Anywhere, anytime: the new benchmark for taking and fulfilling customer requests
By Paul Demery
Taking orders from passionate customers is never easy, but with the onset of spring and a new golf season underway, Golfsmith knows it must step up its game in the way it handles and fulfills orders.
And like any good golfer playing a tough course, it has more than one way to approach each challenge. If a customer from Maine orders a driver on Golfsmith.com, for instance, the retailer may ship it from its centralized warehouse in Austin, Texas—unless its web-enabled order management system, sensing that the preferred driver is in stock in a store in New York, routes the order to that store for a faster delivery.
Then again, the order management system, sensing that stock levels of the popular driver are low in both its Austin warehouse and its stores in the Northeast, may route the order to a supplier for drop shipping the golf club directly from the supplier's warehouse to the customer.
A good game
All the customer knows, assuming all goes well, is that the driver he ordered online from home—or through a web-enabled store kiosk or POS terminal, or a contact center—arrived in time for him to hit the links on his first golf outing of the season.
And Golfsmith, a growing retail chain, e-commerce site and catalog operated by Golfsmith International Holdings Inc., is driving up sales largely because it's playing a good game of web-based multi-channel order management and fulfillment, says Matt Corey, vice president of marketing and brand. The retailer did $40 million on the web last year, ranking it No. 214 among all retailers in online sales, according to the 2008 edition of the Internet Retailer Top 500 Guide.
But while web sales have doubled over the past four years, web-influenced sales across all channels have grown even faster, thanks to Golfsmith's ability to view and manage cross-channel orders and fulfill them from multiple sources of inventory, Corey says. "We've grown well over 100% in web- and e-mail-driven demand across all channels," he says.
Like a number of other retailers, Golfsmith is building on its ability to leverage a web-enabled system that lets it view and manage orders regardless of where a customer places an order, then fulfill orders from the most appropriate stockpile. So even as it has expanded its chain to 72 from 40 stores in the past four years, it knows that the web has influenced a significant percentage of store sales as well, Corey says.
Consumers expect to be able to shop across channels, according to a recent survey by Sterling Commerce, a subsidiary of AT&T Inc. that provides cross-channel order management and fulfillment for large retailers. 70% say they expect to be able to place or change an order "anywhere, anytime, anyhow," says Jim Bengier, Sterling's global retail industry executive and former vice president of supply chains at Best Buy Co. Inc.
To capitalize on that cross-channel demand, multi-channel merchants need to have the technology and processes to address three critical areas: visibility and management of customer data related to how they place orders across channels, visibility into available inventory, and the ability to match incoming orders with the most efficient way to fulfill orders.
Go with the flow
"The most critical thing a multi-channel retailer can do is to understand how orders flow through its order management system, what drove the order and where it is shipped from," Corey says.
The benefits fall into three general areas, experts say. Cross-channel order management and fulfillment can provide for the most efficient way to process orders and move inventory, expediting the delivery of accurate orders to customers. It provides retailers with valuable information on how customers like to shop across channels, helping merchants refine cross-channel marketing and merchandising as well as fulfillment. And it enables web managers to quantify the growing value of the web in driving sales across all channels.
"For every dollar of online sales for multi-channel retailers, there are $3 of web-influenced store sales," says Kasey Lobaugh, direct-to-consumer practice leader for consulting firm Deloitte LLP. "Retail revenue is not created in a single channel, because customer shopping behavior is across channels."
The cross-channel strategy and technology system for any particular retailer, however, can depend on the merchant's legacy operating environment as well as its size and goals, experts say.
Golfsmith, with roots in the 1970s as a cataloger, still operates with a single warehouse in Austin and a home-grown warehouse management and fulfillment system that the retailer has modified to process orders across its web and store channels as well as its contact center. Operating mostly in-house software with Oracle databases, Golfsmith has continually upgraded its system and related processes to serve customers across channels while capturing and using information about how they shop.
The retailer pulls reports from its order management system that show how customers, tagged by identifiers such as e-mail addresses or loyalty account numbers, shop across channels and help the retailer tailor marketing and merchandising efforts. It's also working with Experian, the consumer database company, to produce automated reports tied to customer identifiers to support more personalized marketing and merchandising.
