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04/14/2015

Network Approach Key to Success in Omnichannel Retailing

At first, omnichannel retailing sounds simple; providing the item customers want, regardless of how, where and when they want to purchase it. However, times have changed since the early era of e-commerce, when consumers researched, selected and paid for an order in a single channel.
 
The “uni-channel” approach is no longer enough to make a modern omnichannel retailer competitive. Blame it on Amazon, or increased consumer expectations, but items must be available quickly and competitively priced, wherever the consumer finds it. Accordingly, an in-store experience must go beyond a face-to-face interaction and complement its digital presence.
 
Essentially, retailers and suppliers must reinvent how they do business — from front-office functions, like merchandising, marketing, sales and customer service, to back-office endeavors, such as IT, finance and operations. Additionally, these improvements need to work in unison.
 
The simplicity consumers want isn’t possible without retailers looking beyond their four walls to achieve integration across in-store and digital channels (e-commerce, mobile commerce and social commerce).
 
By adopting a “network” approach within their trading community, retailers will reinvent their relationships with suppliers and other trading partners. Utilizing retail business networks as a form of social media allow those same key industry players to connect with each other and remove barriers separating them from true omnichannel success.
 
There are several ways these emerging networks are addressing the omnichannel retailer’s most pressing challenges:
 
  • Item sourcing scale. Consumer demand for an “endless aisle” of goods forces retailers to expand their merchandise selection. Traditional sourcing methods lack the scale necessary to provide, at times, millions of products items online. Retailers must work to vet new suppliers, vendors and items in hours or days, not months.
  • Seamless community management. Retailers manage an ever-growing network of trading partners, requiring instant integration with the involvement of significant IT resources. 
  • Robust item management. Unprecedented SKU expansion demands that retailers manage endless amounts of data and digital assets from an expanding vendor network. This shift requires a new approach to traditional business processes and technology architecture.
  • Fulfillment breadth. Managing orders, shipments, payments and returns within the retailing organization, and across trading partner relationships has become substantially more complex (buy online, pick up in store; buy in store, deliver to home, return to store, etc.), requiring an infrastructure that supports growing, changing requirements.
  • Insight-driven analytics. Consumer-centric retailers track everything, from transactional information to demographic data to brand commentary in social forums. When analyzed with the right tools and shared with the right stakeholders, this data can drive better item sell-through and increased profitability (60% improvement in operating margins, according to McKinsey).
Retail business networks are key in connecting trading partners to form communities, offering a space to exchange information in a common language and measure performance against mutual goals. Integrating existing businesses into these pre-built communities allows companies to retain their infrastructure while accessing modern, cloud-based technology capable of enhancing their trading relationships.

Peter Zaballos is vice president, marketing at SPS Commerce.