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Consumer-to-Consumer: The Latest Addition to Omnichannel Retailing

A conversation with Terry Esper, associate professor in the Department of Supply Chain Management at the University of Arkansas.

Consumer-to-Consumer: The Latest Addition to Omnichannel Retailing

In the world of modern-day retailing, no idea seems too far-fetched to contemplate. Take the notion of the omnichannel: a term for the mash-up of online and brick-and-mortar sales. Now add a new element to the mix: the consumer. Soon, this prized individual might be called on to play a larger role than that of simply buying the product. In fact, itís already happening, as shoppers purchase goods, then turn around and either resell or exchange them within their social circles. Beyond that, consumers might even be asked by retailers to deliver product from physical stores to others who placed orders online. Or they might be enticed to report on current inventory levels at the retail shelf. These are some of the intriguing possibilities raised in this interview with Esper, conducted at the most recent annual conference of the Council of Supply Chain Management Professionals in Denver, Colo.

Q: What do you mean by ďconsumer-to-consumerĒ?

A: Esper: Itís the notion that consumers can actually play a role in getting product to other consumers. Collaborative consumption says that consumers participating in communities can engage in the use and consumption of products. We often think of supply chains as ending at the B2C juncture, where a shopper buys a product from retail and thatís the end of the supply chain. But this idea is about the role consumers are playing in facilitating the further flow of product to the final consumer.

Q: Is this trend being driven by social media?

A: Esper: Consumers have always engaged in exchange. Thereís always been some form of bartering. Now, though, it is becoming quite significant, and the growth is directly associated with mobile technology. Itís also the internet Ė websites for online purchasing like eBay and Craigslist. Social media is also playing a really big part in allowing consumers to engage with one another.

Q: So what are the implications for supply chains?

A: Esper: Why would a manufacturer care about the exchange that takes place between consumers? I was talking to a company that said, We have determined that there are certain markets where we donít want our product, but somehow itís in those markets anyway. And it got there through someone we sold the product to. The concern is that oftentimes the C2C exchange leads to a potentially competitive or alternative market. And you start to deal with demand that you are not able to fulfill.

The supply-chain implications are especially significant in the luxury products space, where thereís a lot of consumer-to-consumer exchange. The overall experience associated with the product is really big for those kinds of brands. The C2C exchange is a potential threat to that.

Q: I would think that forecasting demand in this kind of a situation would be nearly impossible. How could you know when your product is going to pop up in these unexpected places?

A: Esper: Itís one thing to forecast when people will buy your product. Itís another to be able to forecast why theyíre buying it. Consumers who buy from retail, then resell, are acting in a very different role. They are essentially distributors. The average person becomes an active participant in supply chain processes, and it becomes very difficult to forecast that. You really donít know the intent of someone who is buying your product from retail.

Q: In the old days, this problem would have emerged in the form of the gray market. But weíre talking about legitimate sales. Merchandisers and suppliers are happy that their stuff is being sold. They just donít have any control over it.

A: Esper: Absolutely. And how do they ensure that the service is on par with the product thatís being delivered?

Q: One of the big buzzwords we hear these days is crowdsourcing. How is that phenomenon changing the way in which consumers engage with supply chains?

A: Esper: Thereís been some discussion around a large retailer actually crowdsourcing, by leveraging in-store shoppers to deliver orders to other consumers that shopped online. They receive notification of the opportunity to deliver an order, and are asked whether they would be willing to do that. Itís about relying on shoppers in order to facilitate product delivery and flow.

We donít see a lot of activity in this area yet, but companies are at least thinking about it. One retailer is thinking about asking shoppers to scan a QR code on the shelf if inventory there is low. So am I a shopper, or an inventory manager? Am I doing inventory replenishment? The crowdsourcing concept allows for consumers to actively participate in supply-chain management activities.

Q: Are consumers really willing to do this?

A: Esper: If retailers are willing to pay for it. Thereís a mobile app called Field Agent, which allows consumers to receive notification of an opportunity to do some market research while shopping. Theyíll be asked, say, to go to their local Walmart, take a picture of a particular display and answer a few questions about it. The retailer will want to know how many units of inventory are available on the shelf, whether the product is displayed the way it should be, whether itís protected by locks. And they would be paid for this information.

Q: But youíve got to vet that individual. What if itís a Target employee going into a Walmart?

A: Esper: Thatís one of the issues with this whole thing. Also, if someone is delivering packages for an online shopper, how does the retailer guarantee the quality of delivery, and make sure that the person doesnít run off with the merchandise? There are still some things to be thought about here. But with so much discussion about crowdsourcing, you canít help but ask, is this going to be the next step?

In Northern California, thereís a mobile ride-share app called Sidecar. If you want to go from Point A to Point B, you put in a request, and someone going in that direction can decide to give you a ride. So what if Store A has run out of a particular SKU, and Store B has several on the shelf? Can we utilize the Sidecar app to ask someone whoís going in that direction to stop at a store, pick up the inventory and drop it off at another location? The extent to which companies will actually utilize this technology remains to be seen, but weíre right at the cusp of some really interesting developments, whereby the crowdsourcing phenomenon can have a significant impact on how we manage product and inventory flow within supply chains.

Q: How is omnichannel retailing changing consumption and shopping behavior in general?

A: Esper: Now that we have a better understanding of the fact that the omnichannel is here, weíre starting to ask, who are these people who are actually engaging in omnichannel shopping? Iíve read that by 2017, weíll see the rapid growth of consumers shopping on mobile devices and picking up products in store. More than likely, theyíll be shopping while en route to the store. Which means that the order has to be fulfilled pretty rapidly, more so than it is today. And the consumer will have to have good visibility to the retailerís inventory, in order to make an informed shopping decision.

I was talking to one retailer who said it might soon be informing consumers as to when in-transit inventory is expected to arrive, and how many units of inventory are going to be on that shipment. The well-informed omnichannel shopping experience requires a discussion about visibility.

At the same time, retailers need to understand omnichannel shoppers Ė  what are their expectations about their shopping experience, and the consuming of goods? Weíre still on the verge of this, but itís opening up some really interesting discussions about the agility and flexibility of the supply base, in order to fulfill omnichannel demands.

Resource Link:
University of Arkansas, Department of Supply Chain Management

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