The Rise of Omni-commerce and its reflections on Supply Chain Management Erhan Musaoğlu Çağdaş Yıldız Büşra Kurt
The Rise of Omni-commerce and its reflections on Supply Chain Management As of today it s obvious that evolution in technology has a direct and breakthrough impact on evolution of retail. No doubt internet coming into our lives deeply and the unlimited no of customer touch points for people have the primary impact in this evolution. Retail is facing a more demanding and more powerful customer every day. As a result of evolution in technology and change in consumer behaviors, many different sales channels have risen to access the consumers. The evolution of retail from a channels point of view can be examined in 4 different groups. These groups represent the variety of channels and also how channels are treated as a whole. These groups are Single Channel, Multi-Channel, Cross-Channel and Omni-Channel. Single channel is called to be the brick-and-mortar companies who operate only in physical stores. The physical stores are the only touch point between the brand and consumer and the consumer shops in the physical stores with no other alternatives. In cross channel which was an inevitable consequence of multi-channel, the consumer is able to go through shopping experience in multiple channels of the same brand. Besides, the brand can offer logistics services with common stocks and operations for the all channels. E.g the order of e-commerce channel can be fulfilled by physical stores depot. On the other hand, cross-channel offers use of mobile devices and applications in shopping experience and allows time saving for the consumer.
Omni-commerce We live in a fast-changing world. The number of customer touch points is exploding. Innovation and agility are critical factors for business success. Today, companies need to be able to sell and communicate consistently across online stores, smart phones, tablets, social networks, and any internet-enabled devices. New customer touch points are emerging every day and no one knows which touch points will be respected by consumers. That s why companies need to keep up with new innovations and they should be ready to take advantage of those as they emerge. However, there are some challenges: The pace of innovation accelerates dramatic: Leading brands such as Apple and Samsung, as well as growing social media phenomena like Facebook, Twitter and Instagram are innovating continuously at dramatic speeds. Customers are also keeping pace with the innovation speed hence often pushing these channels for innovation. However, many retailers are struggling to keep up with evolving expectations and the exponential increase of customer touch points. Channel and product based processes and infrastructure fail to respond to innovation: Many companies have developed processes and systems with the channel and the product, not the customer. Furthermore, they are mostly standalone solutions with no communication with other systems. The ultimate result is that they fail to deliver value to the customer and lack the functionality required in today s omni-channel world. Cumbersome IT inhibits agility: It is difficult to come with a conclusion that which touch points will be widely welcome by the consumers and which ones are destined to extinct. It is also difficult to estimate the potential business benefits of a new touch point. This brings out the conclusion that companies can t afford to invest in lengthy, cumbersome IT processes to integrate each new touch point. Commerce Universe: Unique Shopping Experience through different retail parties The most outstanding feature of omni-commerce is providing a seamless shopping experience to the consumer across all channels. This means that when the consumer purchases an item of a brand from any channel, he/she will encounter the standard service personalized for him/her. Many retailers create their own e-commerce sites without considering that it s a challenging business case without adequate scale of fulfillment business. The alternative of selling through e-retailers such as Amazon.com or Hepsiburada.com and other consolidator sites can bring large amount of sales potential. Today, many retailers are doing this well since they fail to develop extensive strategies for collaborating with e-retailers. As a matter of fact, omni-channel model and its ultimate purpose to offer consumers unique service will push retailers to collaborate with e-retailers, department stores and any consolidative businesses. Many retailers create their own e-commerce sites without considering that it s a challenging business case without adequate scale of fulfillment business.
As a result of this collaboration, the consumer will get the same level of standard service for the same brand in different retailers; hence wherever he/she buys the item of the brand, he/she will face the same service and standards. E.g when a consumer a purchases an i-phone at consolidator sites such as amazon.com, he/she will be able to return it at an Apple Store in Atlanta or the other way round. Omni-channel will push all parties of retail for a tight and extensive collaboration thus the competition between brands will run through their overall retail chains. This is called Commerce Universe that means collaboration between brands and retail parties letting them taking the full responsibility of another brand. Not an extension of brick-and-mortar Many brick-and-mortar retailers try to setup their e-commerce, m-commerce businesses and many others. Most of these companies address e-commerce and other channel businesses as an extension of their brick-and-mortar business, keeping it in the center. With ignoring the different processes and strategies required for different channels, they do a completely wrong startup. In order to leverage the sizeable opportunity in different channels and compete profitably, the retailers need to orient their organizational capabilities, internal processes, and content. Besides, they must do these without jeopardizing their relationships with their traditional channel partners. The retailers must embrace a truly omni-channel strategy. SCM Impact of Omni-commerce The history offers a big deal of changes where at certain points in time, several forces gather to spur significant change. The industrial revolution, the age of computers, and the internet, are all examples of these landmarks that rapidly shift the trajectory of the world. The supply chain is in the middle of one such landmark caused by a retail model called omni-channel. The companies and brands who can transform their supply chains fast to offer omni-channel shopping experience for the consumer will be the ones who deserve to move forward. Those who don t are destined to extinct. Why is omni-channel causing a landmark? In omni-channel, there are changes in three key areas the role of the store, the role of the DC and the way product is positioned. The changing role of the store is obvious when offering superior services such as shipment or pickup of online orders is considered. However, stores are also now being used by consumers as research sources. Before ordering online, consumers want to see, touch and try on the product or ask questions. This change definitely affects how product is positioned; how store staff is trained, equipped and compensated.
