Putting seamless retail to work. Developing the back-end capabilities to drive omnichannel retailing

Transcription

1 Putting seamless retail to work Developing the back-end capabilities to drive omnichannel retailing

2 Contents Not ready for omnichannel? You re in good company 2 Time to come to the party 3 Strategies for success 4 1. Real-time and accurate inventory awareness 5 2. Effective order management and fulfilment 6 3. Sales and operations planning 7 4. Sophisticated data analytics 8 5. Shared supply chain operations 9 Making the transition 10 More information 11 1

3 Not ready for omnichannel? You re in good company Your consumers are more demanding than ever, but it s not their fault. With access to more shopping channels and formats than ever, they naturally want seamless retail experiences that make shopping efficient and pleasant. Unfortunately, many retailers aren t ready for this omnichannel era. According to industry research, consumers want a lot from their retailers including the ability to view in-store inventory online and to access a variety of purchase options, such as buying online but picking up in store. 1 However, few European or North American retailers can offer these options and retailers in Australia and New Zealand lag even further behind. As can be seen in Figure 1, few retailers have the complete functionality consumers crave. As might be expected, shoppers aren t delighted by this situation. According to Accenture research, nearly 40 per cent of consumers say retailers must improve their shopping experience across in-store, online and mobile channels. 2 At Accenture, we have extensively examined how companies can develop omnichannel capabilities. In our earlier report, Don t get left behind: Six ways to transform your company into a seamless omnichannel success 3, we explored how companies can transform the front end of their operations through strategies such as becoming customer-centric organisations and scaling for seamless delivery. In this report, we shift our focus to the key back-end strategies retailers need to become omnichannel operators. Drawing on Accenture s global experience, we have identified five key factors companies should develop, namely: real-time and accurate inventory awareness effective order management and fulfilment sales and operations planning sophisticated data analytics shared supply chain operations. Figure 1: Omnichannel capabilities are the global exception rather than the rule Unique pricing, discounts and returns based on purchase history 31% Earn and use loyalty points across channels 29% Use one acount across all channels 26% Suggest right products based upon my profile 24% My account is completely connected online and in-store 22% Suggest products based upon what my social network bought 15% Source: Seamless Consumer Retail Research November

4 Time to come to the party Australian businesses in particular have been slow in providing online shopping options. As a result, they have been ambushed by online-only retailers, as well as fast-fashion outlets such as H&M and Zara setting up in their backyards. The Australian department stores in particular and retailers in general have copped a lot of flack for being slow to move online, Caroline Finch, senior analyst at research group IBISWorld, has said. Myer and David Jones in particular have been slow when compared to their international counterparts, and the department store industry has gone backwards over the last five years largely as a result of losing market share to other players who have jumped into the online space. 4 However, this situation is starting to change. For example, Wesfarmers, which runs supermarket giant Coles, says its greatest competitor is not necessarily arch-rival Woolworths. The gorilla on our doorstep is Amazon, Wesfarmers Chief Executive Richard Goyder has said. They are a very strong competitor and if Wesfarmers isn t strong, lean, dynamic, creative and innovative, then Amazon will eat our lunch. 5 Goyder notes that retailers now operate in an omnichannel environment where they must provide a seamless journey for consumers. After all, the prize at stake is significant. Forrester Research expects combined global online and web-influenced retail sales to reach US$1.8 trillion by 2017, up from US$1.3 trillion in Now s the time for retailers to act. But the move to an omnichannel environment requires a substantial shift in thinking the scale of which can be seen in Figure 2. In such an environment, the concept of delivering goods and services through a single channel, or multiple disconnected channels, is antiquated. Instead, retailers must put the customer first by designing shopping experiences where the seams are invisible and the benefits are significant. Figure 2: Shift work Traditional supply networks Independent channel mentality Channel-specific customer view Inventory allocation by channel Channel-specific replenishment planning Disparate order management systems by channel Distribution centre-centric fulfilment Static fulfilment logic Channel-specific organisation Omnichannel supply networks Buy anywhere, fulfil anywhere, return anywhere Single view of a customer across all channels Single, consolidated management and view of inventory Integrated replenishment using all sources of inventory Consolidated order management All nodes in network participate in customer fulfilment across channels Dynamic fulfilment logic, including the last mile Cross-channel organisation 3

5 Strategies for success Where do retailers begin in adapting to the omnichannel environment? In Accenture s global experience, retailers should develop the following five key capabilities: 1. Real-time and accurate inventory awareness 2. Effective order management and fulfilment 3. Sales and operations planning 4. Sophisticated data analytics 5. Shared supply chain operations 4

