Fulfillment in a Multichannel Retailing Environment:
Consumer Expectations, Proven Strategies,
Organizational Issues, and Technology Considerations
Contents
The Multichannel Retailing Imperative
Consumers Expect an Integrated Multichannel Experience
Proven Cross-Channel Strategies
Buy Online, Pick Up From Store Inventory
Buy Online, Return In Store
Save the Sale with Out-of-Stock Fulfillment
Endless Aisle Kiosks
Technology Considerations
Taking the Next Steps
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3
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Print
POS
Website
Social Media
Customer
Mobile
Call Center
TV
Fulfillment in a Multichannel Retailing Environment
1
The Multichannel Retailing
Imperative
Consumer adoption of multichannel shopping practices has
reached the mainstream, as evidenced by a number of notable,
unfolding trends in the North American retail landscape:
→→ Across the continent, retailers are moving quickly to integrate their physical stores and online channels to create
greater synergies, improve store-level economics, increase
sales productivity, and better leverage both in-store and
warehouse inventories.
→→ A majority (57%) of retailers selling online have increased
their e-commerce technology spending due to the low cost
and relatively high ROI (compared to other IT projects) of
such investments.1
→→ Executing coherent cross-channel strategies is now a top
priority for leading retailers as they ramp up integrated
multi-channel solutions to deliver a consistent, seamless
cross-channel customer experience.2
→→ While shopping in brick-and-mortar stores, consumers
refer to digital channels, with 19 percent reporting that they
browse their mobile device while in-store. The majority
does so to compare prices (66%), with others using mobile
to compare product choices (27%), and read online recommendations (7%).3
→→ Shoppers spend between 15 percent and 30 percent more
with retailers who offer them an integrated, multichannel
experience. In addition, business from multichannel buyers
is 5 percent to 10 percent more profitable, online conversion
rates are more than 30 percent higher and inventory losses
are up to 60 percent lower when virtual and physical stores
are integrated.4
Industry leaders are engaging in multichannel integration
for some very good reasons. More effective cross-channel
strategies lead to more satisfied consumers as well as more
efficient, more profitable retail operations.
One retail industry consulting firm has suggested: “In order to
progress to next-generation retailing, retailers must be capable of integrating multichannel selling, multichannel fulfillment,
and multichannel service capabilities that span cross-channel
order and inventory management, replenishment, logistics and
fulfillment services, and returns processing. Next-generation
retailing insists consumers have many options for where to
shop, return, and pickup or send their purchases.”5
Integrating the offline and online components of a large retail
operation into a seamless merchandising function has its challenges. Different executives and distinct groups of employees
usually manage store operations, supply chain and e-commerce operations, and frequently they have divergent priorities and
goals. Consequently, it’s difficult for retailers to build the internal momentum required to launch a cross-channel initiative.
This paper describes a set of proven cross-channel fulfillment
strategies and their benefits to consumers and merchants. It
also examines some of the business processes, organizational
issues and technology considerations to address when seeking
management buy-in and developing a roadmap towards achieving a fully integrated cross-channel customer experience.
Consumers Expect an
Integrated Multichannel
Experience
During Q1 2012, hybris commissioned a survey of more than
500 consumers in the U.S., across varied income levels and
ages, with an equal distribution of genders. The survey found
that over 80 percent of the responders were more likely to
become loyal customers to retailers who provide an integrated
multichannel experience.
The importance of online and mobile strategies was seen to be
rapidly increasing, with more than a third of consumers (39%)
reporting that they make more purchases online than in-store.
Looking ahead to the holiday shopping season, 46 percent said
they planned to increase their online shopping during the holidays, while only eight percent indicated they would increase
in-store shopping.
According to the survey, U.S. consumers are shopping a variety of
channels and devices, often simultaneously, as new technology is
introduced. Shoppers now routinely expect that their favorite retailers will be accessible to them anytime, anywhere, via any channel.
