Multichannel
The 7 Habits of Highly Effective Multichannel Retailers
by Michael Ker
Multichannel retailing is hot. Forrester Research reported in May 2003 that multichannel retailers would contribute to 75% of online sales this year, while, ironically, pure play e-tailers would contribute just 25%. Yet multichannel retailers face a unique set of challenges not encountered by traditional brick-and-mortar stores. Multichannel issues exist on the selling and supplier sides, affecting both inbound and outbound shipments, and revenue and cost.
Given that the customer�s experience with a retailer is defined by its ability to manage the process of delivering a quality order on time, regardless of order channel, an integrated strategy for multichannel retailing must be deployed to maintain consistent, superior service across Internet, catalog, and brick and mortar. The strategy should include strengthening backend processes like order fulfillment. Following the seven habits below will mean bigger profits for your multichannel retail efforts:
1. Treat e-commerce as one of many channels � not a separate business. Retailers are typically divided into direct and store channels, and each channel doesn�t know what the other is doing. This can present a host of problems, from duplicate � and costly � systems to duplicate inventory to incompatible SKUs. Retailers must make sure that the right hand knows what the left hand is doing. Remember, e-commerce should drive store business and not stand alone. And since that�s the case, e-commerce customers should get access to customer service just like store customers do.
2. Implement cross-channel pick-ups and returns. The Wall Street Journal reported last November that multichannel retailers significantly benefit from impulse buys when customers pick up merchandise from a store that they ordered online. But, according to an AMR Research alert in December, one of the biggest problems retailers face is processing in-store pickups, since store clerks have no visibility into the customer�s online order. AMR further stated that up to now retailers have under-invested in technologies required to support cross-channel pickups and returns.
3. Make special orders as simple to buy as stock items. In traditional retail operations special orders are usually handled manually � that is, an employee handles processing one customer at a time without visibility into vendor lead times or inventory, and legacy systems aren�t much help. Throw in product configuration, returns and order cancellations and the process can be a nightmare. Consolidating special orders and services through a common order management system for all channels is mandatory.
4. Implement the right infrastructure for shipping single orders. As retailers� online or direct channels grow, shipping to customers requires a different process and infrastructure. Still retailers fail to see the differences between shipping single items and shipping bulk, nor do they understand what�s involved in building the correct infrastructure. Without implementing the right infrastructure, the processing cost per order will soar and may eventually kill multichannel initiatives.
5. Leverage drop-ship vendors. Vendor drop ship is the most underutilized order fulfillment strategy even though the benefits are so clear. Retailers who establish a drop ship partnership with their suppliers can expand customer offerings without incurring higher inventory costs. For every $10 million of wholesale inventory held by vendor partners, assuming a 15% cost of capital, freed up cash flow can amount to $1.5 million.
6. Use order visibility applications to manage your network of shipping locations. Customer-responsive order fulfillment requires the flexibility to manage changes, especially for long lead-time and made-to-order items. This cannot be done using point-to-point systems that merely send POs to vendors over the Internet. Without business applications that provide real-time order visibility, the benefit of sending electronic documents over manual faxing is marginal. By monitoring order fulfillment, retailers can improve long-term customer service levels.
7. Measure the performance of every process involved in getting the order to the customer, and then automate, automate, automate! The customer fulfillment value chain includes more than taking and delivering orders. E-commerce fulfillment, for example, starts with setting up systems for product merchandising, promotions management and interactive selling rules before you even get to order taking and order management. Once systems are in place, they must be measured with business intelligence tools to make ongoing modifications for improved customer service. Orders taken in-store, from kiosks, through the call center, and via the Web storefront can and should be analyzed using a common database.
Michael Ker is CEO of Redwood Shores, Calif.-based Escalate, a provider of e-commerce and order management solutions.
Executive Technology
Posted by Craig at March 24, 2004 02:51 PM