Ann Inc.: Making the Leap to Multichannel

Women who order apparel from or probably would never guess that their purchases may have been picked, packed and shipped from one of Ann Inc.'s brick-and-mortar retail locations, but today, that is very much a possibility. On its road to multichannel excellence, Ann Inc. made fulfilling from stores its first stop.

Matthew Siegel, executive vice president, e-commerce, at Ann Inc. – which in addition to its e-commerce sites has 950 full price and factory retail stores – has  learned a lot since taking up the multichannel mantle at the specialty women's vertical retailer. As a keynote speaker at Manhattan Associates' MOMENTUM user conference taking place this week in Las Vegas – where Manhattan also officially launched its Store Inventory & Fulfillment solution – Siegel shared some of the wisdom he's gleaned from tackling the multichannel challenge head on.

Insight #1: in order to launch multichannel, your company has to be ready. That's ready with a capital R-E-A-D-Y. And that means that your CEO has to be the champion of multichannel. "If you poll leadership teams, you are going to find widespread agreement that multichannel is important. But that is conceptual agreement," says Siegel. To go from concept to actual project, you need stores, logistics, executives — in short, everybody — to "lock arms" and agree on a project.

"At Ann we are all aligned. But it turns out there is one more thing you have to do – you have to figure out where this aligns in your IT." Ann finally jumped that hurdle when CEO Kay Krill pushed the discussion from theoretical to actual by informing the company that multichannel was not a choice, that it was about positioning the company for the future, and that it was time to move forward.

Insight #2: In order to launch multichannel, you have to know what type of multichannel you're trying to launch, explains Siegel, who says if he asked 10 people what that should be, he would get 10 different answers, because there are so many possible permutations of multichannel, and each requires its own approach. There are the biggies, about 10 of them, such as buy online, ship from store; and buy in store, ship from the warehouse. But there are also "subflavors" that include such variables as determining whether or not to optimize for profit by looking for the most distressed unit of fleet or whether or not to offer next-day shipping or gift wrap, and if so, whether or not to offer them free of charge, adds Siegel.

To determine the path it would follow, says Siegel, Ann "took 30 of our best and brightest. We threw them in a room where they developed 17 models, built ROIs for all of those cases, ranked on cost and complexity." The result? Ann decided to make store inventory available online. "In order to launch multichannel, you have to winnow those ideas to one concept you are going to go after, and work on it until it's done. Multichannel is not one project. You need to pick the first thing you are going to go after," he says.

Insight #3: Your culture has to evolve with the technology. "For years, we have hired teams to maximize outcomes for the inventory we have put in their channels," says Siegel. But multichannel is a fundamental paradigm shift. You are no longer trying maximize within a single channel, you are trying to maximize the yield across the enterprise, which entails an entirely different way of thinking and a new approach from the corporate level down to the store level. "It takes a huge amount of courage for everyone to come together and work together in ways they've never done before," says Siegel. At Ann, that "everyone" includes 17,000 store associates.

The technology is hard to get right, but you can always get machines to eventually do what you want them to do, because they don't have any say in the matter, notes Siegel. As for people, that's another story. "Multichannel success rises and falls on your ability to get people to do what you want them to do." Success depends on whether or not associates regard orders as individual clients. "As hard as the tech is to get right, you've got to win the hearts and minds of your people, and align incentives to support the behaviors you want," he says.

Insight # 4: Launching multichannel will be the hardest project you will ever launch at your company. Having every piece of data in your enterprise connected in the most ideal way is "probably 20 years away," says Siegel. "In the meantime, Manhattan makes a great order management product that is the heart and lungs of your company. That is a big integration project on its own. Think of [all the] changes [that entails] – you will have to update planning systems, sales reporting; you are building shipping stations, changing your stores into DCs. Your customer service has to change. You also have to simultaneously train all of your people to use all of these tools. After all this, you're ready to take your first multichannel order. … This is hard stuff. Everything isn't going to go perfectly out of the gates." But when you're done, says Siegel, the benefits are worth the effort.

Insight #5: Multichannel works. It's the future of retail. For about 100 years, retail worked to optimize planning and allocation, and "we got good at it," says Siegel, but no matter how good there were things out of retailers' control, like the weather, and sweaters aren't going to sell well during a hot spell in Atlanta. That local Atlanta store is going to start marking down. You've got trapped inventory. "You can't plan and allocate your way around the weather," says Seigel. Another issue retailers could not have foreseen way back when: e-commerce. "Just look at your compounded e-commerce growth rates. When an e-commerce business J-curves that hard, it's hard to figure out how much inventory to allocate."

E-commerce alleviates many of the problems caused by uncontrollable variables such as the weather, or unexpected lower demand for any reason in a particular area of the country. "We can pass the virtues of the website across the company. … We can clear out trapped inventory through e-commerce." When it's warm in Atlanta, it's probably still cold in Colorado, says Siegel. E-commerce allows companies to move distressed merchandise at higher margins.

Ultimately, multichannel allows you to get to the peak of the curve for the depth it provides. "Learning how to be smarter about putting inventory at different nodes of the network is key to unlocking higher gross margin rates across enterprise," says Siegel.

In short, the race to multichannel is on across the retail industry. The companies that move the fastest will be positioned to be around when the future of retail arrives.

Jordan K. Speer is editor in chief of Apparel. She can be reached at [email protected].
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