White paper. How omnichannel shoppers create new delivery challenges for retailers.

Transcription

1 White paper How omnichannel shoppers create new delivery challenges for retailers

2 Content Introduction 3 Supply Chain Management 4 What does an omnichannel supply chain look like? 5 Inventory Management 6 Fulfillment and Global Demand 8 Payment strategies 9 Effective delivery matters 10 Returns Management 11 Cross-border challenges 12 Conclusion 13 Sources 14 2

3 Introduction Consumers have consistently sought easier, more convenient, more efficient ways of shopping for the products and services they want. E-tailers have responded: When brick-and-mortar locations and call-in orders were not enough, companies provided streamlined e-commerce websites. When smartphones and tablets took off, those websites became mobile-optimized. Some e-tailers have even developed apps to provide an easier shopping experience. This drive to better respond to customer demands has also translated into offering a multitude of delivery options: Home delivery, in-store pickup, orders sent to a different location for in-store pickup, and so on. However, none of these developments have completely forced out any of the others they all coexist side-by-side. This is the omnichannel e-commerce world in which we now live: Multiple avenues through which consumers can browse for goods and place orders. For the foreseeable future, e-businesses will have to balance these channels without compromising service, efficiency, transparency or fulfillment in any single one. This will require better platforms that can consolidate operations, prioritize steps in the supply chain, and handle new obstacles in the developing world of e-commerce. This whitepaper seeks to identify the primary challenge omnichannel shoppers present to e-tailers and provide ways these organizations can better manage consumer demand levied at them from all angles. The drive to better respond to customer demands has translated into offering a multitude of delivery options: Home delivery, in-store pickup, orders sent to a different location for in-store pickup... 3

4 Supply Chain Management Omnichannel retail can become profitable in fact, its potential is huge. In one 2015 survey from Ernst & Young, nearly 90% of senior supply chain professionals maintained that consumer goods firms cannot drive growth using yesterday s channels. Instead, it will be Internet- and mobile-based shopping to take up the slack. In a sampling of developed and emerging markets, Internet-generated retail sales growth is forecast to easily outpace storebased sales growth from 2014 to However, without any adjustment to the supply chain, not only will businesses fail to latch onto the opportunity omnichannel shopping can provide, but omnichannel capabilities may also dilute retailers margins by driving sector growth without increasing revenue. Retailers focus on omnichannel growth because it can boost many categories: So then why do retailers bother focusing on omnichannel growth if they do not expect it to improve profits? Because the trend can boost so many other categories. About 95% of supply chain professionals expect omnichannel initiatives to strengthen customer loyalty, 90% expect it to create a competitive difference, 84% anticipate improved consumer insight and even 79% foresee higher sales. Instead of abandoning this clearly advantageous strategy, the trick is to make it work for an e-business from a financial standpoint. That is where the supply chain figures in. 79 % foresee higher sales 84 % anticipate improved consumer insight 90 % expect it to create a competitive difference 95 % expect omnichannel initiatives to strengthen customer loyalty, 4

5 What does an omnichannel supply chain look like? To answer this question, we must first examine why the old supply chain is unfit for the new world of e-commerce. Historically, the supply chain was not seen as a reflection of business model it was largely separate. Customer orders went through the retailer, which made the necessary arrangements through its logistics wing to transfer a package from a warehouse onto a delivery platform and ultimately transport it to the preferred location. But there are too many internal steps for this model to be effective for the modern, omnichannel shopper. For one thing, orders reach a company through multiple channels, placing stress on the business to effectively manage inventory and conduct simultaneous logistical operations through various channels. For another, with the proliferation of the Internet and immediate gratification, consumers demand transparency throughout the supply chain. They want to know when their order is processed, when the package is shipped, where it stops along the way and when they can expect it to arrive at its destination and will it be there in the morning or the afternoon? This requires e-commerce organizations to overhaul their supply chain not just make incremental changes. It must reflect a companywide commitment to omnichannel shopping. That means it has a few core features: Consumer-focused: The supply chain is not a closed system any longer, it s an open and flexible tool that should be able to deliver an item in a variety of ways to optimize customer satisfaction. Transparent: Similarly, employees and consumers must be able to look into the supply chain and examine how things are moving along. Adaptable and responsive: Because the omnichannel supply chain is transparent and consumer-focused, it must also be able to change at a moment s notice to better accomplish fulfillment goals. That favors segmentation even if it means the supply chain is not quite as lean. Integrated with the company at large: The supply chain must become a factor in decisionmaking throughout the organization because it will be so much more customer-facing than before. In this way, the supply chain should influence overall business strategy. Once a company has overhauled its supply chain to align with today s omnichannel experience, it can hope to glean actual profits from that omnichannel strategy. But there are other factors that go into handling this new variety of consumer. With the proliferation of the Internet and immediate gratification, consumers demand transparency throughout the supply chain. 5