The study examined consumer shopping behavior and preferences across a variety of channels, devices and product
categories to identify the key features that shoppers look for in
a multichannel shopping experience.
When asked to rank desired features in a multichannel retail
experience:
→→ Almost half (45%) of respondents indicated that in-store
pickup options for online purchases were most important.
→→ Nearly a third (28%) of consumers selected in-store returns
1
Forrester Research, B2C e-commerce Platforms, Q4 2010
2
Gartner Group, Research on Retail Technologies, July 2011
3
hybris 2012 Multichannel Shopping Survey, see page 3 for more details.
4
IDC Retail Insights on Unified Retailing, September 2010
5
AMR Research / Gartner Group, July 2011
for online purchases as most valuable.
Eighty-two percent of respondents would shop again at a retailer who accepted in-store returns for online purchases, and
73 percent were more likely to become a repeat customer if a
store offered in-store pickup. Only a third of these consumers
Fulfillment in a Multichannel Retailing Environment
2
believed that retailers were currently offering both in-store
pickup and returns for online purchases.
A gap was discovered between consumer expectations and
retailer offerings, especially for mobile. Participants indicated
they would be more likely to return to those stores that distributed personalized offers (40%), or in-store mobile promotions (42%), but nearly half of them believed retailers did not
currently have those capabilities.
The study also identified specific factors that would potentially
impact the likelihood of a consumer following through with a
purchase online.
The most important factors for following through with an
online purchase:
→→ Easy navigation (59%)
→→ Simple checkout process (57%)
→→ Presence of product images (42%)
The most important factors that might deter an online
purchase were:
→→ Shipping costs (47%)
For a variety of reasons, some online shoppers prefer to pick
up their orders in a physical store rather than having them
shipped to their home or office. Example: a typical technologysavvy consumer is in the market for a new, flat screen TV. He
wants to dazzle his friends with gigantic, crystal clear action
shots of their favorite team during the upcoming Big Game.
He uses a web browser and/or mobile device and spends hours
comparing size, native resolution, dynamic contrast control,
power efficiency, and the prices of dozens of available models.
After deliberating for several days, he returns to the online
store offering his top choice at the best price and finds there is
no way it can be delivered to his home by game day. He explores his options and finds that a national electronics chain has
the same TV in stock and it costs only $30 more to pick it up at
a local branch in his neighborhood.
The value to the consumer of this cross-channel strategy is
obvious and yet powerful:
→→ Convenience – The customer can research the purchase
online at his leisure and on his preferred electronic device
without being actively “sold”.
→→ Immediacy – The customer can choose when to actually
purchase a product.
→→ Out of stock items (28%)
→→ Lack of product images (23%)
→→ Cost Savings – The customer feels better about purchasing
Since consumers demonstrated relatively strong price
sensitivity, retailers should consider store-based fulfillment
strategies such as buy online and pick up in store. In addition
to omnichannel retailing strategies eliminating barriers to
purchasing, they also present opportunities for retailers to sell
more, once they attract customers into stores.
→→ Enhanced Experience – The customer can see, touch and
Proven Cross-Channel
Strategies
As the industry acts on the multichannel retailing imperative,
proven fulfillment strategies have emerged. Retailers should
evaluate the benefits of the following strategies in the context
of their brand promise and target customer, and build a case to
quantify business value. Retailers who have been successful in
adopting multichannel retailing practices generally stage the
rollout of these strategies according to a prioritized roadmap.
Buy Online, Pick Up From Store
Inventory
A prominent multichannel fulfillment strategy now being leveraged with great success by many big-name retailers6 is Buy
Online, Pick Up From Store Inventory.
when his is able to choose his delivery method and save on
the cost of shipping. Bulk freight shipping to a brick-andmortar store is almost always less expensive than home
parcel or home freight delivery, resulting in overall lower
cost to a customer.
feel the merchandise in the store before final acceptance.
