Scott Fenwick, senior director of product strategy for Manhattan Associates, writes, “With consumers’ growing expectations to shop the way they want, traditional brick-and-mortar retailers have overcome their fear of ecommerce cannibalization of store sales, adopting dotcom storefronts and strategies to help ensure a consistent experience across all channels—and ultimately increase sales.” [“Other Voices: Tools for Cross-Channel Retailing,” Modern Materials Handling, 28 June 2011] Managers at traditional brick-and-mortar stores probably aren’t as happy with multi-channel commerce as corporate headquarters; but, they are learning to adjust. As Jayne O, writes, “Online and offline experimentation will be omnipresent this holiday season, as retailers and consumers both try to figure out the most effective way to shop. There is much at stake for the retailer who can’t figure out how to integrate online and in-store shopping. Those who aren’t optimized for digital and mobile devices could lose customers.” [“Lines Blur for Online and In-Store Shopping,” CRM Daily, 29 November 2011] Fenwick notes that figuring it out is not necessarily an easy thing to do. He continues:
“With these new cross-channel opportunities come new challenges, and perhaps going somewhat unnoticed and unattended is the impact to store operations. Perhaps the most common cross-channel activity among consumers today involves completing research online prior to making a purchase in the store, but a number of other permutations have materialized to keep customers happy—and sales on the books:
• Buy online/pick up in store;
• Buy anywhere/ship from store to home;
• Buy online/transfer to store for pick up;
• Research online/reserve in store;
• Buy online/return to store; and
• Endless aisle buy in store/ship to store or home“But new channels, along with new services, bring new challenges. Retailers need new and improved store systems and processes in place to address this business problem.”
Without even going into detail about each of the shopping options listed by Fenwick, the complexity they bring to retailing is obvious. Fenwick writes, “To transform a store from simply being an end-point in the supply chain and a gateway for the in-store shopper into a fully functional ‘node’ in the supply chain, [a number of] technology capabilities must exist.” The first deals with inventory management. He explains:
“Tightly managing the flow of merchandise into the retail store is the first step in improving inventory accuracy, which is the life-blood of any cross-channel retail enablement initiative. Retailers should look for solutions that offer the ability to receive goods into the store electronically and perform and audit quality inspections. For retailers that receive shipments directly from external vendors, they should also look for the flexibility to print store specific price tickets at the point of receipt.”
For some merchandise, one excellent method to achieve this goal is through the use of RFID tags. They have the potential for providing improved inventory management, audit quality inspections, and data that can be used to improve stocking and planograms as well. Fenwick next turns to order fulfillment. He writes:
“Both cross-channel and endless-aisle initiatives involve better leveraging inventory assets residing at the store to fulfill customer orders. This approach ensures sales opportunities are not lost and takes advantage of the most cost-effective fulfillment strategy. Retailers should look for the ability to negotiate and accept orders being fulfilled from their store locations as well as direct store associates to pull merchandise from the retail shelves efficiently and either pack and ship, or hold, depending on the customer-delivery model. For goods being shipped to other store locations for pick-up or direct to the consumer’s home, retailers will require the ability to leverage common parcel carriers dynamically to perform rate shopping, generate shipping labels and documentation, track the shipments, and possibly capture electronic signatures for proof of delivery.”
To achieve this goal, a retail chain obviously needs a robust IT backbone and needs to establish close collaborative relationships with shippers. Fenwick next discusses supply chain visibility.
“To facilitate most … business processes, … store managers need visibility well beyond their own front door. Retailers should look for solutions which give them instant access to information pertaining to inbound shipments (from any point in the supply chain), outbound shipments (to any point in the supply chain), current order status, as well as inventory (both on-hand and intransit goods). This information should be rendered in easy-to-use and flexible formats, which are purpose built for the in-store operator.”
My company, Enterra Solutions®, specializes in offering the kind of visibility Fenwick recommends so this is obviously a topic of interest for me. Some companies still fear sharing information up and down the supply chain; but, their reluctance could be costing them profits. Professors Martin Christopher, from Cranfield University, and Hau Lee, from Stanford University, have asserted, “If information between supply chain members is shared, its power increases significantly. … Mason-Jones and Towill (1997 and 1998) have demonstrated that ‘information-enriched’ supply chains perform significantly better than those that do not have access to information beyond their corporate boundaries.” [“Mitigating Supply Chain Risk Through Improved Confidence,” International Journal of Physical Distribution & Logistics Management, 2004] Fenwick next addresses another area in which Enterra excels — business analytics. He writes:
“Finally, once the store is operating as a fully functional distribution point, it is critical to gather key performance measures from each store to monitor efficiency and effectiveness over time. Retailers should look for solutions that automate the collection of these execution-centric metrics and consolidate those across all distribution channels.”
