Operational efficiency is no longer enough

The ability to effectively sense, shape, and fulfill demand through a customer's channel of choice has become retail's competitive differentiator, according to a white paper from Epicor.

The seamless shopping experience - providing what customers want, when they want it, in the way they want to purchase it, has come to the forefront.

As a result, efficiently fulfilling customer demand in the back end is no less important now - it's just more complicated.

But the effort is worthwhile.

Analysts agree well-executed cross-channel retailing is essential to growth and success, no matter the vertical.

Cross-channel shoppers typically spend nearly 30% more than their single-channel counterparts, according to the AMR Research Report, Retailers Invest to Efficiently Fulfill Cross-Channel Customer Demand, September 2006.

Customers that order online and pick up in the store will increase their market basket by an average 58% once in the store.

About 55% of US online consumers cross-channel shop by researching a product online and then buying it offline, according to an April, 2006, Forrester Research report, Understanding US Cross-Channel Shoppers.

Those cross-channel shoppers are better educated and have higher incomes than those who don't shop cross-channel - average household income is $74,302 compared to $58,672.

Effective cross-channel retailing not only boosts incremental sales, it also saves lost sales, enhances customer service, fosters loyalty and can preserve margins by moving more merchandise at the initial price.

Delivering a satisfying cross-channel experience requires tight integration among supporting technologies and business processes.

Exceed customer expectations and drive sales with a seamless shopping experience.

Inventory locator systems have emerged as the enabling technology facilitating this integration.

Retail sales channels typically emerge over time; a brick and mortar retailer adds a website, cataloguers open their own stores, and so on.

As a result, these lines of business are typically organised as separate divisions, each with its own IT infrastructure, rules and processes.

So when customers want to do business with more than one channel, retailers try to accommodate them through manual processes that eat away at productivity and can still leave the customer unsatisfied.

Integrating IT systems that support each channel is clearly the solution.

But integrating applications point to point is always easier said than done; software is often of different vintages and platforms and built around different business rules.

Even if a retailer is able to overcome these obstacles, point-to-point integration is costly and time-consuming and results in fragile connections that must be maintained over time.

Retailers acknowledge the gap between their current systems and processes and the cross-channel integration they need to attain, but are facing issues in getting there.

Just 11% of early adopters had up-to-date multi-channel integration solutions in place, according to the RIS News 16th Annual Retail Technology Study, while 15% had begun their integration process and 31% planned to begin in the next two years.

Those who lag confront significant risks: the likelihood of lost revenue opportunities because of lack of access to cross-channel inventory, lost incremental sales, reduced margins, lower productivity levels from manual cross-channel efforts, and lower customer satisfaction and loyalty levels because customers will defect to retailers that can meet their cross-channel demands.

Best in class retailers have a better understanding of the risks of alienating their customers and their intolerance of mistakes and miscues than others do, according to Aberdeen Research's The Multi-Channel Retail Benchmark Report, December 2005.

The silver lining in this cloud is that retailers who get there first can claim clear competitive advantage, even over those who already offer multi-channel integration through fully or partially manual processes.

Fully 34% of retailers said they can take a cross-channel return, but described the process as manual and cumbersome, in the September 2006 AMR Cross-Channel Customer Demand report, while just 25% have automated the process with software.

Savvy retailers can attain this competitive advantage through cross-channel order management and inventory locator solutions, the enabling technologies of the cross-channel shopping experience.

Cross-channel order management solutions facilitate these important retail capabilities of high value to customers: Buy Online, Pickup at the Store.

Endless Aisle - the ability to access any node's inventory from any other node in real time.

Cross-Channel Returns.

Cross-Channel Customer Relationship Management.

Cross-channel Promotions.

"Multi-channel retailers are developing stronger customer relationships with more frequent customer contact and a distinct competitive advantage that shows up as increased conversion in all of their channels of distribution," states a Deloitte Touche report, The Changing Nature of Retail: Planting the Seeds for Sustainable Growth.

