Consumer expectations and buying habits are defining a new world in retail selling. E-commerce sales continue to climb. Yet according to AT Kearney, 90% of all retail sales still occur within a brick-and-mortar store. Furthermore, 95% of all retail sales are captured by retailers with a brick-and-mortar presence.
Yes, consumers want it all—the convenience of e-commerce and the personal experience of physical stores, creating highly fluid shopping experiences. According to Aberdeen Group, companies with a strong omni-channel strategy retain on average 89% of their customers. That’s compared with only 33% for companies with weak or no omni-channel strategy.
Analyzing the 2017 Amazon model, Tom McGee argues in Forbes that “physical stores are just as valuable as ever, and that’s only becoming clearer in the digital age.”
Every channel you sell through adds complexity to your business. Are you ready for the transition? Consider these 6 hurdles that can make or break your success.
1. Multiple Service Level Agreements (SLAs)
In the e-commerce model, SLAs are defined by market trends. Now add to that the unique SLAs of each retailer, which can be very demanding. The stakes are high, as failure to meet SLAs can lead to chargebacks or termination of a partnership.
How to leap the hurdle: Meeting multiple SLAs requires supply chain management knowledge, experience, and resources. This is where a capable partner can be cost-effective.
2. Complex order profiles
A typical e-commerce order has only a few SKUs and few pieces per order. On the other hand, retail and wholesale orders can have many SKUs and pieces per order. The make-up and size of various order types will affect how the product is stored in the warehouse, how the product is picked and packed, the material handling equipment needed, the type and amount of labor needed, and the layout of the warehouse.
How to leap the hurdle: Call on a supply chain management partner to plan the space, skillsets, labor, and equipment required. Consider outsourcing warehouse management for efficiency.
3. Shipping requirements
Shipping an e-commerce order is much different from shipping a wholesale or retail order. Omni-channel introduces the need to build pallets of product, wrap pallets, and create and attach multiple labels. From there, you may have to follow retailer routing guides, transmit data into a retailer’s or third-party system, use specific carriers, and produce additional shipping documentation.
How to leap the hurdle: Consider outsourcing fulfillment for efficiency in complying with a myriad of custom requirements.
4. Systems and integration
As compared with an e-commerce model, which typically integrates shopping carts and order processing through a single warehouse management system, omni-channel selling introduces many new integration components—with multiple retailers, warehouse management systems, and value-added networks. Each may have its own requirements, such as EDI specifications. IT development and system integration can be costly.
How to leap the hurdle: Consider a partner with the necessary robust IT infrastructure, a dedicated system integration team, and extensive retailer connectivity already in place.
5. Unpredictable order volume
In omni-channel, forecasting has vastly more moving data points, and retailers may surprise you with whopping swings in volume—each happening at different times and for various reasons. How do you recalibrate? Having excess labor in place can drive up costs and erode profits, but holding labor too low could meaning missing SLAs whenever volume swings upward.
How to leap the hurdle: Select a supply chain management partner with omni-channel forecasting expertise and the ability to flex or share labor—someone who can be nimble and reliable in meeting dynamic service needs.
6. Inventory management
Omni-channel fulfillment requires a deep infrastructure, along with decisions about how much inventory to hold, where to store it, and how to disposition it, with creation of intelligent business rules. Errors in inventory management decisions can lead to significant costs, such as opening a building that is not fully utilized.
How to leap the hurdle: Work with a supply chain management expert who can plan and leverage the flow of inventory across channels, while reducing associated costs.
Building an agile, customer-centric supply chain that answers every requirement for a host of players and partners is a dynamic puzzle. It calls for robust new infrastructures, data management, and integration. It calls for new high-level supply chain management skills and systems that deviate from some of the core strengths of e-commerce business.
FIDELITONE works to build customer loyalty with proven omni-channel strategies and the expertise to leap the hurdles. Contact us for more information.