Benefits to the retailer are significant. In addition to creating
an improved customer experience, the retailer builds more
store traffic and greater opportunities for in-store impulse
purchases. On the way to the customer pickup desk, the consumer is exposed to in-store merchandising and special offers.
For example, the TV buyer picking up his purchase in store
might be tempted by high definition video cables, new DVD
releases or other high-profit accessories that he might have
chosen to buy elsewhere.
While the Buy Online, Pick Up From Store Inventory strategy
offers concrete benefits for almost any large retailer, its value
proposition is particularly strong for those who sell higherpriced and heavily-researched products like electronics, office
equipment and high-end toys (this could be also valuable for
customers who want to try on products, such as shoes or
apparel). This strategy has not been as popular in the apparel
industry, but it has recently been implemented by a number of
leading footwear retailers.
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These include Apple Retail Stores, Best Buy, Costco, GameStop,
Home Depot, Lowes, Nordstrom, REI, Sam’s Club, Sears, Tiffany’s,
Toys”R”Us, Walgreens, Wal-Mart and many others.
Fulfillment in a Multichannel Retailing Environment
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Buy Online, Return In Store
This is often considered an obligatory strategy for brick-andmortar retailers with a strong online presence or catalog.
However, it does create opportunities for more sales.
Use case: a footwear shopper buys an item online, has it shipped to her home, but then decides to return the item. Rather
than shipping it back, the consumer simply drives to one of the
retailer’s physical storefronts and returns it there.
Use case: a footwear shopper buys an item online, has it shipped to her home, but then decides to return the item. Rather
than shipping it back, the consumer simply drives to one of the
retailer’s physical storefronts and returns it there.
Probing further, we find that a consumer ordered a pair of
shoes online and had them shipped to her house. Trying them
on at home, she realizes that a size eight in this brand and
style is too small, and, close up, the brown color of the shoes
is not as pleasing as it appeared in the online photos, taken in
a studio. Instead of packing up the shoes, sending them back
and wondering for days or weeks whether the return was processed correctly, the buyer drives down to the local mall and
visits a physical storefront and returns them there.
The benefits to the consumer resulting from this strategy
include:
→→ Convenience – The customer can return an item in a way
that is more convenient to them
→→ Outstanding Customer Service – The customer gets their refund
faster by dropping off their unwanted purchase in the store
→→ Enhanced Consumer Experience - The customer feels great
about resolving a minor problem quickly and efficiently.
Similarly, the benefits to the retailer are compelling.
Again, the retailer gains an opportunity to upsell the consumer
when she visits the store to make the return. A sales clerk has
a higher likelihood of convincing the consumer to consider an
exchange instead of a return. The buyer may be “once bitten and
twice shy” about ordering another size or style of shoe online but
more willing to do that when she visits the physical storefront to
see and try on the merchandise.
At a more strategic level, offering Buy Online, Return In Store will
make your business appear easier to interact with and has a better
chance of increasing satisfaction (or decreasing dissatisfaction)
with a potentially contentious segment of your customer base.
Save the Sale with Out-of-Stock
Fulfillment
Here’s a common example of how retailers apply the principles
of multichannel retailing to prevent lost sales due to out-of-stock
items. A consumer visits a local store but can’t find the exact item
or variant of an item that they saw online or in a catalog. Even
though the item is not in stock at that store, the store staff is able
to ring up the sale and have the item shipped to the consumer’s
home from another store or a central warehouse.
As a scenario, imagine that a customer is shopping in a clothing
retailer’s brick-and-mortar store. They accumulate a shopping
cart full of goods and then stumble across a sweater closeout
that they fall in love with. Unfortunately, they can’t find their size.
When they inquire with a clerk, they’re upset to learn that the
store is out of that size, and they nearly walk out of the store.
The clerk saves the sale by informing the shopper that another
store location in a nearby city has three of those sweaters in their
size, with a choice of colors. The customer agrees to have the
sweater shipped to their home and also has the clerk ring up the
other items in their shopping cart. Leveraging the second store
as a remote warehouse saved the sale on the sweater, and likely
saved the sale of other shopping cart items as well.
