Lockdowns and the flexibility of omni-channel retail has seen online services flourish over the past 18 months, with on-demand delivery now the norm. Michelle Mooney explores why supply chains form the backbone of every omni-channel distribution service…
Establishing an omni-channel logistics operation in retail allows for a more efficient supply chain, giving consumers the freedom to purchase goods either online, in a bricks-and-mortar store, or even check virtually if a product is in stock in a physical store. According to recent research from Klarna, 89% of shoppers use multiple channels to search and spend yet the research highlights that physical retail is still an important channel, with 51% shopping at retailers’ physical outlets. It’s no wonder omni-channel retail is proving so popular.
However, there are some challenges with omni-channel distribution, which Mel Tymm, Industry Principal at Naveo Commerce, points out. According to Tymm, organisational problems may occur from fulfilling orders from one group of stock when allocating products to the various channels of an omni-channel retail model. For example, making sure that an incorrect product is not delivered to a customer is essential if a company wants to see repeat business. Added cost to the business, with increased delivery packaging and returns, is another concern, as is fear that e-commerce could take sales away from physical stores.
A report by McKinsey & Company suggests that, to make omni-channel successful, reparation is essential, however many retailers are “plunging in headfirst” to keep up with competitors and don’t do enough research into what it takes to run a successful operation. This often leads to retailers investing in a host of new technologies without fully planning every eventuality, which can result in businesses wasting money on solutions without a significant ROI. Thus, without planning and a clear ambition, “retailers often end up with fragmented investments that destroy value”, the report states.
However, Tymm says that if businesses do plan for every eventuality and invest in the right technologies, then the omni-channel model can be ideal. “By implementing an omni-channel strategy, retailers can avoid siloed stock being wasted in one channel while being in high-demand in another.”
Visibility is key in omni-channel distribution as it allows for full insight into available stock and where it needs to be moved to. Mel Tymm at Naveo Commerce says having visibility over stock can not only help eliminate any losses but more easily direct goods to where they need to be. “The technologies being utilised are primarily integrated and unified systems that allow products in the retail estate to be incorporated with the back-end of the retailer’s e-commerce site,” Tymm says. “By doing so, products can be viewed in real-time and reserved by either customers or store employees when needed.”
Omni-channel can therefore be valuable in both the fashion and grocery markets where seasonal items typically go to waste. Deploying a successful omni-channel distribution model can lead to huge benefits for the customer as it allows for almost seamless, low-pressure shopping when they choose to buy online. Furthermore, if the operation is carried out properly, it can lead to big profit gains and, importantly, customer loyalty.
AI also allows operators to streamline omni-channel distribution models. According to Wayne Snyder, VP for retail industry, EMEA, at Blue Yonder, AI allows visibility to ensure products are in the right place at the right time, and ready for delivery to the customer. What’s more, in the current climate, consumers expect brands to “always be on”, says Sian Hopwood, EVP, local business units, BluJay Solutions.
Customers also expect businesses to provide real-time product information, such as “whether a product is available in a particular store, and delivery time frames,” adds Hopwood. This requires two things: “Visibility into inventory levels and the capability to communicate real-time information to partners, suppliers and customers alike.”
There is now no escaping the expectation that goods can be ordered and delivered at pretty much any time the consumer wants. And if brands want to keep customers happy, adopting an omni-channel model is essential. It has been particularly vital over the past 18 months with lockdowns leading people
to work from home and many non-essential stores closing.
For the businesses that had a very weak online presence, or no presence at all, sales from brick-and-mortar stores tumbled and, for many, these figures were not enough to save them. For example, Arcadia Group was one of the largest retail businesses to go into administration. Thus, to keep up with online demand, retailers are increasingly adapting their supply chains to a ship-from-store model.
As we move past the pandemic, “the appetite for using stores to ship local orders is continuing, creating ongoing demand for last-mile delivery and growth opportunities”, says Ken Fleming, President of Logistyx Technologies, who states that the global courier market is expected to grow by 11% from 2021 to reach US$722 billion (£538 billion) in 2023. The omni-channel model, thus, shows no signs of slowing down and, if retailers are looking to succeed, this form of omni-channel service could be particularly useful for the FMCG market, which, as the name suggests, requires fast and reliable decisions to limit losses and satisfy customer needs for repeat business.
According to Fleming, opening-up stock from a physical store for home delivery will give retailers more flexibility and help to negate the problem of fewer people shopping on high streets. “Adopting an agile approach to shipping and fulfilment helps retailers work more effectively to increase responsiveness and improve the customer experience,” he says.
The gig economy also helps solve problems with wait times as orders can be shipped directly from a store or restaurant to the customer, rather than be processed through intermediate stops such as DCs. Gig workers often operate in a particular area, thereby eliminating the need for retailers to use full-time shipping company employees – which, Fleming adds, are difficult to find now following the HGV driver shortage. The gig economy can therefore be an invaluable means of delivery in the omni-channel model.
In a world where a t-shirt can be ordered at 3am and delivered the same day, it’s crucial to have the right automation to keep up with demand. AGVs and AMRs, for example, are especially helpful when looking to upscale warehouse operations. These machines can carry out many of the tasks human employees can, yet can work 24/7 if needed. And it’s not just the warehouse that can benefit from automated vehicles; autonomous and electric vehicles “will transform the last mile”, says Snyder, as they allow for better visibility and tracking, as well as better communication with customers.
It is this sort of technology that provides a lot of flexibility to an omni-channel model, and with retail competition growing, those that are flexible, will be the ones that survive.