The age of omnichannel: Why retailers need to go 'all-in'

ByChris Shaw, senior director of product marketing and analyst relations, Manhattan Associates

In today's retail landscape, retailers face extreme pressure to deliver an exceptional shopping experience for consumers across all channels. Consumer expectations for shopping have evolved drastically and will continue to do so. With these changes in shopping behaviors (and expectations), the importance of successful omnichannel adoption — and the urgency with which that adoption takes place — becomes ever more critical for retailers to remain competitive.  

While many retailers have recognized the need for omnichannel investments, some brands have taken a more gradual, fragmented strategy by investing in a few new features or upgrades that enable specific functionalities, but do not transform the system as a whole. While this may work for certain, simple use cases, this quick-fix will not stand to last. Brands that do not go "all-in" on omnichannel will be hard pressed to deliver new offerings, profitably, and will be unable to completely meet consumer expectations. However, those who fully adapt their systems and processes to this new cross-channel business model will be much more apt to find success in this age of omnichannel.

The new retail environment

Initially, retail transactions only occurred in stores. As the retail industry developed, catalogs, call centers and eventually websites were introduced, and orders placed through those channels were fulfilled from a designated warehouse. Order fulfillment is much more fluid and complex in today's retail environment. Stores now also often serve as fulfillment centers for online orders, which introduces a new set of complications.

Keeping the omnichannel fulfillment promise

When the concept of omnichannel first hit the scene, "buy online, pick-up in-store," or BOPIS, became the first cross-channel function to garner interest and force retailers to rethink fulfillment. The growth and increasing sophistication of e-commerce quickly drove consumer demand for this function — as well as other omnichannel experiences — and retailers were pressured to respond. In the rush to meet demand, many took a piecemeal approach to augmenting their systems, bolting on new technology and processes to what they already had in place.

While these systems fulfilled an immediate need at the time, they were never truly designed for the omnichannel world. And as more channels were introduced and consumer needs evolved, the limitations of these systems became increasingly evident, especially in the areas of inventory visibility and management. A satisfying omnichannel experience depends on a retailer's ability to reliably keep omnichannel fulfillment promises, like a specific order pickup time or same day delivery. These promises can only be made if inventory availability is highly accurate.

The key to omnichannel? Order management

Retailers can't fulfill orders on-time if they lack stock. With the increasing immediacy of fulfillment needs — think same day store pickup or same day delivery — the accuracy of inventory availability becomes even more critical. A key "must have" for effective omnichannel fulfillment execution is a complete view of inventory, so obtaining inventory authority should be a top priority for investment.

For this reason, a strong order management system (OMS) that provides accurate visibility into global inventory is critical. A sophisticated OMS delivers a complete and real-time view of inventory levels across every fulfillment location in the enterprise, including store, in-transit, on-order, and third-party owned/fulfilled inventory. The functions of an OMS are especially important with the rise of BOPIS and stores having to play a greater role in fulfillment processes. Unlike warehouses, stores see two-way inventory traffic and are subject to theft and more general disorganization of stock, making it far more difficult to keep accurate track of product levels. And without a powerful OMS, retailers cannot achieve a complete picture of inventory and can easily run into customer experience challenges, such as a missed store pickup commitment.

Beyond timely and accurate visibility into inventory availability, an advanced OMS also considers how to optimally use available inventory. Intelligent fulfillment optimization can evaluate large numbers of parameters across fulfillment points in real time to ensure available inventory is used in the most efficient, cost-effective way possible.

For example, inventory is available in a specific store, but is ship from store the best way to fulfill a next-day delivery order? The order management system would evaluate characteristics of the store such as historical performance of fulfillment activities, staffing load, in-store traffic and inventory levels before determining if the store is the best option to handle a next-day delivery order. Optimizing how stores are leveraged for fulfillment opens the opportunity for quicker delivery times by leveraging proximity to customers and optimal inventory utilization for profitability and service commitments.

Leveraging the store associates

While the importance of technology investment is clear, going “all in” on omnichannel also means a change in how stores are viewed and utilized. Retailers are looking for new ways to leverage their stores and make the most of the investment in floor space. Often, stores are physically closer to the customer than warehouses, which means an opportunity to meet customer demand for immediacy, like same day delivery. It could also mean saving on shipping fees and cutting shipping times for online order delivery, a critical differentiator in the battle against pure-play e-commerce retailers.

In order to do this, the role of store teams must be redefined. In the age of omnichannel,  store associates are at the front-line of in-store inventory management. Their job includes receiving, adjusting and updating inventory, with precision, to ensure global inventory accuracy. Additionally, they must be able to quickly and efficiently locate product within the store and manage order picking to guarantee fulfillment from the store is completed swiftly and correctly.

As in-store fulfillment becomes more popular, retailers must equip store associates with tools that improve the effectiveness of store inventory management, which in turn improves inventory accuracy, enhances sales, lowers out-of-stock risks and reduces the steps for in-store replenishment. Currently, there is a great opportunity for physical stores to enhance the shopping experience for customers, but in order to do this they must rethink in-store associate duties, training initiatives and the systems that support them.

Omnichannel isn't going anywhere, that much is clear. If anything, the fluid world of multichannel shopping and consumer touch points is only going to become increasingly involved and complex. To succeed in this new retail landscape, brands can no longer get by with minor investments and upgrades. They must go all-in on omnichannel, making holistic, thoughtful investments in both technology and staff. This year, and in the coming years, those who completely embrace and invest in omnichannel will be the retailers beating out their competitors and earning the most market share.