While ideally the entire brand is supported by one IT infrastructure to enable such transactions, the reality is that few retailers can afford wholesale replacement of the siloed IT underpinnings of their e-commerce, store, catalogue and call centre operations.

A cross-channel order management and inventory locator system, however, can sit amidst the various applications so they can exchange data in real time.

Indeed, according to the December 2005 Aberdeen Multi-Channel report, 43% of Best in Class retailers enter product information into one system and move it electronically to other channel systems.

This strategy preserves retailers' IT investment and delivers faster time to benefit.

Cross-channel order management and inventory locator systems enhance customer satisfaction by boosting retailers' ability to locate and deliver product no matter where it's currently located, in any channel or in the supply chain.

Attaining this through technology, rather than people-driven processes, offers a better quality of experience since these transactions can be performed faster and more comprehensively.

At the same time, retailers preserve hard-won back-end efficiencies in planning and allocating inventory; these solutions can optimise customer requests according to retailer-specific rules in order make the most effective and cost-efficient sourcing decisions.

Real-time, cross-channel inventory location.

Inventory locators, for example, might include a catalogue of chain-wide, real-time inventory data that has been geo-coded with latitude and longitude coordinates.

That enables a customer or associate to make localised searches - if the shopper only wants to pick up from stores within 10 miles of home, for example, or to pinpoint the optimal geographic location from which to fulfill an order.

Inventory is updated as merchandise moves throughout the day, so customers are assured it's really in stock.

Flexibility in search capabilities - text descriptions, SKU, department/class, geography, and so on - allow quick and easy location of merchandise.

Determining where the inventory is located is half the battle; the other is the ability to place orders for those products from any channel and access them from another channel.

Order processing enables users to create, update, review, deliver, forward, and cancel orders in the system and provides for real-time access to current order status.

The associate who can place the order online for home delivery and close the transaction at the POS prevents a lost sale and enhances customer regard for the retailer.

Among the fears retailers bring to cross-channel retailing is loss of the supply chain and fulfillment efficiencies they've engineered.

When a fulfillment location for an order is not specified, optimisation capabilities within crosschannel order management systems can select the best logical location from which to fulfill based on geographic proximity, inventory level, and more, by following retailer business rules built into the application.

What's more, reporting capabilities mean order placement and fulfillment activity from all channels can be provided to merchandise planners.

Detail about unfulfilled orders can also be provided by capturing abandoned orders or unsuccessful inventory searches in any channel - a metric never before available.

Analysis of these transactions can fuel additional efficiencies in future allocations.

Cross-channel order management not only facilitates customer satisfaction through the ordering process; it also enhances the entirety of the relationship between customer and brand.

For example, store associates can see customer order history from any location to check status, apply loyalty rewards, add an online purchase to a store order, process a return from another channel, enroll the customer in a prize draw, and so on.

Associates are no longer limited by the stock in the store or the data in the local POS, and can easily meet a customer's expectations regardless of other channels that customer may have used.

The capabilities enabled by cross-channel order management and inventory locator solutions deliver multiple benefits because they prevent lost sales.

Cross-channel order management saves sales by finding that merchandise elsewhere in the retail network and delivering it at the customer's convenience.

They also foster loyalty, pleasing the most profitable shoppers.

"The assumption is customers will appreciate this improved experience so much that they will become loyal again," says Crosschannel Customer-centricity Key to Regaining Loyalty, a report by Paula Rosenblum, vice president, research at Retail Systems Alert Group.

They can boost incremental sales, through the additional purchases customers make when their initial need is satisfied.

Customers picking up an online order in a store spend an average of $154 on additional items, according to The US Consumer 2004: Multichannel and In-Store Technology, Forrester Research, September, 2004.

They can optimise fulfillment locations, by directing fulfillment to the most cost-efficient locations.

For example, a retailer might decide a store can fulfill up to five customer-direct orders a day, and allocate Web orders accordingly.

Margins are boosted by selling more inventory at full price and reducing markdowns.

