How to Compete with Amazon in an Omnichannel World


It's been described as huge, mysterious and ruthlessly efficient. Many opinions exist on how to characterize it, but one thing is undisputed: Amazon is changing not only the face of retail but also global business.
Its trademarks, from one-click purchases to vast product offerings, and the new standard of—two-day delivery—have set the bar high. It can be argued that Amazon spawned showrooming, as a result, the rest of the retail world is playing catch-up, trying to battle the "Amazon Effect".
But are Amazon's advantages so great that we already know the story's ending? Not necessarily. E-commerce sales represented approximately $230 billion of total retail sales in 2012, Amazon sales accounted for 25% of all e-commerce sales.
Exacerbating retailers' challenge to keep pace is the exploding omnichannel phenomenon, fueled by purchases originating from retail stores, online orders and mobile apps. This triumvirate is forcing retailers to re-strategize their approach to customer service, redesign distribution networks, develop new return policies and streamline supply chain operations to best serve customers through their desired channel.
At the heart of omnichannel is a frictionless shopping experience. To compete, retailers need to optimize inventory management for multiple channels and integrate purchasing information into a single operational plan.
Some retailers are already ahead of the curve, successfully merging the digital and physical selling worlds into one seamless customer experience. One retailer has a "one-view inventory" of its entire enterprise. With no disparate inventory across multiple businesses, this retailer provides the option of home delivery or store pickup, as well as a consistent return policy regardless of the channel.
Another retailer keeps shipping costs low by basing the point of shipping on the customer's ZIP code.
A department chain retailer fulfills items from both its stores and its online fulfillment centers. For in-store pickups, this retailer leverages its floor associates to quickly locate the merchandise. Some online orders are filled from stores' back rooms as well.
Another retailer has installed lockers at a dozen of its stores, offering customers the convenience of picking up goods ordered online.
These and many other retailers actually get omnichannel, realizing that consumers no longer view purchases in channels. Toward that end, retailers must develop strategies to drive a consistent customer experience across all channels and enable inventory visibility through all of their businesses.
This is where a 3PL provider can help to develop cost-effective solutions that provide several benefits. First, leverage your providers and their IT expertise to set up a common inventory system across all channels. A common, not siloed, system, such as ERP, determines from which channel to pull orders based on the delivery ZIP codes or the option the customers choose (store pickup, direct-to-consumer home delivery).
With this visibility, retailers can better understand inventory locations and fulfillment times, leading to lower inventory carrying costs and faster deliveries. Transportation costs can escalate to meet faster delivery times. By understanding inventory flows and developing a clear idea of how sending an order from a store or distribution center to a customer's home can change operations, 3PL providers can determine the most cost-effective, efficient transportation option.
As more is discovered about the omnichannel ecosystem, 3PL providers can help with innovation and thought leadership to address upcoming challenges, such as:

  • The inevitability that consumers will expect same-day shipping. How will retailers adapt?
  • Direct-to-consumer retailers lack of a physical store presence. What is their strategy to serve consumers?
  • Better inventory management. How will retailers handling orders from multiple channels find the right balance between their distribution centers and stores?
  • Shipping from store to consumer. Does it make more sense to have a 3PL provider or some other resource fulfill orders? How does this decision affect labor management, productivity, efficiency and the customer experience?

Evolving technology is changing shopping behaviors, and with one dominant player consuming market share, retailers must keep pace. Retailers need to think holistically to make today's consumer a customer and compete in the omni-channel environment.
Curt Bimschleger is the senior vice president of Retail Logistics for GENCO.

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