Fenwick concludes that even though the challenges are daunting, new technologies can overcome them. “Retailers now have much more cost-effective options for deploying robust and easy-to-use supply chain capabilities across their hundreds and thousands of retail store locations,” he writes. “By leveraging web-based deployment methodologies, retail execution capabilities can now be deployed centrally at the corporate IT location and be fully leveraged by store associates located anywhere in the world.” Jayne O reports, however, that “many retailers are dawdling, some even stumbling, when it comes to courting increasingly tech-savvy shoppers.” She continues:
“Less than half of the top 30 retailers have iPad apps, and none have Web sites that are specifically optimized for the iPad. Three-fourths of the top U.S. retailers are not meeting shoppers’ expectations that mobile Web pages should load in five seconds or less, according to Compuware. ‘Retailers don’t appear to be investing enough to capture that market,’ says Steve Tack, Compuware’s chief technology officer for application and Web performance. Dissatisfied consumers could quickly move on to competitors at a time digital sales are one of the few bright spots in holiday retailing, Tack says.”
Perhaps one of her most profound observations is that “technology shifts behavior.” Retailers that don’t adapt to changed consumer behavior are obviously going to be left behind. Richard Wilson, a marketing professor and a director of the Kellogg Center for Global Marketing Practice, told her, “Technology is quickly making new norms possible. Pervasive digital data plans and in-store Wi-Fi are enabling shoppers to do it all at once, to combine offline and online excursions together.” She continues:
“One in four consumers ‘frequently’ or ‘always’ use a mobile device to compare prices while shopping in a store, a new Kellogg study shows. Nearly two-thirds said they do so at least ‘occasionally.’ Nearly half of smartphone and tablet users plan to make holiday purchases with a mobile device this year, according to a study conducted by Ipsos for PayPal. The uptick in online shopping is good news for retailers: The holiday shopper who uses multiple channels — such as online, mobile and in-store — will spend 22% more than people who shop only in stores, says NRF spokeswoman Ellen Davis. There are several factors affecting the increase, Davis says, including more merchandise options available through multiple channels and the convenience of online shopping.”
From the number of store closings that have already taken place during the current recession, it’s clear that maintaining profitability in a brick-and-mortar store is not easy. And apparently there are more closings to come. SupplyChainBrain reports, “While most retailers have already closed their worst performing stores and made their operations as lean as possible over the past few years, the uncertain economic climate might lead to a substantial number of store closures in the first quarter of 2012. By conservative estimates, next year will likely bring more than 5,000 store closings, says Michael S. Wiener, president and CEO of Excess Space Retail Services Inc., a national consulting and advisory firm specializing in disposition and lease restructuring. And that’s not counting closings related to bankruptcies and liquidations.” [“Store Closings Are Likely to Top 5,000 in 2012,” 29 November 2011] Despite these closings, brick-and-mortar stores play an important role in multi-channel commerce. Jayne O continues:
“Most people don’t solely shop online or only shop in a store, [Martine Reardon, Macy’s executive vice president of marketing and advertising,] says. They pick and choose the channels based on what fits in their lives. Her goal: to let shoppers know that Macy’s can meet their holiday needs, whether it’s in physical stores, at Macys.com, on a Macy’s app or another Macy’s-branded avenue. ‘All I care about is that they (consumers) are engaging with the Macy’s brand — whether they choose to do that online, on the desktop or on their mobile device while walking the store,’ she says. Walmart has a similar stance. Its holiday plan is to provide a ‘seamless experience’ for the online, mobile and in-store shopper, spokesman Ravi Jariwala says. With its range of initiatives — which include new tablet apps and giving Walmart.com users sneak peeks of in-store specials — ‘customers can shop Walmart when, where and how they choose,’ he says. Macy’s is increasingly giving tablets to clerks to search online inventories through a Macys.com app. Customers can view and order merchandise that may be out-of-stock or not sold at a local Macy’s.”
Jayne O indicates that Sears and Home Depot are also using mobile devices. Dana Mattioli reports that they are part of a growing movement that is in increasing the use of mobile devices in store. She reports that a number of “retailers use mobile devices to ring up purchases right on the sales floor.” [“Gadgets Unchain Cashiers,” Wall Street Journal, 28 November 2011] Jayne O continues:
“While consumers are clamoring for more digital shopping options, retailers’ efforts to merge online and offline worlds are about more than customer satisfaction, retailing experts say. It’s more efficient for retailers to limit the inventory they keep in stores, says retail branding and design expert Ken Nisch. Distribution centers allow retailers to ship directly to stores or to online customers. That reduces the need for markdowns at stores where products didn’t sell, as well as the cost of shipping products between stores. ‘Online is not a default mechanism for the failure of bricks-and-mortar stores to satisfy the customer, but a complement,’ Nisch says.”
I think Nisch is right that consumers still enjoy a good in-store experience, but will increasingly complement that experience through the use of mobile devices. Retailers are learning that lesson and are jumping on the bandwagon rather than trying to slow it down. To read more on this topic, see my post entitled Multi-Channel Commerce: The Rise of E-Commerce. The data has not been analyzed for this past holiday season, but it will be interesting to see what it shows when all the results are in.