Reporting on both fulfilled and unfulfilled demand helps merchandise planners improve future allocations, creating a more efficient inventory planning model.

Loyal customers want to be recognised and appreciated no matter which channel they use to make purchases.

According to the Retail Systems Cross-Channel report, "technology-enabled customer centricity is retailers' best hope to recapture the hearts and minds of today's time-starved, hard-to-impress, technology-enabled consumers".

Just 17% of retailers reported being able to deliver consistent customer recognition across channels, but many said they are working toward it, according to the 2006 RIS News Technology Study; 28% are underway or were starting a major upgrade in 2006 and 17% will start within two years.

Store associate productivity will be boosted, by eliminating manual inventory, order management and CRM activities.

Empowering associates to easily deliver stellar service can, in turn, enhance associate job satisfaction and longevity.

Sales can be increased in lower-profile stores by enabling easy ordering of low-turn merchandise from high-volume locations or warehouses.

"Retailers are paring back in-store selections of odd sizes or offbeat colours in order to save inventory handling costs as well as precious floor space," according to a Wharton report, Can't Find That Dress on the Rack? Retailers Are Pushing More Shoppers to the Web.

Several of these benefits deliver considerable financial benefit; for this reason, the return on investment in cross-channel order management and inventory locator solutions can be pleasingly fast.

If a 300-store retailer with an average item price of $50 could save one order per day per store, they could rescue more than $5 million in lost sales, not to mention the incremental sales that go along with those orders.

Decreasing total inventory by even a fraction of a percent due to improved allocation and lower chain-wide levels delivers similarly dramatic impact.

Respondents to a survey conducted for AMR's September 2006 report expected to improve inventory on hand, out of stock rate and conversion rate by more than 20% in the first year by investing in crosschannel order management and inventory visibility solutions.

While applications for inventory visibility in the supply chain are becoming more common, visibility across IT supporting each retail channel is less so.

But to gain the full benefit of cross-channel order management and inventory locators, systems must be fully automated across all facets of the retailing end of the enterprise.

On the technical end, it's important that solutions scale to accommodate anticipated future volume, and that they accommodate international business transactions.

Another key element is effective change management, to break down cultural and process barriers among channels.

According to the December 2005 Aberdeen Multi-Channel report, "Best in class retailers are more likely to have consistent cross-channel performance metrics, and are less concerned with cross-channel cannibalisation than their competitors.

"They are changing their organisational structures to be brand - rather than channel - specific".

Phasing in new cross-channel processes is a winning strategy for helping the organisation adapt to this change.

"Being able to provide multiple purchase points for your customers is critical to success in today's competitive landscape, but retailers must manage these channels in a cohesive manner to create a seamless experience among them," according to a 2006 AMR Research article, "A cross-channel strategy provides a solid platform to provide alternatives for customers when availability for a desired item is at risk".

Fully automated cross-channel order management and inventory locator systems are the essential enabling technology to fulfill now lost customer demand and deliver the seamless shopping experience customers demand.

Retailers who have already implemented cross-channel order management are seeing rapid return on investment and incremental revenue impact, leading those currently adopting to expect improvements to inventory on hand, out of stock rate and conversion rate by more than 20% in the first year.

Retailers who fail to keep up will see a widening gap.

Epicor|CRS is the leader in software and services for the real-time retailer who seeks to deliver best-in-class customer service.

We are the ideal choice for multi-channel retailers who demand proven, integrated, full-featured, scalable and global solutions.

Our products are helping over 130 specialty retailers exceed customer expectations and improve the bottom line.

CRS EnterpriseSelling combines a real-time inventory locator and configurable order manager to integrate inventory and transaction processing of multiple sales channels, allowing you to sell merchandise and satisfy customer demand from anywhere in your enterprise.

Whether the order is processes between stores when one is out of stock, between the website and store when the DC is out of stock or the customer chooses in-store pickup, CRS EnterpriseSelling manages the inventory and order lifecycle from beginning to end.

Back to top