The value to the retailer of this strategy includes:
→→ Inventory Optimization – The retailer is able to turn their
inventory faster and boost return on invested capital.
→→ Healthier Margins – The retailer is able to shift inventory
across different locations to fulfill demand across a broad
geographic area, resulting in full price sales that otherwise
might have become discounted deals.
→→ Customer Loyalty – Retailers can increase sales of sales
while satisfying a diverse base of customers and prompting
loyalty.
Store-Based, Out-of-Stock Fulfillment is a strategy that could be
used by virtually any retailer, and it has been found to be particularly effective with retailers whose inventory items have many
variants (size, style, color, flavor, etc).
Endless Aisle Kiosks
This strategy allows retailers to offer an extended catalog of
slower moving items.
Here’s a prototypical scenario for this strategy. A consumer
shops a store looking for an uncommon shoe size. Retailers
who carry odd sizes often end up with a surplus, and are forced
to mark them down or push them into an outlet channel.
Instead of absorbing this risk of stocking odd sizes in every store,
the retailer can offer an “endless aisle” kiosk or an order point
within the store to allow consumers to view a wide selection of
inventory housed outside the store, place an order inside the store
and have it shipped to their home.
Consumer benefits:
→→ An opportunity to see, touch and try an item not easily found
in stores.
→→ An ability to order a unique or desirable item if they like it.
→→ The convenience of shopping at one physical location that
offers everything they need.
Fulfillment in a Multichannel Retailing Environment
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Retailer benefits:
→→ Ability to serve customers that might otherwise go to a
niche online player.
→→ The opportunity to profitably carry slow moving items.
→→ The option to provide a wider selection of variations, colors,
sizes, applications, and choices.
Organizational Issues
Store operations and store associates are the threads that tie
together the cross-channel strategies described in this paper.
Despite the best technology, most thoughtful process design,
and the best intentions, merchants still need to motivate front
line staff members complete the steps of picking an order
from store stock and shipping it to the customer.
What can be done to ensure that the most important part of the
operation–-the people–-execute the strategy? Below are three
proven tactics, based on the experiences of dozens of retailers
over the last decade.
→→ Offer clear incentives – Commissions and same-store sales
volumes are the scorecards for most retail organizations, and
it’s critical to maximize these numbers. However, some crosschannel retailing strategies conflict with these metrics. In the
case of store-based fulfillment, why should store personnel
feel motivated to fulfill an order for another store? The perception is that this only helps another store’s sales numbers, and
that an inventory item shipped out the back door reduces front
door sales opportunities for the store that ships it. Incentives
must be designed to prevent this impression. Many retail organizations use a 50/50 credit split between the store that made
the sale and the one the fulfilled the order, and others share
commissions. A method must be found for both stores to share
credit, otherwise everyone loses when a customers walks out
the door, unable to purchase the product they wanted.
→→ Promote team collaboration – Some retailers who have
implemented store-based fulfillment strategies have also
experienced increased inventory hoarding behavior among
store personnel. This can happen when there’s a hot
product in short supply and it’s tempting to hold onto a hot
inventory item rather than share a sale with another store.
Incentives don’t always work, and it sometimes becomes
necessary to implement procedures that reward collaboration and discourage non-cooperation.
These may include the distribution of management reports
that show declined orders versus in-stock positions, and
specific disincentives for store personnel who repeatedly fail
to demonstrate a willingness to be a faithful team player.
inventory at the lowest possible cost. This is like running a
relay race, while cross-channel retailing is more similar to a
team sport like hockey that requires the team get the puck
to the teammate who’s best positioned to score.
Organizations that win with this new approach to retailing will
be those that quickly identify what works and what doesn’t
work. The best way to make that determination is to collaborate with experts who work with your processes and customers
every day and know them well.
