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Harder Than It Looks
Improved order management paves the way to retailers fulfilling web orders from stores.
Topics: B2C Partners, Canada, fulfillment software, gamequestdirect.com, July 2012 Magazine, Le Chateau Inc., multichannel retailers, Order management system, order management systems, RedPrairie Corp., Retail Systems Research LLC, supply chain management, VendorNet Inc., web distribution center, web inventory
Fashion is a fickle industry. What's hot one day is passé the next. That poses a challenge for a fashion-focused multichannel retailer like Le Chateau Inc., because once seasons and trends change a formerly chic item can no longer be sold for full price—if at all.
That means Le Chateau, which has more than 240 physical stores dotted throughout Canada, as well as a distribution center that supplies inventory to those stores and fulfills online orders from LeChateau.com, has to close every sale it can, when it can, says Bill Mirabito, founder and principal of consultancy B2C Partners, who works on the retailer's e-commerce strategy.
"The seasonal nature of the merchandise, particularly in fashion, is that it is perishable," he says. "Things are constantly changing, and we need to meet consumer demand regardless of where the merchandise is located." And because fashion shoppers want to have what's trendy right now, Le Chateau has to offer not only its entire inventory, but also a variety of shipping options, ranging from buy online, pick up in store, to buy in store, ship from another store.
That's where the retailer's order management system fits in. Flexible order-processing and fulfillment software can close the gap between stores and the web, letting a store ship an order to an online shopper if the web distribution center is out of stock, or satisfying a store shopper who can't find her size or color in stock by shipping the item to her from web inventory. As a growing number of multichannel retailers deploy sophisticated order management systems they're realizing gains. But the systems aren't cheap—systems start around $1,000 a month and range up from there—and many are also finding that fulfillment from anywhere poses specific problems that vary by the product being sold, and how the retailer reaches its target audience.
Le Chateau illustrates both the potential benefits and the challenges. The chain, as of last month, only could fulfill orders from 12 of its stores, or about 5% of its locations. But that 5% is already making a difference to the chain's bottom line, says Franco Rocchi, senior vice president at Le Chateau.
"Before our stores started fulfilling orders there were always items we couldn't ship when our distribution center ran out of stock—even when our stores had those same items on hand," he says. "We didn't want to disappoint the customer. The demand was there. But we needed to fulfill unexpected demand quickly and cost-effectively. Now we can." Those orders are helping boost the retailer's e-commerce sales numbers, Rocchi says, although he did not say by how much.
Retailers like Le Chateau are increasingly recognizing the need to satisfy the needs of the shopper who wants to be able to buy anytime and anywhere they are. Allowing inventory allocated for one channel to be used to fulfill orders from another channel, for instance, was deemed "very important" by 61% of retail executives in a 2011 report by research and advisory firm Retail Systems Research LLC. And 42% of the retailers in that survey with comparative-store sales that exceeded the industry average of 3%—chains RSR defines as "winners"—offer that functionality, compared to 27% of the "laggards" that didn't surpass that growth metric. Comparative-store sales refer to sales at stores open at least one year.
"What retailers have to recognize is that shopping is changing," says Brian Kilcourse, managing partner of RSR. "Retailers can offer immediate gratification with their stores. And, if an item isn't in the store, they can order it and have it fulfilled from the distribution center or another store. But that requires retailers to have 360-degree visibility of their selection in something approaching real time."
The physical advantage
It isn't just immediate gratification that stores can offer, it's also associates' expertise. That's part of what attracts enthusiasts to multichannel motorcycle parts and accessories J&P Cycles, which operates JPCycles.com, a catalog, retail stores in Iowa and Florida, and temporary showrooms that it sets up at motorcycle rallies and races throughout the country.
The retailer determined three years ago that it needed to have that full visibility of its inventory across its channels because consumers coming into its stores wanted to buy from one of its on-site technicians, but that was complicated when the store only had some of the products the shopper wanted on hand. "There's only so much you can stock in a store," says Zach Parham, the retailer's general manager. Store associates had to ring up multiple transactions to let the shopper take some items with him while others would be shipped from its distribution center.
That's changed since the retailer began using a RedPrairie Corp. order management system that enables a store associate to check an item's availability in its distribution center, pull the items that are in stock and have other merchandise sent to a shopper's home. That's especially important when selling at rallies and other events when its pop-up stores often are mobbed, Parham says. "We needed simplicity," he says. "We had to have a way to streamline the checkout process during events."
By making the sales process smoother, J&P Cycles has seen its in-store online orders grow dramatically, he says, although he declined to offer specific figures.
Easier said than done
It isn't often that J&P Cycles stores have an item in stock that its distribution centers do not. However, when that happens, and the stock can't be replenished within a few days, its stores fulfill online orders. The system works because the stores' backroom or warehouse areas have the space to fulfill orders. And the packing system is simple, which meant it was easy to train its stockroom staff on how to fulfill orders, Parham says.