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1 An intoduction to Multichannel Whats inside Read our best practice tips for keeping stock control in check. Even the best inventory managers sometimes trip up, but using our experience we've complied some simple steps to help you ensure a smooth, slick and accurate stock control system.

2 Welcome to An Introduction to Multichannel Retailers and wholesalers are no longer able to compete by just selling through one or two sales channels. Customers are increasingly choosing to buy via different routes. We all know about the rapid growth of ecommerce, which now includes online marketplaces such as ebay and Amazon as well as merchants own online shops. Customers regularly research online, even if they prefer to buy in store or over the phone. In order to catch all this business, you need to be present on all these sales channels, or else risk losing out to your competitors who are. Multichannel isn t just about retail, either. Business buyers are increasingly looking to use web-based systems where they can see inventory levels and place purchase orders with you at any time of day or night. 2

3 What does multichannel mean? A sales channel is any interface where your customers can buy a product from your company, whether it s self serve or via a sales person. Sales channels are both online and offline, and include multiple departments within a wholesale organisation as well as online channels for an e-retailer. Think of them as departments, where you may have different product ranges, prices or customer types. Here are some examples: High street retail store(s) Warehouse trade counter ebay Online shop / ecommerce Amazon Pop-up shop Telephone sales team Sales reps on the road For the purposes of this guide, anyone selling on more than one of these channels is a multichannel retailer, and includes both B2B and B2C businesses. The type of customer is a separate concept; since both your wholesale and retail customers can buy through multiple sales channels. Sales channels are not retail and wholesale - those are customer types, customer groups, or in some systems, price lists. 3

4 A hub system for all your sales channels Running a retail or wholesale business involves many, many different processes. As sales are made, you need to decide how they are fulfilled, transfer information into your carrier systems, and then communicate tracking information back to the customer. You need to update inventory levels on all your sales channels so that you don t sell the same item twice. You need to know when you are running low on inventory, and place purchase orders with suppliers. This requires a purchase order system and single, global view of stock levels, controlled from a central location. When new inventory is delivered or made available from your suppliers, you need to get this information out to your sales channels as fast as possible so that you can start selling. When customers phone up, you need to be able to find their order and any payments they have made without needing to trawl through multiple systems. If you re running your business on multiple, disconnected systems, then you ll be spending a huge amount of time moving between them, transferring data back and forth, and increasing the likelihood of mistakes. This is where a Commerce Acceleration Platform comes in. It s a central command system for your business, and integrates with all your sales channels, as well as your other business systems such as shipping and accounting. 4

5 The Commerce Acceleration Platform 5

6 What about my existing software? Ecommerce platforms will be built for selling, and usually this means that it won t be designed for efficient back-office processes. Anything that your shopping cart platform is having to do that is not selling, is taking time, effort and computing power away from the essential task of selling more. Sales should be downloaded from your ecommerce platform into your hub system automatically, to join the sales that have been pulled in from other systems. Order processing, inventory management and customer service should be done in the hub system, leaving you to handle ecommerce-specific tasks in your ecommerce platform. Similarly, accounting software is not designed to be a business operating system for multiple users on multiple channels. Whilst all accounting systems have a certain amount of order processing, purchasing and inventory management, they are rarely powerful or flexible enough to run a growing retail or wholesale business. Whilst you can usually set up different companies in a single accounting package, you can t usually handle invoices and communications under different trading names for a single company, which is a common requirement for multichannel retailers. Successful businesses have a single central software system, used by most of the team on a daily basis, to work with sales, purchases, customers, suppliers and products - which means that you need different levels of access permissions. Again, accounting software is not really up to the job. 6

7 What does a Commerce Acceleration Platform do? Maintains a product master list which gives you control over your business data. Provides global inventory levels that are then shared automatically across sales channels in order to prevent double selling. Lets you design a business-wide pricing structure that helps ensure that products are priced correctly for the right audience. Gives you a single, holistic view of all orders across the business so that you can compare channels against each other, and see within a channel, which products, customers and marketing is doing well. Transfers data to and from carrier systems to ensure you process shipments faster, with fewer mistakes. No more copy/pasting from sales channel systems into carrier systems. Enables you to set up company branding that matches the customer experience on each channel. If you re consolidating all sales into a basic accounting solution, your ability to expand into new, independent channels whilst keeping up quality communication ( , phone, paperwork) is restricted. 7

8 A product master list - control over your business data Each of your sales channels will have different software systems that power them. Perhaps a subset of your products will be available on some channels, and different products on other channels, or perhaps all your products are available on all channels. Either way, there will be an overlap where different software systems are talking about the same physical item. You need a way to reference an item in a common fashion across all parts of the business - this is the SKU, the Stock Keeping Unit. These systems will need to know the relevant information about the product, such as its name, description, images, attributes and so on - data that you will need to enter into each channel. As you manage more channels, this data entry and data management becomes a very time consuming task. Inventory levels across the business also need to be synchronized so that sales of an item on one channel automatically update the inventory on other channels, to prevent stock-outs and the high cost of just-in-time orders, or else the worst case, where you can t get the item at all. In order to track inventory properly, you need to have one system that contains ALL the products that your business sells. It s quite likely that none of your sales channels contains all products, since each audience will be different. Multichannel product management is a complex topic, and is covered in detail in the separate Commerce Acceleration 101 topic : Multichannel product and inventory management. 8