Turn Customer Service
into a Profit Center
Many forward-thinking retailers are taking steps to
leverage their centralized customer service functions as
profit centers.
Here’s an example of how this might work: a customer
calls a retailer’s 800 number to get help with an issue they are having with a new flat screen TV they just
purchased. For some reason, the picture just isn’t as
sharp as the one the customer saw in the store. The
telephone service rep questions the customer and learns
that while they bought a great TV, they didn’t opt for the
superior, high definition cables to connect their DVD
player and satellite dish to the TV.
In a cross-channel-savvy company, the customer service
rep would be able to sell the high-end accessories needed by the customer and have the order fulfilled from
the warehouse, picked up in a local store, or shipped
from another store.
What better time is there to upsell a customer than
when the call center is in the process of resolving a
customer satisfaction issue?
The hybris customer service module gives retailers
powerful capabilities, including multiple store handling,
shopping cart view, customer management and self service. It helps speed response times and time-to-resolution, supports true cross-channel customer service, and
enables personalized service to customers of multiple
brands with multi-tenancy.
→→ Communicate effectively – Store-based fulfillment and
other cross-channel retailing strategies are inherently complex, collaboration-intensive business processes. The mission of many retail businesses is to do a few things very well
– open lots of new stores quickly, fill them all with the same
Fulfillment in a Multichannel Retailing Environment
5
Technology Considerations
The following are key considerations identified by leading commerce experts as being important to retailers as they evaluate
technology platforms to power their cross-channel strategies.
1) Does the solution offer a robust, feature-rich front-end
with all of the most desirable shopper capabilities?
Today’s consumers are surprisingly demanding, especially
when it comes to the way they interact with technology. When
shopping online, they expect their favorite e-commerce websites to not only look fantastic but also read their minds and do
everything they could possibly want with a minimal number of
clicks. It’s a tall order, but front-end features such as intelligent search, personalization, customer ratings & reviews,
social media sharing capabilities, mobile browser support and
a product recommendation engine are now routinely expected
by the cross-channel shopper.
2) Is there an order management platform capable of managing the order lifecycle from creation to delivery?
If you truly want to engage in all – or most – of the multichannel best practices noted above, you need an order management platform that sees all and knows all. It requires visibility
into multiple sources of inventory and needs to orchestrate a
diverse set of order flows across multiple channels.
3) Does it have warehouse management capabilities that
cater to the deep complexities of cross-channel operations?
Contemporary warehouse management systems must be
capable of accommodating multiple product fulfillment scenarios and managing inventory for both stores and e-commerce
orders. Given time to market considerations, it is not practical
to wait to replace or upgrade a legacy warehouse system that
cannot accommodate a multichannel operation. In this case,
consider adjunct warehouse management systems designed
for e-commerce to run alongside a traditional warehouse
management system.
4) Is the system able to provide inventory visibility?
A modern multichannel commerce operation requires that a retailer have inventory visibility across stores and warehouses. This
is a foundational capability. Most retailers have a highly accurate
inventory system of record that multichannel systems (such as
order management) can tap into to access this information.
5) Is there product information management (or product content management) functionality capable of delivering product
related information?
Retailers now have the opportunity to provide shoppers with
deeply rich data and volumes of information related to products, but this has created an explosion of product content that
is challenging to manage. For example, how do you manage
the complex web of data tied to one SKU that might include
attributes as diverse as digital photos, videos, schematic drawings, audio files, component part numbers and social media
testimonials? And how do you do this in a multichannel retail
operation, when product information changes rapidly and must
be propagated across different channels? All multichannel
commerce solutions should have robust product content management capabilities as a part of their core foundations.
6) Optimal deployment: which model best fits your business?
A There are different ways to deploy multichannel commerce
platforms including on-demand, hosted, and on-premises. You
might need installed software that runs on yours servers and is
administered by your IT staff. Or you might prefer a fully hosted
software-as-a-service option or managed deployment where
the vendor maintains dedicated servers and is responsible for
all software maintenance and upgrades. Similarly, a managed
services deployment with software residing on your servers but
maintained by the vendor might better suit the needs of your business. Not all vendors offer all of these options and, even when
they do, the cost differences among the options can be significant.
