How To Deal With Merged Channel Inventory?Written by Evan Schuman
As merged channels (also known as omnichannel) become the default for an increasing number of retailers, the challenge of efficiently handling the supply chain and managing inventory becomes exponentially more complex. The goal in a merged environment is channel agnosticism, in that the chain’s management shouldn’t care whether a customer starts a transaction in mobile and completes it in-store or starts it with the call center and tenders the transaction online or if the research, purchase, payment and pickup are each handled with a different channel.
Store management should care as much about whether a transaction started in mobile or in-store as for whether an in-store entered the store through the South entrance or the West entrance. True merged channel thinking would say, “What do I care how they came into my store as long as they came in?”
Alas, today’s retail reality is overflowing with conflicting incentives and bonus/commission plans that make retail executives care very much about how a shopper comes to them. Much of this happens to the detriment of the sale, as shoppers are forced from one channel to the next, with no regard to making the shopping experience as easy and quick as possible for the shopper. These programs must allow shoppers to use any of the channels they want, however they want and it must be easy for them to do so.
But how to deal with that supply chain and those inventories? We’ve looked at some of the more interesting approaches for dealing with these retail merged channel inventory challenges, to help give you some ideas of improving your own merged channel challenges.
Fulfillment is becoming one of the most popular retail trends and is being tested or fully deployed today by Best Buy, Macy’s, Walmart, ToysRUs and Target, among quite a few others. But it’s not without its challenges. Macy’s, for example, has been struggling with its shopper-friendly policy of allowing merchandise to be returned to any store.
The problem? Each store is encouraged to have its own inventory, something that will sell well with the customers in that geography. What happens when a product is returned to a store that knows that it can’t sell that model? The answer was ship-from-store for e-commerce, so that wayward shoe could be sent to a store (or an online customer) where it’s wanted.
Ahhhh, but then there’s another problem, a price/discounting/cost-of-shipping spreadsheet calculation type of problem. Could that store—the one where the shoe is not part of the inventory—sell it anyway, albeit at a discount? How much of a discount will be needed? Even worse, is the shoe now out of style? Yet more discounting.
Instead, let’s ship it someplace where it’s wanted. How much will it cost to ship to a friendlier store versus someone who has just purchased it online? And factor in whether that online customer will pay full price and the store might have to discount anyway (albeit to a lesser degree than the first store). Where to send it and how? That’s an awful lot of work to just support a policy of “you can return it to any store you want.” Whoever said “customer-friendly isn’t cheap” quite possibly worked at Macy’s.
Same-day delivery is really “a delivery XX hours from now” approach. Thought of that way, it’s tailor-made for mobile. On the train going into a meeting and you realize something you’ll need for a meeting tonight. Same-day delivery requires access to a local inventory, generally from within local stores or, if you’re lucky, you have a local warehouse.
But some services can deliver cross-country delivery within a few hours, if everything is done perfectly. This places an entirely new burden on inventory, while delivering new opportunities for revenue. Most chains will not be able to quickly deliver such a complex supply chain. If you can, that’s a huge strategic advantage, winning you the bulk of the sales from those people on those trains. When you’re the only one that can fulfill quickly enough, your pricing no longer needs to be so low.
Some sites have mechanisms in place to deal with returned products. When a product’s reason for return does not involve an allegation of a malfunction or a quality issue and is more along the lines of “This color was not what I thought it would be” or “I inadvertently ordered the wrong size” or “I accidentally ordered two and we only need one,” then the system can route the returned product to a store that can fulfill it online. In effect, the system can connect the dots between online shoppers who want to buy an item with that item being returned by other customers. The product still needs to be routed to a store or a warehouse so it can be checked and repackaged, but it’s additional inventory that some are not factoring in.
When mobile shoppers are interacting with your site while they are in an area far from their home area, use the fact that they are less likely to know where stores are or who carries what. Let’s say a shopper is searching for a very specific television and they do this while in their home base of the Boston area. It just so happens that no one has that specific television in stock locally.
