Omni-channel Implementation Lessons Learned
Change has to be adopted at the grass root level
By grass root, we means folks who are working in the stores and making difference as to how your customers are serviced each day. Much has been said but change management at the Store level, but this point cannot be emphasized enough. The point was reemphasized at a women’s fashion retailer where the program almost failed because stores could not relate to the e-customer as one of their customers. In this example, the stores were intentionally rejecting the web orders for fast selling items because they feared the web orders will deplete the stock of product that draws their customers to visit store. As we know in fashion business the season is short and stores often never get second shipment of that fast selling item back again. Buyers at the corporate knew the product they were trying to fulfill out of stores was close to a markdown cycle where store associates did not. The point being, folks whose jobs are changing have to be very clear of why it’s changing, what are the new expectations, and how it fits in the overall organizational change.
Consistent customer experience across all paths is often overlooked
If your customer is used to receiving a shipment notification within 24 hours of placing an order they, should expect the same service level when the order is fulfilled from Store. The store cannot possible match the efficiencies of a distribution center and therefore its important that the store fulfillment schedule, labor plans should be made such that an organization SLAs can be achieved across locations. Along similar lines, the packaging of the shipment, personalization for store fulfilled orders should be consistent with the overall organization. More than once, we have experienced this aspect of the customer experience being ignored during the execution of the program to be corrected later.
Define and measure the right KPIs
The omni-channel programs such as ship-from store help in driving up top line benefits and very rarely are there cost benefits. Also, it is fairly hard to carve out and tell with high confidence the incremental top line benefits due to such programs. To add some perspective, let’s say ecommerce channel records 5% sales lift (all else equal) after launch of ship from store program. It is likely the entire 5% is not incremental sale and in the process some cannibalization happened for otherwise store sale. Going by a measure like this one could drive a certain organizational behavior that could hurt the organization in long run. The bottom line is that the customer shopping behavior is changing and omni-channel enables customers to shop in the way they like so there is a somewhat of a necessity for such programs. However, the success of the programs should be measured and some of the KPIs we recommend clients to measure are a) Order ship accuracy b) Time to fulfill c) Split shipments amongst others.
Be prepared to learn from unique set of operational challenges
We heard from more than one retailer that stores have trouble picking the correct item going by the product description, which is often very short or cut out due to byte space constraints. If the item description says something to the effect of “Polo Blue shirt Size M”, there is no way a picker can get the right product. In warehouse environment all pick locations are marked, and pickers are told which aisle/shelf/bay to pick the items from; whereas in a store environment, a picker has to go by product description. Some retailers have tried to address the issue by printing pictures of the items on the pick-ticket to help with picking the right item that customer ordered.
Technology will be the critical enabler
Most retailers we have worked with in the past were running store POS systems from nineties that generate sales data in the form of nightly t-logs. A centralized order management system that is expected to make order sourcing decisions requires real time inventory positions to know which stores have the product in-stock to avoid a guessing game. Incorrect or a delayed inventory picture could mean a store getting an order for an item that is sold-out, an unaware picker wasting time searching for that item, and eventually rejecting the order. And as a net result, customer getting their product late from a different store that actually has the product. Omni-channel transformation invariably comes with technology changes, and implementation of new systems that are real-time and enable enterprise order orchestration and fulfillment. With new systems comes the need for IT staff proficiency with the new technologies and capacity to take on these projects. We have seen on many occasions both IT capacity and capabilities become a challenge at deploying these new systems. Successful organization have been able to draw out a future state systems blue print that enables business objectives and with a close partnership with the business, define a road map to get there with each stop delivering incremental technology capabilities to the business.
To conclude, in Part 1 of this series, the retail landscape has never witnessed as much disruptive innovation as we see today. With the explosion of sales channels, much faster growth of digital channels (or stagnation in traditional channels) and most importantly changing customer shopping habits, much greater channel integration is imperative to grow or even remain competitive. The transformation starts with defining the strategic factors, assessing foundational capabilities and using that to agree with flexible fulfillment priorities. Ship from store delivers on several of the key strategic factors, has good composition of leveraging existing and new organizational capabilities and as a result is the most widely implemented as the first flexible fulfillment program.
In our experience, Ship from Store provides a strong foundational omni-channel capability managing risk and change within the organization. Once the Stores have embraced the change, the channel boundaries have started to blur in your organization, technology capabilities are in place some of the more complex fulfillment programs such as buy online and pickup in store, return anywhere, order in store deliver at home can be built fairly quick using the foundational work.