To gather customer identifiers, it runs online incentives such as the chance to win a trip to the Pebble Beach golf course in California for joining its loyalty club, and offers rewards of cash or trips to store employees who gather the most customer e-mail addresses or telephone numbers.
Knowing the mix
With identifiers in its database, it then tries to match where customers place orders with where Golfsmith fulfills them. "We call it our 'demand versus shipped' report," Corey says. "We identify the channel of demand, such as web, catalog or e-mail, and then determine where the orders shipped from."
That helps Golfsmith better understand, for example, how many online orders are being shipped from stores or drop shippers as well as from its distribution center, enabling it to better manage marketing efforts based on how customers shop.
But while it's important to get visibility into how customers generate orders across channels, it's just as important for Golfsmith to share cross-channel inventory information with shoppers to promote a cross-channel order and fulfillment environment. By providing near-real-time visibility on Golfsmith.com into available inventory in its stores as well as in its distribution center, for instance, the retailer makes it more likely shoppers will place orders rather than abandoning its site if a desired product is no longer in stock in the distribution center.
Retailers can boost sales even more by integrating order management and fulfillment with web-based transportation management systems to let shoppers know of new inventory being shipped from suppliers instead of indicating a product is out of stock, says Bryan Kinsella, order lifecycle product manager for Manhattan Associates Inc., a provider of a cross-channel order management and fulfillment software suite.
Producing such an inside look into inventory stocks is best served by a web-based system that can access information from multiple points as well as make it available to shoppers on the web, agents in contact centers and clerks at store POS terminals, experts say.
"The key thing is accurate inventory going in, and being able to allocate that information in an order management system," says Mark Clendenin, director of consulting at Fry Consulting Services, a unit of e-commerce platform and web site design firm Fry Inc. While many legacy systems may report only aggregate chainwide store inventory, integrated web-based systems can more easily be coded to show inventory status at each store, he adds.
Maintaining inventory and order records, along with related information on product pricing and promotions, in a centralized web-based system can improve overall customer service, experts say. "If order taking took a customer service rep three to five minutes before because she had to check multiple computer screens, it can now take about one minute because she sees all the information about customers, product details and promotions, and inventory status on fewer screens," says Sahir Anand, senior retail analyst at Aberdeen.
On the drawing boards
Not surprisingly, many retailers have cross-channel order management and fulfillment at least on their drawing boards. "Retailers have been hyper-focused on a consumer-facing online presence focusing on search, navigation and checkout, but as they look to a next-generation system for consumer-facing applications there will be two priorities: cross-channel inventory visibility and order fulfillment, and cross-channel merchandising and demand planning," says Rob Garf, vice president of retail strategies at research and advisory firm AMR Research Inc. "For example, by the end of 2010, 72% of multi-channel retailers will provide access to web orders via self-service or assisted selling on in-store kiosks."
Web-based systems not only provide more flexibility in order management, but also speed because orders can be more quickly routed to back-end fulfillment.
Several developments in the technology market in recent years, meanwhile, support the deployment of cross-channel order and fulfillment systems. The extensive use of web-based integration technologies including XML and different versions of web services can centralize cross-channel order data in a single database and automatically route each order, based on business rules set by the retailer, to the best available supply of inventory to produce the fastest and most efficient delivery.
Escalate Retail, for example, is addressing the market need with version 10 of its e-commerce platform, due for beta release this summer and designed with web-enabled technology to better support a cross-channel environment. The new platform is designed to make it easy to forward online orders for in-store pick-up to a store employee's Blackberry device or cell phone to ensure the order gets fulfilled on time, says David Bruno, director of product marketing for Escalate Retail.
Newer order management systems let shoppers choose a different shipping option as well as shipping destination for each of several items in the same order, says Kelly O'Neill, product manager at ATG Inc., a provider of an e-commerce platform that includes cross-channel order management and can integrate with third-party systems for handling complex back-end fulfillment.