6 1. Real-time and accurate inventory awareness As seamless retailers, companies need to view their inventory across all channels, distribution centres and stores. This is a crucial step in allowing them to coordinate the movement of goods to efficiently and effectively fill customer orders. However, some retailers are unable to form this complete inventory picture. In particular, some operations are hampered by siloed information and processes that do not cut across geographies or channels, as well as a lack of digital enablement (that is, the use of key digital tools). Importantly, if companies can t see their inventory in totality, neither can consumers. And consumers are chasing this information. For instance, more than half of consumers want product availability information before they visit a physical store. 7 Furthermore, when asked about improving the seamless experience, shoppers cited the ability to check product availability and whether a product is out of stock as the most important elements. 8 This means retailers need to establish a complete view of their inventory, and they need to prioritise digital enablement. To achieve this, companies should create a centralised inventory repository that serves as a single, real-time version of stock-based truth for employees and consumers. This will give stakeholders and consumers excellent visibility of order and inventory information, increasing customer satisfaction and potentially loyalty. However, having a holistic view of inventory is only part of the challenge. Retailers also need the capabilities to accurately account for inventory across their operations. To achieve this, decision makers may need to enhance their stock management processes in stores, warehouses and merchandise support areas. 5

7 2. Effective order management and fulfilment Companies also need to fulfil orders in the way customers want. Some retailers might be very good at in-store sales, but stores may not be the preferred channel for all shoppers in every context. Also, when consumers do shop in store, they want a connected experience that is linked to other retail channels. For instance, if customers prefer to order online but pick up products at a store near them can retailers make that happen? and requirements of individual channels or customer types. Instead, leading omnichannel retailers are harnessing a mix of distribution centres and physical stores to fill all orders across the supply chain. This is a much more efficient arrangement and gives consumers as much choice as possible in the way they receive their orders. We say as much choice as possible because it might not be financially feasible for all retailers to offer every option. For instance, consumers are surprisingly unwilling to pay for what they want. According to Accenture research, a quarter of consumers are not prepared to pay for next-day delivery, and the majority (44 per cent) are only happy to pay between US$1 and US$5 for that service. 11 Companies should also engage leading delivery partners to consistently meet the customer timeframes expressed above and keep order fulfilment costs in check. Forrester Research found that if a product is out of stock, customers would prefer to complete the purchase in-store and have it shipped to their home rather than go through the hassle of visiting another store but only if the retailer is prepared to ship the item for free. 9 In addition, 41 per cent of consumers want sameday delivery, and 70 per cent want their orders consolidated into one delivery (see Figure 3). 10 Not all retailers can meet customer expectations on these measures. Some customers are happy to wait for their goods to be delivered, provided retailers tell them when the order is likely to arrive. This option could offer retailers a further way to drive cost-effective order fulfilment. To address this disconnect, retailers need to refine their inventory and order management arrangements. This requires a shift from maintaining dedicated facilities tailored to the specific order profiles, frequencies Figure 3: A question of speed (of delivery) 22% Next day 29% % 6% 6% Same day Half-day Within two hours 36% Wait for free delivery Source: Seamless Consumer Retail Research November

8 3. Sales and operations planning In our experience, a number of retailers are responding to what has happened rather than what is happening or is likely to happen. They do not have the planning capabilities to assess where by geography and channel consumer demand is coming from and how that might change over time. Some retailers are also plagued by an old way of thinking where a single type of customer shops exclusively in one channel. If this was the case, sales and operations planning would be simple. But in an omnichannel environment the reality is far more complex. Retailers need to track how customers move between channels and geographies and to flexibly respond to customer demands. This encompasses effective merchandise planning in order to contain sourcing costs while delivering goods in a timely fashion across the supply chain. To address these challenges, companies should integrate their planning capabilities across stores and the supply chain as a whole. From an inventory point of view, all elements along the supply chain need to have an equal claim on goods, including stores and distribution centres. This ensures retailers can quickly replenish stock in high-demand locations and move goods between stores and geographies to smooth fluctuations in demand. Overall, this approach can deliver substantial benefits for retailers of all sizes. For instance, by using order management strategies and fulfilling orders through a range of channels retailers can more quickly sell through ageing stock and reduce the need for price markdowns to move goods. Also, smaller stores can improve their ability to meet customer needs with less stock on hand with extended aisle capabilities, which use electronic kiosks to help consumers find goods or order out-of-stock products. In addition, safety stock is stored across the supply chain and not in a single location. This reduces the amount of safety stock required, as surplus goods can be efficiently transferred across locations and channels to where they are most needed. Furthermore, companies may need to predict how events in one channel could affect another and pre-emptively prepare to ensure orders continue to be processed and fulfilled. To achieve this level of dynamic fulfilment, retailers should put in place automated decision trees that automatically balance speed and cost when it comes to fulfilment, ensuring a high degree of flexibility and responsiveness. 7

9 4. Sophisticated data analytics Around the world, data analytics is giving companies actionable insights into their operations, customers and future trends. Retail is no exception. Macy s, for example, is one of the world s largest retailers, yet it was still relying on Excel spreadsheets to analyse customer data as recently as To better understand customers buying behaviour and improve its promotions, the company implemented data analytics. Now, the company analyses tens of millions of terabytes of information every day, across social media (including Twitter feeds) and store transactions. 12 The strategy has delivered substantial results. According to Kerem Tomak, Vice President of Analytics at Macys.com, Macy s has boosted its sales by 10 per cent by using analytics. Data is now at our fingertips, Tomak has said. 13 In addition, Accenture helped a large global retailer apply sophisticated analytics to determine which products and services were most likely to appeal to consumers. This strategy was underpinned by machine learning, automation, continuous improvement and the ability to accommodate substantially larger data/sets to drive more valuable analysis. By implementing this approach across just one channel, the company achieved a multimilliondollar boost in revenues in only three months. 14 8

