Merchants Refine Omnichannel Strategy as Demand Grows

Aug 26, 2014 12:16 PM  By

Omnichannel, omnichannel fulfillment, omnichannel strategy, retailers, retail, online retail, Operations and Fulfillment, ship to store, ship from store, in-store pickup, OMS Systems, Order Management Systems, order management, order management partnerAs retailers continue their ongoing battle with Amazon’s relentless push towards “free” shipping and same-day/next-day delivery, omnichannel fulfillment is becoming an increasingly important weapon in their arsenal.

While they might not be able to compete with Amazon’s vast assortment of products, more and more retailers are seeking to counter its far-flung distribution network by turning dozens or hundreds of store locations into de facto fulfillment centers via ship from store.

Ship to store and in-store pickup – also known as “click to collect” – are also becoming increasingly popular omnichannel tactics as retailers look to meet continually rising consumer expectations without breaking the bank on shipping and other fulfillment costs. Omnichannel systems not only allow retailers to save sales they might have lost when items are unavailable either in store or online, but to determine in real time the most profitable fulfillment path by locating merchandise that is closest to the customer.

Many stores now have systems which allow associates to access all in-store and online inventory from a handheld device, so they can quickly route orders through another store or a DC, whichever meets the customers’ needs in the quickest and most cost-effective manner.

Making sure inventory accuracy is buttoned up – i.e. ensuring what someone orders online is in the local store – and getting fulfillment operation buy-in from store-based personnel are the two key success factors for omnichannel growth, merchants and experts said.

“An effective omnichannel strategy depends entirely on having accurate in-store inventory,” said Peter Sheldon, a vice president and principal analyst covering e-business and channel strategy for Forrester Research. “It’s the Achilles heel of the whole thing, and most retailers are not there. Some are investing in RFID to get to better accuracy, and a lot of them e relying on legacy point-of-sale systems.”

Sheldon said a modern order management system (OMS) is needed in order to nail the inventory accuracy piece and make omnichannel work effectively. Solutions run the gamut from end-to-end, multi-million-dollar enterprise systems used by major retailers to per-transaction-based SaaS solutions that are more affordable. “They’re more accessible to the mid-market at the right price point, and are perfect for smaller companies looking to start out in omnichannel.”

He recommended that retailers implement ship from store or ship to store using an OMS for at least six months to refine inventory accuracy before graduating to in-store pickup. That’s because in the latter case the item has to be in the store when the customer arrives, every time – or he’ll quickly become a former customer.

“With ship from store, you can buy yourself some time if you have inventory accuracy issues,” Sheldon said. “If the item’s not in a store, the OMS can route the order to another store or a DC. You can fulfill the order in a couple of days and still keep to the customer SLA. But with in-store pickup, if the customer gets an out-of-stock email three hours later, that’s a killer that destroys confidence in the brand. You need to get to 97% or 98% accuracy before doing a full-blown (in-store pickup) rollout.”

One of the most important ways to get associates to buy into a new expanded role that includes fulfillment as well as selling and stocking is to make sure that allocation of both sales and returns is handled equitably. Without it, associates can grow resentful if they’re doing the work for sales that get credited to the online channel.

Worse still, an online order returned to a store means a negative sales figure for the store and associate unless the customer offsets it with another purchase. Handling in-store returns of online orders is one issue that omnichannel retailers continue to wrestle with. Nearly a quarter of the respondents to Multichannel Merchant’s 2014 Outlook survey said they process web returns in store in 2013, while another 8% said they planned to do so this year.

Kevin Gardiner, director of store operations and strategies for Macy’s, said the company did experience “some angst” from associates before implementing a system that shared credit for both sales and returns between online and stores in 2013. Macy’s has been doing ship from store since 2008.

“Before that, any order placed online meant 100% credit to Macys.com,” Gardiner said. “Now associates see the online channel as a partner, and appreciate the fact that web-driven sales have led to increases in store-based purchases.”

While Sheldon said retailers would be wise to not have every single location handling ship from store – for instance, tapping one major outlet in each metropolitan area – Gardiner said almost every Macy’s store is handling outbound fulfillment.

“Out of our 800-plus stores there are maybe a handful that don’t,” he said. “The reason is expanded inventory. If we have merchandise in inventory, we want to sell it to the customer. The more stores doing fulfillment, the greater the inventory and the better the sell-through for us.”

Faisal Masud, executive vice president of global ecommerce at Staples, said the company’s approach to omnichannel is simple: be channel agnostic and let customers shop however they want.

“Whether they’re browsing on mobile and then coming to the store, checking an item out from their desktop or ordering from a store kiosk, we want to be absolutely aligned with the way they want to shop, making sure it’s as convenient as possible,” Masud said. “And we’re seeing a lot of success in that approach.”

The biggest challenge in implementing omnichannel, Masud said, was ensuring integration between the company’s online and store-based OMS. “Once that got done, it came down to technically being able to offer everything we could as far services to the customer,” he said.

Masud said Staples has been accelerating its omnichannel strategy to make ship from store available across all its locations. Ship to store and in-store pickup is an option at all its U.S. stores. While Staples customers can already make purchases via tablet and smartphone, a mobile app to make the process easier and quicker is planned for later this year.

  • Felton E. Lewis IIII

    Could not agree more with the solid advice from Peter regarding starting with Ship From Store. In Store Pick Up is less forgiving of a brand experience if the product can not be quickly located by sales associates, or can not be located in back stock, or on the retail floor, or if the only item showing as available…is on a mannequin.

    The soft benefit that arises from Store Based Fulfillment initiatives is it brings additional management visibility to the “Inventory Distortion” issues as one of my esteemed colleagues, Ted McCaffrey, has coined at http://www.ebayenterprise.com

  • Ted McCaffrey

    …the numbers from our millions of Ship-from Store orders with 40+ retail customers bare this out. They are experiencing a 96% fill rate with Ship-from Store, with 80% of of orders in 1-day transit, 96% in 2-day transit…which means a successful transaction and a happy customer. This also means trouble for Amazon and their extremely low margin approach.