But what happens when their phone signal suddenly pops up in Dallas (business trip? visiting a relative? on vacation)? Turns out that your Dallas store has that specific TV in stock and on display.
You could message this fact to them and ask if they’d like to see it? And if you do, I can get you that specific set at 15 percent off. Looks like it’s only 3 blocks from your hotel, too. For a chain with stores in many states and mobile shoppers who constantly broadcast where they are, sales opportunities exist in unexpected ways. Surprise and impress your shoppers with your attention.
Some chains, including Nordstrom and Macy’s, have already been doing this for years, using courier services (and sometimes their own associates) to deliver goods to various places in major cities, especially key hotels.
In certain retail segments—consumer electronics is the most obvious—where upgrades to another model and replacements are common—chains can use discounting and other inducements to bring older merchandise (which can be reconditioned and sold again) back to the stores.
Regardless of repurposing older items, the practice of flagging shoppers when their equipment hits a certain age where an upgrade is likely is to be encouraged (three years for a printer, two years for a portable navigation device, 18 minutes for an iPhone, etc.). But this is typically done to push sales of the newer higher-margin devices. But what if the chain looked at it from the other perspective, where the goal is to resell (at an even higher profit) that already-sold device and sell the new one as the proverbial icing on the HTML cake?
Mention merged channel or omnichannel to a retailer and they’ll think about Web sites, mobile sites, mobile apps and in-store. Push them a bit and they’ll factor in warehouses.
But call centers are the forgotten merged channel element. (Well, call center and catalogue, but catalogue usually deserves to be forgotten.) How strategically is your call center being used?
Are they just answering basic questions and pushing the product upgrade of the day? Or are they being used to truly probe shoppers to better understand what they need, what they want and how they can be made happier? Are the answers that the call center reps get—on those rare instances where they actually are proactive enough to ask deeper questions—getting back to the sales force and to product management? What access are you giving your call center? Can they see a customer’s Web activity? Mobile activity? Can they access an in-store purchase history? Have you empowered your call center to truly help you make revenue goals?
Does the system remember? When a customer is in-store and is scanning garments of a very specific size and a very specific type and then does a search, does the screen offer to limit the search to that size and garment type? Or does it deal with every action as a separate step, forgetting it the instant it’s completed?
If shoppers are being nice enough to use your app to scan price tags, there is a ton of information that they are
giving you, data that you can instantly turn around to make the experience easier for them. Use what you’re being given.
One of the big developments that started last year was being able to pay with cash for online purchases, something that Walmart started. The process typically bounces the customer back and forth between channels, though. A shopper starts in-store and can’t find the desired SKU. An associate suggests that they get it online.
The shopper replied “I only want to pay cash.” The associate replies: “No problem. Just choose the cash payment option. Once processed, you can just come back to the store within 48 hours, pay with cash and the online order will then proceed and ship to your house or to the store, depending on which option you chose.” And the customer thinks it sounds great and begins the process.
The customer makes the cash online order and returns to the store the next day to hand over the greenbacks. But the plot thickens. That desired SKU has now arrived at that store, courtesy of an overnight truck. Most cash-online systems have no way to flag to the shopper (and the associate) that the item now happens to be in stock.
The rational reaction is for the online order to be canceled, the delivery charge zapped and for the customer to just grab and pay for their item in-store. But that doesn’t happen today. Shouldn’t it? Internal politics are an issue here, as it’s taking revenue out of the mouth of online and giving it to in-store. Aren’t those battles exactly what merged channel/omnichannel is supposed to have eliminated?
Remember the problems we just discussed about cash online? Much of that problem would be gone if the chain’s supply chain was better organized and communicated. Had it been, the system would have told the associate that the missing item is slated to be delivered to the store that night. Would have saved a lot of hassle that way. That also might have saved the sale had the customer not felt like playing the game of multi-channel Ping-Pong.