Unique traits
Among vendors offering that level of order flexibility is Sterling Commerce, which is recognized by analysts as having a comprehensive front-end order management to back-end order fulfillment software suite, one popular with large Tier 1 and Tier 2 retailers. Bengier says the company can serve retailers as small as $100 million in annual revenue.
IBM Corp. also has been developing cross-channel order management for large as well as mid-size retailers, and it partners with Manhattan Associates to integrate Manhattan's distributed order management system with IBM's WebSphere Commerce platform.
There are several vendors focused on the mid-sized retailer market, including CoreSense, Sigma-Micro Corp., Micros Retail Systems Inc., CrossView Inc., Vcommerce Corp. and Epicor Software Corp. Among those serving smaller retailers are Stone Edge Technologies Inc., OrderMotion Inc., Zoovy Inc. and Dydacomp Development Corp.
Each vendor's technology offerings have their unique range of functionality, and many partner with other vendors to provide a complete front-end to back-end order management and fulfillment system, Anand says. And while some vendors like Sterling and CoreSense have their roots in serving store chains that bring in web and catalog channels, others like Sigma-Micro have focused more on the web and catalog channels—something retailers should consider when choosing a vendor, he adds.
Although many retailers are using some form of integrated order management and fulfillment system, according to analysts and vendors, a lot of merchants have yet to maximize its full potential. In a survey of 220 retailers in February and March this year, "Technology Strategies for Multi-Channel Integration," research and advisory firm Aberdeen Group found only a third had attained some level of cross-channel integration across order management, inventory, fulfillment, and customer-serving data like pricing, promotions and loyalty programs.
What makes a winner
The top 20% of best-in-class performers realized notable benefits: a 12.8% year-over-year rise in comparable channel sales, an average 22% improvement in customer conversion rates, and an average 25% increase in cross-channel contribution to gross profit margins.
Retailers with less effective order management and fulfillment systems experienced average cross-channel sales increases of 1.7% to 5%. These retailers' order management systems lacked flexibility in legacy operating systems and processes, leaving retailers without visibility into cross-channel orders or integration between front-end order management and back-end fulfillment systems, says Aberdeen, a unit of Harte-Hanks Inc.
Technology systems can't do it all, of course. Golfsmith, for example, continues to adjust how it processes orders routed to stores for shipment. For now, its order management system forwards online and contact center orders to drop-ship suppliers as well as some Golfsmith stores, where the inventory receiving manager checks an online log each morning for direct-to-consumer orders that his staff will pick from store inventory, pack and ship.
But Golfsmith faces a constant challenge in keeping things running smoothly, Corey says. A headquarters team of store operations and logistics managers routinely reviews order and inventory levels throughout the company as well as at each store, and adjusts the flow of orders to ensure that orders are properly allocated according to each store's available inventory and overall level of activity. "We have rules to distribute orders in a logical way, but we constantly upgrade these rules," Corey says. "We don't want to over-burden any one store, especially a new store breaking in a new staff."
Further refinements are coming. "We have to figure out what is the right model going forward," Corey adds. "Should we have every store ship products, or one super hub store per regional market? The more places we have shipping product, the more chances for errors and a bad customer experience."
Winning over the CEO
In addition to directly matching online orders with products shipped from stores, Golfsmith uses its integrated order management and fulfillment system to look at broader order and fulfillment trends. It has determined, for example, that its web site and e-mail campaigns have influenced a significant number of store sales.
"If the number of orders through our web site is up 18%, but only 12% shipped from our warehouse or a drop shipper, we know that the stores accounted for the other 6% of sales," Corey says. "I can tell senior management about the actual impact of the web channel, so we'll invest in the channel the way we should."
The more successes retailers report from using cross-channel order management and fulfillment, the more retailers will invest in a web-centered multi-channel environment, Lobaugh says. Deloitte figures that, in addition to the average 7% of multi-channel sales processed online, the web influences an average of 20% of offline sales. "That 27% will approach 50% by 2012," Lobaugh says, "so retail CEOs will become even more interested in investing in cross-channel retailing."
paul@verticalwebmedia.com
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