Retailers typically focus their omnichannel capabilities with laser-like precision on customer-facing functions.
It’s a good start. But many struggle to maintain healthy margins because they forget to sync up with the key departments and processes that customers never directly interact with. Merchandising, logistics, marketing and planning departments all play a key role in the assortment, pricing and promotions that influence shopper experience. Without their participation, efforts to create seamless customer experiences can fall flat — and so can profits.
Call it historical oversight. Back when omnichannel was just a glint in retailers’ eyes, initial e-commerce efforts often ran parallel to – and independent of – traditional brick-and-mortar support operations. Instead of one overarching vision, there were two. The online business unit and brick and mortar business unit often found themselves with no consolidated financial planning and no strategy for sharing inventory. Omnichannel requires retailers to close those gaps.
Here are 6 steps for shaping a more holistic approach to omnichannel strategy that can help optimize margins by actively including merchandising, logistics and planning:
Establish cross-functional teams
For a successful omnichannel operation, the organizational barriers have to come down across all digital and physical channels. Executives need to support merchandising with working groups that bring together members of marketing, supply chain, logistics and inventory planning teams.
Reorganize merchandising with clear roles/responsibilities
Organizational structure and credit for sales can be a hot spot for internal battles. To ensure corporate focus on common goals, develop a flexible structure that includes common teams for buying, planning, and consumer insights, as well as for pricing, promotions, and markdowns. Note that retailers are also restructuring to align their merchandising and marketing functions. For example, Neiman Marcus has merged its online and store merchandising and planning teams.
Another area of focus is around creating omnichannel ownership and ensuring executive support for channel alignment and consolidation. Lowe’s has a Chief Omnichannel Officer (COCO) overseeing all channels and reporting to the CEO. The Finish Line COCO reports directly to the President and is responsible for all customer-facing touchpoints including digital, store operations, the customer care center and brand marketing.
Invest in IT and business processes
The good news is that retailers are getting better at managing the IT and business-process implications for enhancing the customer experience. But there remain many opportunities to bring greater efficiencies. For example, the popular service of allowing customers to buy products online and pick them up in stores is challenging for retailers’ demand planning and fulfillment operations. A comprehensive review of customer preferences with appropriate business and IT enhancements to meet their needs can help smooth the process for retailers and shoppers alike.
Develop a goal-oriented incentive structure
Departmental goals often distract from the mission of omnichannel organizations. Retailers’ dominant channels, whether in-store or online, often elbow out their smaller counterparts and can lead to infighting. Reinforce the omnichannel approach by tying bonuses to overall corporate numbers rather than specific business unit goals.
Adopt continuous, real-time planning
Retailers can no longer plan within silos bound by artificial “seasonal” timeframes. Instead, planning cultures must break down the silos and adopt continuous, real-time processes that anticipate and adjust to market changes as they happen — whether mid-season, post-season, early season or late. By implementing a cross-channel, integrated planning process, retailers can infuse agility and intelligence into the enterprise and improve responsiveness, anticipate trends and expand margins.
Don’t forget to plan for the cultural changes
Modifying retail culture to support omnichannel operations is especially challenging. Change management is crucial. To create executive champions for channel alignment and consolidation, retailers such as Lowe’s, Macy’s and The Finish Line have added chief omnichannel officers to the C-suite.
Omnichannel means one company, one team. By adjusting their lens to focus company-wide as well as on customer touchpoints, retailers can create the channel-agnostic merchandise planning process that’s essential to omnichannel success.
Steven La Schiazza is director of retail consulting at Cognizant