6 Inventory Management There is at least one theme that holds true for all aspects of overcoming challenges omnichannel e-commerce presents: Each individual solution depends on all others to operate simultaneously. As a perfect example, supply chain optimization depends on effective inventory management. Without that, even the most agile, consumer-focused supply chain will break down. In omnichannel e-tail, inventory management is defined by visibility the ability for businesses to access their entire inventory all at once, whenever they need to. As cross-channel consumption opens up multiple channels for order placement and as consumers expect an increasingly responsive fulfillment strategy, it becomes even more important for organizations to efficiently track which products are coming and going, when those transactions are taking place, where those items are going and how much revenue is being created. Ideally, companies will also be able to analyze this data and make informed decisions about how best to manage inventory given their consumers priorities. Why isn t inventory more agile? First and foremost, it is difficult for some organizations to track inventory changes across multiple channels in real time. Consider an example: A company sells watches. They have an inventory in their main store, but also a distribution center from which they fulfill their online sales and replenish in-store inventory. As online sales grow, this company will need to place more emphasis on tracking orders through their various digital channels, without losing efficiency at the storefront. But some customers might prefer to have their preferred watch delivered to the store for pickup, while others prefer home delivery. Some customers will buy in-store, and if the watch is out of stock, they might have it delivered to the store right at the front desk. Others will buy on their laptops, smartphones, tablets and the distribution center must maintain up-to-the-second accuracy or else risk falling short on supplies unexpectedly. There are several obstacles that prevent e-tailers from achieving this goal. Supply chain optimization depends on effective inventory management. Without that, even the most agile, consumer-focused supply chain will break down. 6

7 A flexible, end-to-end, consumer-facing supply chain can bring the inventory up to speed and deliver the products in an efficient manner, but not if the inventory strategy does not exhibit comparable agility. Furthermore, as we will examine later, it is also crucial to have that same transparency and flexibility in returns management, as well. On the other hand, some inventory management issues stem from an indistinct understanding of what customers will want next. Without projecting trends and forecasting future sales, inventories may not reflect shifting consumer demand. In this age of data collection and trend analysis, organizations should be able to predict what their customers will want the most during certain periods like holidays or sales. Still, that does not mean e-businesses should simply hold product in silos to ensure fulfillment. Unnecessary inventory complicates matters, as it must be accounted for and could potentially lose value sitting on the shelf over time. Inventory should as closely reflect demand as possible. In the event of an item going out of stock, organizations should have a contingency plan. That begins with a clear definition of out-ofstock does that mean the item is completely sold out, or that it is running in short supply? Could it mean the item is missing from a particular store, or from the distribution center, or from the supply chain at large? Or could it simply mean pickers responsible for the item cannot find it? According to the Ernst & Young survey, 40% of supply chain professionals have no recourse for an out-of-stock item. Consider, too, that inventory from a centralized center might be easy to track and maintain, but it might not be the most effective place from which to distribute products around the world. Omnichannel consumers do not only use different channels, they also live in different areas creating another set of challenges for e-tailers doing business in this day and age. 40% of supply chain professionals have no recourse for an out-of-stock item. 7

