It has been a wild ride for retailers these past few years. But when we look back, we won’t be talking about the economy, the drive for lean inventory, or deep discounting. Rather, we will recognize the fundamental change that occurred was in the shopping process itself.
Shoppers are often interacting with retailers in many channels at once, and while this creates major challenges for retailers, this trend is impacting supply chain networks just as dramatically. The ability of supply chain networks to adapt will make or break retailers’ ability to deliver on all-channel commerce promises. Quite possibly, the supply chain experts may be the unsung heroes for the retailers that successfully adapt.
What triggered this historic transformation?
Feeling Left Behind?
As consumers, we are not buying products the way we did even three years ago. We use our smartphones in the aisles to comparison shop and check prices. We often interact with a retailer in several channels before making a purchase decision. We read online peer reviews. We want to buy on the Web and pick up in the store. We want to see it in the store and then buy on the Web.
In short, the customer shopping experience has rapidly evolved, and it happened during a period of time when retailers didn’t have a lot of cash to adopt technology to better serve these new shopping trends. There is a lot of catch-up work to be done for many retailers. Shoppers have gained the edge on retailers in technology adoption for perhaps the first time.
We might say that retailers face a new, empowered, enlightened customer. As a result, many of the time-honored retail strategies are proving less fruitful for retailers. For example, pricing transparency is here and is forcing retailers to rethink margin on promos. This customer empowerment affects labor too, since consumers have often researched a product online and may know more than the customer service associate.
And it’s not just product knowledge that is being tested. The workforce is facing more complex operational requirements too. A customer who buys online might return to the store, and sometimes it makes sense to fulfill an Internet order from shelf stock at an overstocked retail location. These changes in product flow are standing traditional supply chains on their head. These fundamental changes to the business model require a rethinking of logistics.
The Experience and the Platform
The key to navigating all these changes is both simple and challenging. The simple part? It is still all about customer satisfaction. In fact, more than ever, customer satisfaction is the key as people become brand advocates on social media or in the online reviews they write.
The challenging part for most retailers is adapting to all-channel commerce and providing a consistent experience across all the customer touchpoints. On a positive note, same store sales are trending upward and retailers may be in a position to update the technology platforms they are using. After several lean years, it stands to reason that many retailers will invest in the technologies that can tap into all-channel consumer purchasing. So, how will retailers make this happen?
The answer requires two elements. First, there is still a big need to deliver a great experience at all customer touchpoints. This means people and products working together. There is no substitute for having the right staff, in the right roles, during the right hours, with the right inventory to support them. To support all-channel commerce, product forecasting needs to be tied to real-time demand. This may sound like a Herculean effort, but for retailers that have the right technology in place, synchronized all-channel operations will pay ultimate dividends for the retailer — and customer satisfaction.
The second major piece of the puzzle is to develop a commerce platform so that customers have a seamless experience when talking to your call center, transacting with the website, visiting the brick and mortar store, and interacting with any other part of your operation. Customer information needs to be accessible to retailer staff across all these channels too. If a customer chatted with a sales rep on the website, that detail should be available to the returns clerk at the store. The experience should be personalized and the systems should leverage acquired knowledge of the customer’s likes and dislikes to present more compelling offers.
The Logistical Underpinning
All of the above discussion still hinges on supply chain. All-commerce capability needs to be backed up by all-channel logistics. The top retailers are optimizing inventory with every move they make, even deciding where an Internet order will be fulfilled, as Internet fulfillment is no longer always chained to a specific distribution center. And if a product is out of stock, customer service personnel are being trained to take the order and ship it to the customer’s home, sometimes pulling that inventory from a nearby store or a DC, whichever makes the most sense.
Back-end systems are helping retailers make these individual shipping decisions, and in aggregate the process is helping optimize the retailer’s inventory carrying costs while satisfying consumer demand.
In summary, shoppers will continue to leverage their new-found empowerment, and there’s no going back for retailers. The time is here to embrace these changes and to realign supply chains and processes accordingly. It’s an exciting time, but most retailers and their supply chain partners realize there is some catch-up work to be done.