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02/25/2022

Jog, Run, Sprint: How the Pandemic Changed Omnichannel Retail

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Girl looking at computer, purchasing online

Retailers know that e-commerce traffic has been on the rise for years, a trend that has sharply accelerated during the global health crisis. This means there has never been a more important time for retailers to expand their omnichannel capabilities, especially back-office operations, which contain difficult challenges to overcome. 

Back-office operations, such as merchandise management, inventory planning, finance, and supply chain, enable the consumer’s shopping experience to run smoothly, so transitioning to omnichannel requires a thoughtful plan of action. 

When retailers expand omnichannel capabilities, one of the best guides to follow is what I call a “planful” approach. This refers to detailed thinking about what you want to accomplish, to game it out, and see what happens if we do X.

For example, in financial reporting, who gets credit for an omnichannel sale? Does it go to the store? Does it go to e-commerce? Who gets labor credit, especially if it is split between multiple locations? Or what happens if 20% or 30% of a store’s inventory goes to online fulfillment?

A ‘Planful' Approach to Omnichannel

It is fairly easy to think through click and collect, because all you are doing is converting a walk-in customer to one who orders online and later goes to the store to pick it up. 

However, when a retailer starts thinking about how stores can fulfill e-commerce orders, that’s when it gets complicated. How do you plan store inventory for e-commerce sales? How do you create an omni-sales plan? How do you replenish inventory? How do you manage the store’s incentive plans?

Incentivizing stores is important because when stores aren’t incented they sometimes view fulfilling e-commerce orders as taking away from their own customers. However, when stores are incented, they know e-commerce sales are part of the store’s financial plan and part of its bonus structure.

When transitioning to omnichannel, it is important to think carefully about how to leverage each store, because stores are not created equally. Retailers wish every store was an A-level store on Oxford Street in London or Fifth Avenue in New York, but that is rarely the case. Most retailers have a number of C-level or D-level stores that do not deliver A-level sales.

So it is important to model it out and determine the best way to use these different stores. Should one be used as a mini distribution center? Should it be loaded up with additional inventory, labor, and racks to create a mini warehouse covering downtown San Francisco? Or should you turn five or six stores into a mini distribution network and provide coverage in Chicago for next-day delivery, possibly even same-day delivery?

Jog, Run, Sprint

Retailers used to adopt a “crawl, walk, run mentality” when moving to omnichannel, but that was before the pandemic. Today, the crawl phase has become very short, walking comes quickly, and suddenly you find yourself running. So today it’s more like “jog, run, sprint.”

In the omnichannel world, it is important to recognize consumers aren’t thinking about back-office operations and how products are delivered. All they’re thinking about is the shopping experience, a perspective retailers should adopt, too.

All the customer wants to know is that no matter which channel he or she is in, the brand experience remains consistent. If a retailer prides itself on great customer service, then it should strive to create great customer service in the omnichannel world, too.

For example, if a click-and-collect customer is coming to the store, make sure the order is ready when the buyer walks in. Even better, get it ready 30 minutes before he or she walks in — never make the customer wait. 

To make this happen, retailers need to focus on accuracy and speed. Several years ago, updating sales and inventory data could occur overnight. Just a year or two ago, it could happen every 15 minutes. Now retailers are updating data in near real time. They have to, especially during peak sales periods, because inventory is being pulled out of stores rapidly, and there may be times when both omni-customers and in-store customers are looking at the same products.

This means retailers need to operate in the real-time world. They need to know a red jumper in a large size was just sold in a store in Boston because a customer in Miami might be looking at the same jumper online. If inventory data isn’t updated and the Miami shopper purchases the jumper, then a set of cascading failures occurs, where orders aren’t fulfilled and you are suddenly dealing with a very unhappy customer and lost sales.

Today, retailers need an order management system that operates in the blink of an eye. When a shopper makes a purchase, the system needs to look at inventory availability, the latest price, and where the inventory is located. It needs to pull information from the point of sale and from distribution centers. It has to calculate tax, look at fraud, go to the payment provider for authorization, look for shippers, and assign the order to the best location based on preselected rules.

The pace of omnichannel has clearly accelerated during the pandemic, and as a result retailers need to be planful when making the transition. They should also have a clear goal to deliver a shopping experience that is designed to actually make the brand experience better. 

—Steve Ross, Omnichannel Solution Principal, Aptos

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