9 Accurate, global inventory levels Inventory management is one of the areas where multichannel software can bring the most benefit through automation. The inventory level of a product is the property that changes the most often, meaning that manual updates take a huge amount of time. Displaying excess inventory on a sales channel can lead to selling the same item twice on different channels Delaying the update of inventory levels when items come back into stock means missed sales Once a product exists on multiple channels, and is linked to your central product hub, inventory levels can, in principle, be updated automatically. Because synchronised inventory is a cornerstone of multichannel trading, all online sales channels have a mechanism to let the product hub software update the inventory levels. Reduce inventory as soon as orders are placed In order to prevent double selling, the hub system needs to decrease available inventory as soon as an item is sold, on any channel. This means that it needs to receive orders as soon as possible after they occur. Most sales channels have their own mechanisms for inventory management, which will reduce the inventory on that particular channel as soon as a sale occurs, but you need a central system in command of all your channels in order to prevent sales of the same product elsewhere. Inventory allocation Because the inventory is actually still on the shelf until the order is packed, the system needs to have the concept of inventory allocation - whereby inventory is assigned to a sale as soon as it is placed. This decreases the on hand inventory, which is what is communicated to the sales channels. 10 in stock - 3 allocated = 7 on hand Whilst the sale is still in progress, the inventory is reserved for it and cannot be sold on another channel. Only when the order is actually shipped should the hub inventory level be reduced. Inventory pre-allocation per channel 9

10 Some multichannel inventory management systems require that you pre-allocate a certain proportion of your total inventory to each channel to prevent double selling. If your multichannel setup can react fast enough when new sales are made, however, then you don t need to do this and you can make all your inventory available on all channels - which is a preferable situation for most businesses. Response times to inventory changes and new orders Each channel will have its own responsiveness; Amazon does not respond immediately to inventory changes pushed from an external system, for example. it can take up to 5 minutes for a change to take effect on the customer-facing website. The speed at which an order is added to the hub system is also a key part of inventory management, since that s the point at which inventory is allocated. ebay notifies an external system as soon as a sale occurs, but an ecommerce store will need to be checked periodically for new sales. There s a certain level of communication overhead with this regular check (called polling ) - so the software developer will decide upon a frequency that s a sensible compromise. This shouldn t be slower than every 15 minutes. No system can be built economically for instantaneous updates across all channels, so there will always be a small risk of double selling unless inventory is pre-allocated per channel. 10

11 Products priced for the right audience Once a product is created on a channel, any changes to that product, such as description or images, is content management. Although inventory levels and prices are technically just content, they change more often than the name, description, variations and so on. For clarity, we ve decided to break inventory and pricing out into their own sections in this guide. Pricing per channel In order to make the most of each channel, you should tune your prices for that audience. Some channels - such as ebay and Amazon - are particularly price sensitive, since you are competing with other merchants on the same platform. Others, such as your in-store Point of Sale or Wholesale channels, have very different pricing requirements. Your multichannel system should be able to handle all these - either by setting up a different price list per channel, or using more complex discounting mechanisms. Amazon is a channel where automated price management is more common, since pricing your products just pence below your competitor can make a big difference to sales. If your multichannel system does not incorporate automated re-pricing mechanisms, you should be able to deactivate price management for that channel and delegate the responsibility to a separate price management system. Taxation Many sales channels have not been built with tax reports in mind - that s the remit of the accounting system. Even Amazon, until very recently, had no way of differentiating taxexclusive and tax-inclusive prices. However as a multichannel merchant you want to be integrating and automating as much as possible, and for your sales to be passed to your accounting system properly you need to make sure that the products right at the start of the process are set up properly. This means getting tax set up properly at the sales channel level. The best way to manage prices is to enter tax-exclusive (net) prices, and then tax is added based on a number of rules. In the UK (a VAT based scheme), the tax depends on the type of product, as long as you are buying from within the EU. If you re buying from a UK merchant and are in Australia, you don t need to pay tax. If you re a US merchant (the USA uses a sales-tax scheme), then tax is chargeable based on where you and your customer are located, as long as the product is taxable. Every sales channel will handle tax in a different way (many of them not very well...) so the multichannel order management system needs to be flexible enough to cope with every scenario - and most importantly - needs to be able to maintain full granularity of tax information for onward transfer into your accounting system. A multichannel order management system with accounting built-in is even better as it will have been built with this in mind. 11