Omni-channel model also has dramatic impact on distribution centers. As mentioned above, when e-commerce channel is first embedded into the sales model of a brand, order fulfillment was mostly done in separate operation centers. In order to simplify fulfilling the increasing volume of omni-channel orders and benefit a single pool of stocks and operations and, workforce; fulfillment operations are being gathered in single operation centers. However, fulfilling small e-commerce orders and shipping small parcels requires totally different processes than replenishing stores with pallet and picking algorithms and truckload shipments. The way of doing business in the distribution centers need to be reengineered, workforce needs to be retrained, and maybe automation equipment needs to be implemented. All of these similar changes must be implemented together to provide seamless and superior shopping experience for consumers. Merchandising should also change with the rise of omni-channel. The omni-channel model represents the radical state of the consumer-driven economy and the consumer-driven economy will never be satisfied with the traditional push strategy based on the product and channel. The consumer and his/her preferences should be understood well, responded fast. The combination of the change in the store, distribution center and merchandising cause the landmark in retail and supply chain management. Innovations in Retail With the rise of omni-channel, many technological innovations are brought into the retail world. These innovations common purpose is to offer consumers better, standard, personalized and unique customer service. Of course retailers apply these innovations to be one step closer to the consumer and move forward in the competition. The retailers started using technology desks in their physical stores in order to offer faster and more effective service to the consumers. GSM companies started building technology desks in their service centers. At these desks, the consumers are offered first-line expert support for tasks such as phonebook transfer, application installation, internet and mobile modem settings.
M-commerce is rising rapidly in the whole world. Today 65% of world population is using smart-phones and people are surfing the internet mostly with these devices. Retailers are now providing free Wi-Fi and also developing mobile compatible e-commerce sites. M-commerce is definitely being one step closer to the consumer since through their smart-phones they have access to the brands anytime, and they have the opportunity shop even while walking their dogs. In retail, the consumer has a greater role than a king. The consumer, even with a one touch of a finger, makes a purchase on the other side of the world and receives the item in 24 hours, regardless of the location, also 7/24. In this case, speed is one of the most important success factors in this new generation of retail. Popup stores that provide fast access to the consumers, self-service kiosks, same day delivery are the new trends to be applied by retail. The consumer, even with a one touch of a finger, makes a purchase on the other side of the world and receives the item in 24 hours, regardless of the location, also 7/24. THE KING OR MORE? The retail is evolving with new technologies and innovative players continuously. The players in the market such as Amazon are developing superior technologies to be closer the consumer. Amazon s dash button lets you stick a wireless button on your washing machine for you to order washing detergents as soon as you need it. There are innovations such as fast delivery drones, delivery to lockers, NFC, scan as you shop, buy online pickup in store, hologram, augmented reality, virtual store etc. that simplify the shopping experience for the consumer.
Customer Loyalty Through Gamification Despite massive marketing investments in websites, mobile apps, and social networking channels, the new generation consumers hop from one site to the other and product to product faster than ever before. Efforts to harness them and turn them into customer advocates are failing. Marketing people are fighting for consumers time, attention, and loyalty. The result of this engagement crisis is more than 50% of consumers are completely inactive in loyalty programs. Marketing people need a new way to recognize, influence, and reward valuable behaviors that shape consumers who will be both active and loyal for long time. Offering enhanced gamification features empowers retailers to build stickier user experiences for consumers across all their channels. Applying gamification methods and strategies, companies can drive, influence and reward valuable user behaviors everywhere. What s there around the next corner? Parallel to the acceleration of the rate of change in the world and in business, the next landmark is coming right on top of the current one. The emergence of the Internet of Things (IoT) and 3D printing will drastically change supply chain operations faster than you might think. The retailers will need to complete their omni-channel transformation before facing this next step.