Omni-channel is Only as Good as the Supply Chain
If my family’s buying habits are any indication, Omni-channel Marketing and Commerce are the two most important things that retailers and consumer product companies should be working on right now. Today being Cyber Monday, Omni-channel Commerce is the topic du jour.
The essence of Omni-channel Commerce is to allow customers to buy products anywhere at anytime and let the customer get the product(s) in the most convenient manner as soon as possible. It certainly takes more than building and deploying a responsive and scalable commerce website and mobile application to support Omni-channel Commerce profitably.
While Omni-channel Commerce is clearly essential for retailers amid the onslaught of Amazon and other pure-play e-tailers, it is also increasingly necessary for consumer products companies and brand owners. Take for example Dollar Shave Club, which is boisterously attacking the mens’ shaving category. It is an unusual and potentially profit-sapping competition for a company like Gillette, a division of P&G, which relies primarily on traditional retail distribution channels. Gillette might lose marketshare and mindshare if it does not respond to competition from the likes of Dollar Shave Club. These type of competitive puzzles abound in many Consumer and Business-to-Business product categories.
The answer clearly for retailers and brand owners is to develop Omni-channel Commerce capabilities, continually experiment and improve those capabilities. They key goal, of course, is to support Omni-channel Commerce profitably. The Webvan debacle of dot com era continues to cast an ominous shadow, however. Fortunately and thanks to the likes of Uber, Google Express, Postmates and Deliv, the last mile ecosystem to support Omni-channel Commerce is getting better, ubiquitous and cheaper.
At the same time, the design and implementation of the rest of the supply chain, including distribution centers, transportation options, inventory placement, is just as crucial to ensure profitable Omni-channel Commerce. The picture below shows a highly simplified supply chain designed to support Omni-channel Commerce (and/or a consumer product company that is operating in an Omni-channel environment).
It is clear that behind the glossy and responsive website and mobile application is a substantial real world infrastructure that makes Omni-channel Commerce possible. The key, however, is to have a supply chain that can fulfill the promise of Omni-channel Commerce profitably. Omni-channel Commerce adds a number of complexities that are usually not present in traditional retail or pure e-tail channels, including
- Order online and pick up from store
- Product availability in stores for online order fulfillment
- Integration of non-traditional, low cost last mile delivery options
- Inventory positioning
- Retail store as a warehouse
- Returns processing
- Short-term inventory rebalancing
High customer acquisition costs and logistics costs continue to make life difficult for pure play e-tailers as they struggle to earn a reasonable return on investment. On the other hand, a well designed and operated Supply Chain for Omni-channel Commerce builds on the strengths of traditional retailers and provides a competitive edge that cannot easily be replicated by pure play e-tailers or category specialists like Dollar Shave Club.