8 Fulfillment and Global Demand While fulfillment and the global consumer base may seem like peripheral concerns regarding the rise of omnichannel consumption, these are actually central items. When consumers place orders through different channels from all over the world, they each require distinct solutions there are linguistic, monetary, political and geographic barriers separating consumers from their purchase. Omnichannel shopping is simple for the consumer, but that simplicity belies the complexity for organizations to fulfill those expectations. Put another way: Companies that leverage omnichannel solutions should expect their global fulfillment strategy to be equally advanced. Fortunately, there are third-party logistics companies dedicated to exactly that providing a robust platform complete with state-of-theart logistics software and the global network to back it. At Landmark Global we specialize in cross-border shipping, global fulfillment, returns management and other pain points for e-commerce businesses. Omnichannel shopping is simple for the consumer, but that simplicity belies the complexity for organizations to fulfill those expectations. 8

9 Payment strategies Let s examine the process of placing an order through any one of multiple digital. Depending on location, the best e-commerce software interfaces will display relevant options for the consumer. For example, residents in the U.K. will have final amounts listed in pounds, while in the European Union it will be the euro, in Japan it will be the yen, and so on. But omnichannel shopping has also provided space for alternate payment methods to thrive not just regionally based credit cards but platforms like PayPal. Industry leaders will provide all major payment methods and also break down every associated cost, like VAT, duties and fees, and shipping costs so the consumer is not taken by surprise by a higher final amount than what is listed. the sake of the company and the consumer. The more channels through which transactions can be made, the more opportunities there are for third parties to step in and intercept information. That is how large-scale data breaches happen such an event can cripple an e-tailer and cause almost irreversible damage to its reputation. Parallel import is also implicated here, as an organization that imports products to several separate markets must also manage promotions, costs and other attributes effectively or risk financial loss. But on the other hand, offering multiple payment methods can increase the cart value and drives conversion x times. With more variety in electronic payment methods also comes the need for better security, both for Industry leaders will provide all major payment methods and also break down every associated cost, like VAT, duties and fees, and shipping costs so the consumer is not taken by surprise by a higher final amount than what is listed. 9

10 Effective delivery matters Consumers are growing accustomed to the efficiency and convenience of pointing-andclicking to place an order, so it stands to reason they have become more demanding in regard to delivery, as well. However, one survey suggests online shoppers are more concerned with the cost of delivery than with the speed. Respondents to a Forrester study said low prices and low delivery costs are the top two reasons why they would return to an e-tail website. Fast shipping appeared further down the list at No. 14. Overall, 53% said low-cost shipping would factor into their decision to switch to a new e-tailer, while 56% reported they consider shipping costs when they decide on an online purchase. Omnichannel shopping also opens up other potential fulfillment options that companies must consider when deciding how best to deliver items to consumers as quickly as possible. Next to Home delivery, these may include: Click-and-collect: The customer orders an item and has the option of picking it up at a store location. Low prices and low delivery costs are the top two reasons why they would return to an e-tail website. Drop-shipping: The customer order goes through a third-party logistics provider, which handles the fulfillment process. Reserve-and-collect: The customer selects and reserves and item online so that he or she may finalize the purchase and pickup the item in the store. Delivery lockers: E-tailers ship an item to an agreed-upon, convenient locker in a location like a grocery store or train station. Only the customer will have the code needed to retrieve the item. Not all of these options are feasible across industries. In the case of same day delivery, for example, rural or less populous areas may be difficult to reach in a matter of hours. Delivery lockers pose the issue of space when sales run high, only so many items can fit in a locker. Still, e-businesses that provide an array of solutions will be speaking to the nature of the omnichannel consumer flexibility, immediate gratification, and choice. Landmark Global can take the worry out of providing the preferred delivery method for consumers worldwide. By using our powerful software, e-tailers will gain better control over their supply chain and provide their customers with an array of options. 53% 56% said low-cost shipping would factor into their decision to switch to a new e-tailer reported they consider shipping costs when they decide on an online purchase 10

