basic: buy online/pick-up in store. As soon as a retailer starts asking questions about how to enable the fulfillment piece – where will the inventory come from? From stores? From e-commerce shipped to stores? – they rapidly find themselves descending into the middle of a strategic review of the entire supply chain network.”
The retail supply chain was built around a single channel: stores. When most retailers added channels, they also added completely separate supply chains to support those channels, and they considered the sales to be separate, with e-commerce sales competing against retail sales.
According to RSR, however, 54 per cent of retailers are now allowing inventory allocated for one channel to be used for another channel’s fulfilment – for example, by leveraging inventory from retail warehouses for direct fulfilment as well, thereby increasing order fill rates whilst reducing inventory across the supply chain through better inventory balancing and further satisfying their green credentials though a reduction of ‘inventory miles’.
Ultimately, the goal is for the consumer to be able to buy any available inventory from any selling channel, anywhere and at any time, and return it anywhere.
This presents challenges and opportunities in equal measure.
Buy on-line, pick up in store
For example, whilst ‘click and collect’ is an increasing number of consumers’ preferred choice, for the retailers providing it, it means linking the selling channel directly with the fulfilment channel, making inventory visibility a crucial attribute.
Save the sale
The same applies to ‘save the sale’ capabilities. Out-of-stocks are a persistent problem for a lot of retailers trying to keep in-store inventory lean. In a situation where a particular item, size or colour isn’t available, in order to ‘save the sale’, retailers are giving their customers the option to order that product in the store and then have it shipped directly to their home or to a store for later pickup. However, ‘saving the sale’ also means possessing real-time inventory visibility to determine where in the supply chain a particular item is located, even within the store – back room, high rack or customer shelving – enabling a store to capture an order to be fulfilled from another fulfilment source elsewhere in the organisation.
Endless aisle/Vendor drop-ship
A close cousin to save-the-sale, ‘endless aisle’ initiatives involve offering products in a store that are not normally stocked. Doing so often requires the retailer to set up relationships with vendors that can ship to customers directly from any point in the supply chain, which in turn necessitates a direct link between selling channels (store, e-commerce, mobile, call centre, etc.) and deep points in the supply chain.
Buy anywhere, ship from store
Reducing shipping costs is often a goal for retailers looking to save on their parcel operations. Allowing consumers to shop anywhere and then fulfil those orders directly from a retail store’s inventory has reduced inventory and transportation costs for a number of retailers. In addition, expanding fulfilment options out to stores gives the retailer more options when selling off slow-moving inventory, without greatly impacting in-store margins. This initiative, like click-and-collect, directly links the selling channel with the fulfilment channel, making store-level inventory visibility a crucial component.
The store no longer needs to get into an argument about e-commerce sales (and the associated in-store fulfilment) battling against retail sales, especially if rudimentary rules surrounding e-commerce postcodes are used.
Each of these initiatives has a tremendous opportunity for individual ROI, but make sure your organisation has the infrastructure in place before attempting any of them. Linking retail operations directly to the supply chain first means enabling a holistic, real-time, enterprise-wide view of inventory across all fulfilment sources, as well as inventory moving between locations.
Intelligent order management and fulfilment
However, visibility and flexibility of inventory are only part of the picture. In order to meet the expectations of today’s consumer, this needs to be properly integrated with order management and fulfilment processes to provide a seamless experience regardless of how consumers choose to interact with the retailer.
Increasingly, buyers want to be able to return goods however they want – buy online, return through the carrier network with a guaranteed pickup time or drop in at the store. In apparel, the ‘reverse logistics’ then becomes as important, where potentially 70 per cent of purchases are returned and require rework – such as steaming, quality checking and repackaging – and sending to outlet stores.
Today’s retail environment presents a complex array of fulfilment options that require a flexible, scalable and real-time application managing all phases of the order lifecycle, and operational efficiency is no longer enough. The ability to effectively fulfil customer demand through the customer’s channel of choice has become critical to securing share of wallet and repeat business.
Several capabilities are critical to implementing a successful all-channel and ‘reverse logistics’ order management strategy, including real-time inventory visibility across channels, store integration, drop-ship fulfilment infrastructure, order brokering and pick, pack and ship capabilities, to name but a few.
However, whilst the challenges of all channel order management are significant, so too are the benefits; preventing lost sales through stock outs; expanding choices and sales through ‘endless aisle’ assortments; boosting margin by selling more with less; and achieving higher customer satisfaction. In other words, a win for both the customer and the retailer.
John Bailey is Retail Industry Director, EMEA at supplychain & logistics firm RedPrairie