Wednesday, January 7, 2009

Multi-channel Retailing: Are You Up To the Challenge?

Almost all big retailers today will consider themselves as a multi-channel retail company. Web-commerce has taken a strong hold on the retail landscape, and emerging user habits continue to point to an ever increasing share of retail spend on the web.

Retail is one of the largest sectors in the US economy. The U.S. Bureau of Economic Analysis reported the 2007 GDP of the country to be $14,000 billion, out of which $4,041 billion was retail ( That makes retail account for almost a third of the total economic activity in the nation. Within retail, the CAGR for conventional retail is approximately 4.8%, while the online retail sector has grown at a CAGR of 25.4%. While the online growth must plateau out with time, it is still reported to be anywhere between 11 to 17%, with Forrester Research estimating the online retail to cross $200 billion this year. The point is, online retail is here to stay; most retailers have invested heavily in the technology to support online retail channels; and will continue to so as this is the most logical growth channel at present time.

Given the above scenario, the question in the title seems funny to ask. Till you consider the the gaps between an ideal multi-channel retaining operation, and the current deployments at some of the largest retailers.

Having the ability to sell through multiple channels is simply the start. Multi-channel retailing offers so many potential opportunities for the traditional retailer to create synergy, enhance operational efficiencies, reduce costs, and enhance user experience that it is an obvious choice to implement these changes, that would allow a retailer to achieve most of the above.

On-line retailers have given tough competition to traditional retailing, however, traditional retailers have a lot more going for them if they choose to leverage their assets when planning a multi-channel play. The three main areas to consider are as under.

Integrated Assortment Planning:

  1. Do you have integrated assortment planning capabilities for physical and virtual channels?
    • That supports consolidated assortment planning, and therefore supports corporate level merchandise planning objectives.
    • That supports compatible assortment spread, with core assortment defining the core category attributes, and extended assortment supporting the cores assortment and extending these category attributes.
    • That allows for integrated product and category portfolio analysis for profitability, affinity, market basket, and similar analysis.
    • That allows for aligning all the channels with the customer segmentation, and product positioning approach supporting corporate strategy and goals.
  2. Do you have clearly identified core and extended assortments?
    • Core assortment that is common to physical stores, and the virtual channels. The core assortment is targeted at the core customers of the retailer, and depending on the retailer's product positioning, this may be generic, or highly differentiated.
    • Extended assortment expands the core assortment, and is typically only available through non-store channels. This further accentuates the targeted segmentation and positioning of the retailer.
    • Core assortment is best suited for leveraging common logistics planning, execution, and operations. This is typically not a candidate for vendor drop-ship operations.
    • Extended assortment should be evaluated for fulfillment options that may be fully owned, or operated by the retailer. Such options include vendor drop-ship where the volumes are low, and/or product differentiation is high; VMI (vendor managed inventory), 3PL fulfillment options, etc.
  3. Clearance & price realization.
    • Having a common assortment also supports pricing strategies for best price realization, seasonal ramp-up and downs, regional changes in demand across channels, and categories.

Integrated Supply Planning:

  1. Do you have the capabilities for consolidated demand and supply planning?
    • That allows to plan for all the merchandise demand together irrespective of the channel that would finally sell it?
    • That allows you to have a consolidated view of all forecasted demand, on-hand, and on-order inventories?
    • That allows you to have an enterprise-wide view of inventory layers?
  2. Do your processes support consolidating sourcing, negotiating, and ordering?
    • That allow you to leverage total demand across channels, and therefore allow you to have a clear view of the total projected spend with a vendor for all categories of merchandise?
    • That help you negotiating the right contracts, at the right prices, and optimize the contract terms?
    • That help you raise and manage common purchase orders for the common merchandise, across all the channels; while simultaneously allowing you to allocate dynamically as the vendor acknowledgements, ASN, and merchandise arrives?
    • That help you construct and leverage a consolidated projected inventory view?
  3. Do you have common warehousing, and distribution operations?
    • That allow you to leverage the same inventory stock for replenishing stores, as well as for fulfilling online demand?
    • That allow you to provide in-store pick-ups for core as well as extended merchandise?
    • That allow you to leverage your dedicated fleet to make multi-stop multi-leg deliveries on their daily routes combining store, and customer deliveries when such opportunities exist? How about picking up customer returns?
  4. Do you leverage consolidated inbound shipments planning?
    • To reduce the total inbound shipment expense on transportation?

Integrated Store Operations:

  1. Do you have the capabilities for supporting a unified customer experience across all your channels, call, click, mail, or visit?
    • That supports a common customer view?
    • That supports a common order, and fulfillment view?
    • That supports a common pricing, will-call, delivery options?
    • That supports a seamless "customer case management" for enhanced customer satisfaction?
    • That supports a common product catalog, that is dynamically configurable for supporting a call center customer service rep, a web store front, or a store kiosk?
  2. Can your systems support endless aisles?
    • By having a common catalog across channels, physical stores, and web-stores?
    • By having a consolidated near real-time view of all inventory across all channels & stores; and the ability to view, reserve, and open inventories across these entities?
    • By having all the capabilities available to all associates supporting customers irrespective of their location, channel, and store affiliations?
  3. Can you leverage all the channels, and fulfillment options for product clearance and final disposition events to optimize your realized average prices?
    • By dynamically moving inventories where desirable?
    • Or by deploying multiple fulfillment methods, and selling channels that support direct delivery to customer, or store pick-ups?

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