10 5. Shared supply chain operations As we ve established, many retailers omnichannel dreams are impeded by a lack of integration across the supply chain. In our experience, to enable true omnichannel capabilities, companies need to break down these barriers. Retailers must develop integrated functionalities across the supply chain, encompassing key functions such as inventory, sales and technology. Going one step further, these shared supply chain operations enable companies to have a single view of their customers by getting their channels and facilities to work together. Each area of the business can harness the unique skills of another, allowing retailers to enhance key metrics such as order fulfilment times and customer satisfaction. By developing such omnichannel capabilities, retailers are well placed to enhance their internal supply chains and overall operating efficiencies. For example, by creating visibility across all channels, companies can derive greater benefits from analytics specifically by using real-time data to reduce transport costs and ensure warehouses operate more efficiently. In this way, omnichannel capabilities are being used to drive improvements across the entire supply chain. 9

11 Making the transition In an omnichannel environment, retailers may need to overhaul their operations from all angles. Our previous report, Don t get left behind: Six ways to transform your company into a seamless omnichannel success 15, focused on the customer-facing elements of doing business. And in this report, we have turned our attention to the backend operations that drive seamless retail activities. In our experience, retailers need to link up the front and back ends to create seamless experiences across the customer journey. For example, many retailers are keen to offer a click and collect option where consumers order online and pick up goods in store. However, to achieve this, companies may need to realign processes, revise key performance indicators and create new job functions. Retailers may need to dedicate a substantial amount of effort to deliver painless shopping experiences across a variety of channels. As we ve seen, some retailers have been slow to embrace the omnichannel era (particularly those in Australia and New Zealand). The important thing to note is that your customers are demanding omnichannel capabilities now. If you don t respond, they re unlikely to show you much patience. In the next report in this series, we will examine how retailers can use digital tools to streamline their operations, such as by implementing analytics to establish high-performance merchandising arrangements. We will also go beyond the consumer lens and explore holistic strategies that can drive effective omnichannel capabilities across the entire supply chain, and consider the implications of seamless retail on the overall retail operating model including performance management and organisational alignment. 10

12 References 1. Forrester Research, Customer Desires Vs. Retailer Capabilities: Minding The Omni-Channel Commerce Gap, January The report was commissioned by Accenture and hybris. 2. Accenture, Seamless Consumer Retail Results, February Accenture, Don t get left behind: Six ways to transform your company into a seamless omnichannel success, SiteCollectionDocuments/Local_Australia/ PDF/Accenture-Six-Ways-to-Transform-your- Company-Into-a-Seamless-Omnichannel.pdf. 4. Greenblat, E. Australian retailers get serious about online shopping, The Sydney Morning Herald, 22 March 2014, business/australian-retailers-get-serious-aboutonline-shopping l5.html. 5. Tasker, S. J. Richard Goyder says Wesfarmers must stay lean, or be eaten by foreign competition, The Australian, 29 October 2013, richard-goyder-says-wesfarmers-must-staylean-or-be-eaten-by-foreign-competition/storyfn91v9q Forrester Research, Customer Desires Vs. Retailer Capabilities: Minding The Omni-Channel Commerce Gap, January Accenture, Seamless Consumer Retail Results, February Ibid. 9. Forrester Research, Customer Desires Vs. Retailer Capabilities: Minding The Omni-Channel Commerce Gap, January Accenture, Seamless Consumer Retail Results, February Ibid. 12. Gustke, C. Retail Goes Shopping Through Big Data, CNBC, 15 April 2013, id/ Ibid. 14. Accenture, Accenture big data analytics boost retail revenues by accelerating suggestions via e-commerce channels, 2013, com/sitecollectiondocuments/pdf/accenture- Large-Global-Retailer-Big-Data-Analytics-Boost- Revenues.pdf. 15. Accenture, Don t get left behind: Six ways to transform your company into a seamless omnichannel success, SiteCollectionDocuments/Local_Australia/ PDF/Accenture-Six-Ways-to-Transform-your- Company-Into-a-Seamless-Omnichannel.pdf. About Accenture Accenture is a global management consulting, technology services and outsourcing company, with more than 293,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$28.6 billion for the fiscal year ended Aug. 31, Its home page is Accenture Retail Retail continues to change at a dramatic pace, with shoppers evolving their habits and raising their expectations faster than many retailers can adjust. Through value-driven strategies, Accenture is helping retailers operate seamlessly across channels to create a greater experience for customers. More information Olaf Schatteman Managing Director Accenture Strategy Accenture Asia Pacific olaf.schatteman@accenture.com David Mann Managing Director Accenture Strategy Accenture Australia & New Zealand david.mann@accenture.com Robert Kinkade Senior Manager Seamless Retail Lead Accenture Australia & New Zealand robert.kinkade@accenture.com Copyright 2014 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture