Can retailers keep up with the demands of omni-channel commerce?


describe the imageAs a sweeping transformation in the way retailers do business, omni-channel commerce was bound to produce some growing pains. However, it is fast moving past the "hype" stage. The early adoption stage is always fraught with roadblocks, and the organizations that lead the charge end up bearing the brunt of the hiccups. There's less of a likelihood that a company can ride the first wave of implementation to a significant competitive advantage.

However, as the technologies that make omni-channel possible mature and more companies grow comfortable wielding them, the gaps between the successful and unsuccessful adoptions will widen. Those companies that dragged their feet on the second and third waves of adoption will increasingly find themselves pushed by the tide of inevitably - a wave in which it's more difficult to find one's footing. Meanwhile, retailers acting proactively about preparing themselves for omni-channel commerce will be able to learn from the hurdles early adopters faced while retaining agency over their own course. 

Omni-channel commerce success encompasses a variety of interconnected systems and dependent infrastructures, but it boils down to the three things: the business model, the technology and the people. Without success in these three areas, a company cannot optimize the value of its omni-channel commerce platform.

Building the business model: Accepting new realities
While omni-channel commerce doesn't necessarily call for a complete business model reinvention, a successful approach means doing more than just shuffling the old pieces around. Businesses are built on promises - the promise of service, the promise of availability, the promise of product quality. However, many companies are approaching omni-channel commerce with traditional modes of fulfilling its promises. This can bode poorly for a company that can't put it's money where it's mouth is.

The holiday shopping season is a prime example of the refusal to accept new realities in action. The all-important "arrive by" date is never as critically important as it is during the holidays, when shoppers expect their purchases to wind up under the tree come Christmas morning. Pledging that purchases will arrive on time is a great way to win over people who waited until the eleventh hour to make purchases.

However, many companies who made that promise in the holiday 2013 shopping season didn't come through, according to Bloomberg Businessweek contributor Kyle Stock. Retailers that promised Christmas delivery times for orders made until midnight on December 23 were only able to get two-thirds of products to arrive on time. Even retailers that went with a more conservative window of five to seven days before Christmas only had a success rate of about 80 percent. Many companies had stretched their guarantees beyond their business model.

"[R]etail executives had been boasting for months about so-called omni-channel capabilities, in which stores are essentially de facto warehouses and ship goods as seamlessly as distribution centers," Stock wrote. "Just because a business can do something doesn't necessarily mean it should."

For many retailers that didn't make deadlines - and for some of those that did - order management and warehousing issues abounded, Stock observed. Nearly 30 percent of holiday orders were filled from two or more locations, while 10 percent contained shipments from three or more centers.

Packing and shipping costs skyrocket under such a system, while inventory and stocking efforts can be thrown off as well. This system is confusing, expensive and unsustainable. It's based on an old way of doing business that is incompatible with new realities. 

Transforming omni-channel commerce with technology
It's not a stretch to say that a company is unlikely to make a serious business model recalibration without some technological investments. Fortunately, a company doesn't have toiStock 000008866254 XXXLarge resized 600 spend a significant amount in order to make targeted technological improvements. The area of IT and communications technology that should receive the most attention is that which promotes centralization and collaboration across the omni-channel commerce supply chain, sales team and marketing department. Retail enterprise software is already spiking in demand to address certain extant issues in retail strategies, but a one-stop shop may prove to be the smart and most cost-efficient long-term investment.

Big data and analytics will play an increasingly larger role in omni-channel commerce. One of the biggest issues in optimizing omni-channel commerce strategies is making sense of reams of information and boiling it down into something actionable. Retailers are hit with data from myriad sources, needing to use customer analytics, supply chain segmentation and inventory analysis in order to boost their approach.

At the same time, marketing and advertising IT investments will continue to grow, as contributor Michael Friedenburg recently pointed out. Investments in marketing technology are due to rise by 50 percent by 2017. Investment in retail software, such as enterprise resource planning and customer relationship management programs, will experience a 9 percent compound annual growth rate through 2015 as companies seek to sync their back-end management to their customer-facing front lines. 

Less-than-successful retail enterprise software investments are usually the result of a combination of factors, including a business model that is incompatible with the insights the tools provide or an inability to extract helpful observations from data noise. However, procuring a slew of enterprise software may not put an end to inefficiency. 

A single software solution that connects multiple aspects of retail omni-channel commerce systems, providing flexibility and scalability at the same time, can help eliminate ineffective IT investments. Such is the promise of solutions like the  IBM Sterling solutions portfolio, which offers a variety of supply chain oversight, order management and file protection services that consolidate, simplify and comprehensively protect supply chains. It also offers B2B integration potential that can help companies eliminate incompatible parts of their business or IT model. 

Don't forget people
However finely laid out a business model is and no matter what degree of advanced technologies a company procures, omni-channel commerce effectiveness depends upon the people who make up the organization. It's crucial to centralize and encourage collaboration between different stakeholders. As Friedenburg pointed out, it's high time that the chief marketing and chief information officers began to work together more closely. Aligning all aspects of the omni-channel commerce supply chain, from warehouse management to customer service representatives, won't be easy, but companies will be better off if they start that project today.

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