The best practice here is to evaluate vendors that offer all of these
options and chose the deployment model that works best for your
business in light of your situation and business goals.
7) Can the vendor deliver adequate levels of scalability, time
to market, innovation and a low total cost of ownership to
meet long-range business needs?
Beyond the functionality that can be found or is absent in any
one vendor’s multi-channel offering, there are other technology-related factors that must be assessed and compared. These
include: How long will the implementation take? How much of
your IT staff will be dedicated to the project Is the vendor well
positioned to grow their multichannel platform and be ready
for the commerce challenges that your business will face in
the next three to five years? Will the solution scale adequately with the pace of your business? The financial stability and
technological expertise of the vendor is critically important
to your decision. Are they established enough and sufficiently
forward-thinking to deliver everything you’re going to need without being too large and too entrenched in their own thinking
that your success won’t be important to them?
Taking the Next Steps
Online sales channels are increasing in popularity very rapidly,
with sales growth projections from leading analysts as high as
50 percent over the next three years. The consumers driving
this growth are demanding more options on where they can
shop, pickup purchases, and make returns.
Those buyers who use more than one channel are showing
greater brand loyalty and spending up to 30 percent more with
Fulfillment in a Multichannel Retailing Environment
6
merchants who offer them a smoothly integrated experience
across online and offline channels. Thus, implementing coherent multichannel strategies should be an urgent priority for
every retailer.
This paper has described the business processes, organizational issues and technology considerations that can be leveraged
to build organizational buy-in and deploy a flexible multichannel fulfillment strategy. It has also provided a set of proven
cross-channel fulfillment strategies and their demonstrated
benefits. Retailers should select the strategies which best fit
their way of doing business.
The keys to an effective multichannel retail implementation
are proper alignment around organizational incentives and ensuring that you have chosen the right technology platform for
your business model. If you can clearly articulate the business
benefits of your selected strategies to the rest of your organization, and demonstrate that you have enabled them with the
proper, proven technology, your chances for the success of your
initiative are optimal.
If you’d like to discuss the commerce strategies described in this paper, or meet with one of our multichannel
solutions experts to help you expand upon these concepts, please feel free to send us an email message or
call our nearest office.
Email: [email protected]
Web: www.hybris.com
Other locations and phone numbers:
www.hybris.com/hybris/en/Contact.html
More about our solutions:
www.hybris.com/hybris/en/e-commerce-software.html
About hybris, an SAP Company
hybris helps businesses around the globe sell more goods, services and digital content through everytouchpoint, channel and device. hybris delivers
OmniCommerce™: state-of-the-art master data management for commerce and unified commerce processes that give a business a single view of its
customers, products and orders, and its customers a single view of the business. hybris' omni-channel software is built on a single platform, based on open
standards, that is agile to support limitless innovation, efficient to drive the best TCO, and scalable and extensible to be the last commerce platform companies
will ever need. Both principal industry analyst firms rank hybris as a “leader” and list its commerce platform among the top two or three in the market.
The same software is available on-premise, on-demand and managed hosted, giving merchants of all sizes maximum flexibility. Over 500 companies have
chosen hybris, including global B2B sites W.W.Grainger, Rexel, General Electric, Thomson Reuters and 3M as well as consumer brands Toys“R”Us, Metro,
Bridgestone, Levi's, Nikon, Galeries Lafayette, Migros, Nespresso and Lufthansa. hybris is the future of commerce™. www.hybris.com | [email protected]
Version: October 2013 Subject to change without prior notice © hybris
Fulfillment
in a Multichannel
Retailing
Environment
hybris is a trademark of the hybris Group. Other brand names are trademarks and registered
trademarks
of the respective
companies.
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