12 Up to date product information on all channels Product data isn t always static - you may well need to change some of the information a while after you created the item. Once you have linked your products to a central hub, then a certain amount of information can be updated from the hub, but it gets very complex to maintain full content management from a central system. Rules within sales channels Every sales channel will have its own rules for product data, and these may well conflict with each other and with those of the hub system. This makes multichannel content management extremely complicated. A good example is the ability to change product type - a product type usually exists in order to group attributes, so that Shirts have neck sizes and Trousers have waist size and length. On Magento, once a product has been created as a Shirt, you can t just change it to be Trousers - but on Shopify, you can change the product type as often as you like... so what should the hub system do? Similarly, ebay has strict listing revision rules which make it hard to update the listing from an external system. Manage products on the sales channel software Once a product has been created on a channel, it s best to make subsequent changes on the channel itself. This can lead to inconsistent data if you are making lots of changes across lots of channels, but can also be used to tune the product specifically for that channel. An ebay listing description, for example, would contain a lot more information than the product description - sometimes even a whole storefront with navigation to other products is represented in the listing. Your ecommerce software probably has a raft of features to help your visitors find the right products in a search; custom attributes, compare with features and so on. This information is specific to a web visitor, and would not be possible to maintain on an Amazon listing. For this reason, it s usually best to maintain the channel specific information in the channel itself. Brightpearl (the hub) and Magento (the sales channel) is an unusual pairing in that the data models and business rules are fairly similar, so it s possible to manage more of the product from the hub system than for other sales channels. It s still not 100% content management, however, since there are additional features in Magento designed for layout and design on a website. 12

13 A single, holistic view of all orders Bringing all your orders into one processing system is an essential part of trading on multiple channels. Efficiency All orders in one place means that your warehouse team just need to access one system, and you can batch process much more easily since you ve got higher volumes of orders in the same system. When a customer phones up, you know where to look. Insight and reporting With all your orders in one system, you have a holistic view of the entire business. You can see what s in progress, what s on hold, and what s on back order. You can see how any one channel is doing against another, and see what products are doing well on which channel. Taxation In a similar way to that with products, it s essential that orders are downloaded from your sales channels with the right tax amount and tax codes, so that when information is transferred to your accounts, the numbers are correct. Scalability When new staff join your business, you only have to show them one system. It s much easier to get things right the first time, if there s only one piece of software to learn, and one process to follow. This saves time in training, and means that your staff can be effective sooner. 13

14 Faster shipment processing with fewer mistakes Processing the shipments themselves is no different in a multichannel business, but communicating shipment information back to the customer certainly is, because the customer will have bought from any one of many sales channels. Each sales channel will have different processes and structures for recording information after the sale has been placed. ebay requires that you update the system when the order has been shipped, as does Amazon, since seller ratings and quality of service are monitored closely. Your Point of Sale channel, on the other hand, requires very little post-sale communication since the customer has already walked out with their items. There s no tracking reference to communicate - but you can still make use of your multichannel software to send a receipt or offer to encourage further sales! Ship shipments, not orders Because not all items on an order may be in stock, you need to have the option to send part of it while you wait for more inventory. This means that the shipment is not the same as the order - you may have multiple shipments for a single order. The multichannel order processing software will handle this - but the way that the shipment itself is communicated back to the sales channel differs. Most ecommerce systems support the concept of shipments, and multiple shipments for an order, but ebay doesn t. Where possible, the multichannel software will push the shipment information back into the sales channel - in the case of ebay, the ebay order is marked as shipped only when all shipments are completed. Let the customer know their order has shipped Some sales channels have a mechanism to the customer when a shipment is created (Shopify and Magento, for example). Other sales channels don t - so you may want to use the multichannel system to do this. Carrier integration In order to get shipments out of the door quickly, your multichannel order processing system should integrate directly to your carrier system. This means that you don t need to worry about manual data entry which is slow and has the potential to introduce mistakes. It also means that the tracking reference (if relevant) is taken automatically into your system for onward transfer to the sales channel - again without human interference. Carrier integration does not have to be built in to the order processing system; since many carrier programs are installed on a warehouse computer, there needs to be bridging software between the carrier program and a web based multichannel system. For more information, see Fulfilment - Ship Faster With Fewer Mistakes. 14

15 Company branding that matches the customer experience One of the key reasons for launching multiple sales channels is to support different trading names or different brands for each customer group. A good multichannel order processing system will maintain this information, and all your communications to the customer will have the correct company name, be sent from the sam e address, and with the right logo. As sales are imported into the system, they are assigned to the channel, which in turn is given a branding. Without support for per-channel branding, you either need to have an umbrella brand, with information that helps the customer understand the relationship between the company they bought from and the umbrella brand, or else be very careful to keep each sales channels sales, shipments and after-sales care separate - all of which is going to make it hard for your business to become lean, efficient and fast growing. United Kingdom First Floor, New Bond House, Bond Street, Bristol, BS2 9AG Phone United States 625 Market Street, 6th Floor, San Francisco, CA 94105, USA Phone

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