11 Returns Management Every challenge omnichannel shopping presents to e-tailers may also be present in the returns process. For example, if a consumer decides to purchase an item on a tablet and then decides to return that item, he or she will likely seek to complete that process through that same tablet. If a consumer purchases an item in euros, he or she will hope to be refunded in euros after a return. And if a customer picks up an item at a distinct location, he or she could very well seek to return that item through the same location. In short, omnichannel shopping demands omnichannel returns policy. This is especially important from a cross-border returns management perspective. If a customer orders a product from the U.S. which is delivered in Belgium, to which country would the item be returned? E-commerce businesses that leverage omnichannel solutions from logistics experts like us can determine how and where to return the item, identify the precise warehouse that will receive it, process all the necessary shipping and tracking requirements and do all of this without any excess burden on the customer. found returns account for 40% of all goods in certain industries a costly prospect, as each return requires its own set of transportation, handling, warehouse space and other logistical needs without having generated any revenue. On the other hand, strong returns can separate the best e-tailers from the rest and become a significant sales contributor. By offering generous, flexible, convenient and omnichannel returns, e-businesses establish and can differentiate themselves and win over consumer trust. The best solution is likely a proactive one: By becoming a better e-tailer overall, these companies might avoid the miscommunication and dissatisfaction that can lead to returns. Better omnichannel fulfillment and supply chain strategy can lower returns indeed, Deloitte found return cost as a percentage of revenues to be 48% for entry level e-tailers, 11% for developing and performing e-tailers, and 2% for industry leaders. Generous returns policies result in higher sales and higher costs To be fair, e-tailers must weigh the pros and cons flexible returns place on their business. The burden is not insignificant: A Deloitte survey Strong returns can separate the best e-tailers from the rest and become a significant sales contributor. 11

12 Cross-border challenges E-tailers who ship internationally face a more complex challenge from omnichannel commerce than those who only deal with a domestic market. Some of these are obvious: Shipping abroad is, by its nature, a complicated process compared to local or regional commerce. However, omichannel e-tail can compound those challenges. For example: Will e-tailers be able to register their products and sell in their specific market using different channels? Do they possess up-to-date information on taxes, fees and regulations and are all channels updated immediately? Do each of the payment methods available through these channels reflect the ones preferred by local shoppers in different countries? Are all shopping channels optimized linguistically for consumer preferences? How do they manage inventory for orders placed through different channels? Do they have warehouses all over the world to respond quickly to customer s demand? Clearly, omnichannel presents unique issues for e-tailers who rely on cross-border commerce. But rather than try to manually alter their channels to sync with one another, e-commerce businesses can lean on us for a more effective solution. Clearly, omnichannel presents unique issues for e-tailers who rely on cross-border commerce. 12

13 How omnichannel shoppers create new delivery challenges for retailers Conclusion With the rise of omnichannel shopping come language, fulfillment solutions with warehouses many challenges for e-tailers who may be located across the world, global returns unequipped to handle them alone. Essentially, management, border crossing regulations, the question of omnichannel as it applies to international trade consultancy. international commerce is one of consolidation. Each channel must work toward the same goal, be in communication with other channels and deliver a consistent and intuitive experience for consumers. As a partner, we can allow e-tailers to turn a profit on omnichannel shopping. It is not enough to merely meet consumers current demands. E-tail is constantly evolving and challenges may arise tomorrow that we cannot That is where Landmark Global can excel. anticipate today. Instead, the best organizations We offers a powerful software platform built prioritize flexibility as a central tenet of their to accommodate the rigors of omnichannel business model, allowing them to anticipate shopping and connect the varied facets of trends and react to unforeseen obstacles an e-tailer s business. As a logistics company effectively. As consumer preference ebbs and that specializes in cross-border delivery to more flows, this agility will remain the most important than 200 countries, we can support international attribute an e-tailer can have. commerce businesses wherever they need it. That includes 24/7 customer support in any As a logistics company that specializes in cross-border delivery to more than 200 countries, we can support international commerce businesses wherever they need it. 13

14 Sources Research-2015-Maximizing-Mobile.pdf 14

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