What it Really Takes to be an Omnichannel Retailer
Achieving a one-to-one relationship with customers requires technology investments in four key areas: Inventory Visibility, Automation, Last Mile Delivery and Returns Management.
Omnichannel is more than just a buzzword in retail these days. From large big-box chains to mom-and-pop stores, the line between brick-and-mortar sales and E-commerce is increasingly blurry. Retailers are rapidly increasing their ability to pull from in-store inventory to fulfill online sales and allowing customers to make in-store purchases on their mobile phones, and then visit a brick-and mortar-location to pick up online purchases in stores and return online orders.
Many retailers are improvising when it comes to execution, inventory systems often aren’t fully integrated, and online transaction hand-offs to brick-and-mortar stores that occur are labor intensive and from a consumers perception, results are mixed.
Retail software provider Brightpearl recently published a survey that highlights both the widescale adoption of an omnichannel approach and retailers’ lack of preparation for making it work. According to the study, more than 90% of retailers have an omnichannel strategy or plan to invest in one, and 87% agree that omnichannel will be critical to their business success.
The report also found that only 8% believe they have “mastered” omnichannel, and just 12% believe they have the right technology in place. In fact, 45% said they don’t have the right omnichannel technology or would benefit from additional tech platforms. More than half of retailers said their omnichannel approach was still a work in progress, and 19% described it as a struggle or a “pipedream.” Three-quarters of respondents were dissatisfied with their execution and progress.
A successful omnichannel retail approach puts the customer at the center of the transaction and leverages technology to ensure a good purchasing experience that's executed efficiently and cost-effectively.
Brightpearl’s CEO put it this way: “Today's customers expect retailers to know them. This is made difficult when the merchant spends considerable time on cost-consuming backend processes. Instead, technology that automates back-office processes like order fulfillment, carrier integrations, automated accounting and integrated purchase ordering can free retailers to focus more time on creating authentic omnichannel experiences across platforms.”
Achieving this one-to-one relationship with customers requires technology investments in several areas:
Inventory Visibility. Retailers need a complete and accurate view of their inventory — in the DC, at their third-party partner or supplier facilities and on the retail shelf. That means a robust inventory management solution combined with barcode or RFID scanning is needed to ensure data is available in real-time. This not only makes it easier to find and ship the right product but also to better forecast demand and enable strategies like in-store or supplier-to-customer fulfillment.
Automation. If the shipping velocity of your warehouse or DC is entirely dependent on your employees moving like an Olympic relay team, omnichannel operations can quickly overwhelm the facility. Automated material handling systems, conveyors and picking robots make warehouse operations faster and more accurate.
Last-Mile Delivery. For direct-to-consumer transactions, last mile delivery is the most complicated and expensive leg of the supply chain – accounting for 30% to 40% of transportation costs. Big companies like Amazon have an easier time absorbing the associated costs, but most retailers will have to pass it on to their customers or find ways to reduce their cost-per-transaction so they can break even.
For companies that handle their own deliveries, fleet management technology can ensure route optimization and lower operating costs. Others have partnered with third-party logistics specialists. In-store pick-up can eliminate the problem entirely, and some retailers are using other types of centralized drop-off points or lockers, as well as crowd-sourced delivery networks like Amazon Flex.
Returns Management. Processing returns is labor and time intensive, however, with an omnichannel strategy, if not adequately addressed, returns can become a complex and difficult challenge to solve. In the past, retailers kept their online and in-store inventories separate, and returns were managed separately as well. Now stores have to handle a mix of returned goods that may have been purchased through a variety of channels.
Flexible return policies are excellent for the customer experience, but they create a tricky logistics problem for retailers. Integrated inventory management systems are critical for handling returns in-house. For some retailers, though, outsourcing all returns (regardless of origin) to a third-party vendor is a more viable option.
According to the National Retail Federation Omnichannel Retail Index, there is still a long way to go. While most retailers have deployed customer-facing digital solutions like electronic product recommendations or cross-channel gift cards, more complicated inventory-related strategies have seen limited growth.
Presently, online visibility of in-store inventory is only implemented by less than 20% of retailers, and despite its popularity, the buy online/pick-up in store option is only available at 32% of indexed retailers.
An omnichannel strategy can help boost growth and increase customer loyalty. The data, shows that those benefits will come at a very high price unless retailers first establish the inventory management and logistics infrastructure to support these strategies.
Our team of project managers, engineers, and analysts can assist and support you through your DC automation evaluation and implementation process from start to finish. Contact us today via phone (+1 856.727.1100) or online to learn more.