Executive Briefings

Successfully Navigating the E-Commerce and Omnichannel Landscape

Analyst Insight: E-commerce continues to grow by double digits and many companies are striving to achieve omnichannel success. A successful omnichannel strategy means having the capability to meet customers' increasingly high expectations by enabling them to buy anywhere, take delivery where they want to take delivery, and make returns where they choose. While today's leading retailers understand the need for omnichannel success, the majority are falling short of meeting their objectives. – Kelly Reed, Executive Vice President, Tompkins International

Successfully Navigating the E-Commerce and Omnichannel Landscape

Achieving omnichannel success is dominating today’s business press, and more retailers than ever understand the need to be an omnichannel retailer. However, only a few truly understand the supply chain and fulfillment implications required to achieve success. E-commerce orders are different than typical replenishment orders, and this difference continues to put a stress on distribution operations:

• Order size and shipping unit of measure are much smaller.

• Peak shipping days tend to be more intense and more concentrated.

• A strategy to streamline order delivery based on customer choice for time and place of delivery needs to be developed.

• Brick-and-mortar retailers need to incorporate stores into their fulfillment network.

If your e-commerce business is growing and you are challenged to keep up with the demand, here are some ideas for improving your order fulfillment capabilities:

Combined Distribution and Fulfillment Centers: The most obvious synergy between combining operations is inventory sharing, which results in lower inventory levels and improved fill rates for both store replenishment and fulfillment operations. Since store replenishment and e-commerce fulfillment tend to peak at different times, the investment in equipment and people can be leveraged to improve the operations of both store replenishment and fulfillment.

Store Fulfillment: Brick-and-mortar retailers need to leverage their store network to fulfill customer orders, serve as pick-up points for orders, and to handle returns for items purchased in stores and online. Successfully using stores to fulfill orders can reduce the amount of time it takes for a customer to pick up or receive an order, which reduces overall cost and enhances customer satisfaction.

Local Carriers: In many cases, local carriers and couriers are the right answer to improving service and reducing cost. The professionalism and technology amongst the local carriers has improved significantly, making them a very viable option.  Dimensional pricing being adopted by UPS and FedEx is going to raise traditional shipping costs by 25 percent to 30 percent over time, making local carriers and couriers more attractive from a cost perspective.

Improved Packaging: To keep shipping costs reasonable, it is necessary to get the air out of e-commerce packages while providing adequate protection. There will be a movement toward using more bags, more box sizes, and on-demand box creation strategies to right -size packaging to minimize dimensional pricing strategies that are being adopted by UPS and FedEx.

Marketplace Participation: The more places a company can sell its products, the greater the opportunity for increased sales and growth. However, companies need to resist the race to the bottom by having unique product offerings that are not easily matched by competitors. Most marketplace orders will be processed as e-commerce orders in either the FC or in a store, so companies need to have the right strategy to fulfill, ship and offer returns for product purchased through marketplaces.

The Outlook

Expectations that have been in place for years are becoming obsolete and being replaced by a new level of demands for cost reduction, service improvements and enhanced quality. Each company’s specific situation is different and there is no right answer, although, there are wrong answers that could be disastrous to a company’s bottom line. Adopting the right distribution strategy and operational best practices is critical to achieving omnichannel success in this age of rapid change and growth.

Achieving omnichannel success is dominating today’s business press, and more retailers than ever understand the need to be an omnichannel retailer. However, only a few truly understand the supply chain and fulfillment implications required to achieve success. E-commerce orders are different than typical replenishment orders, and this difference continues to put a stress on distribution operations:

• Order size and shipping unit of measure are much smaller.

• Peak shipping days tend to be more intense and more concentrated.

• A strategy to streamline order delivery based on customer choice for time and place of delivery needs to be developed.

• Brick-and-mortar retailers need to incorporate stores into their fulfillment network.

If your e-commerce business is growing and you are challenged to keep up with the demand, here are some ideas for improving your order fulfillment capabilities:

Combined Distribution and Fulfillment Centers: The most obvious synergy between combining operations is inventory sharing, which results in lower inventory levels and improved fill rates for both store replenishment and fulfillment operations. Since store replenishment and e-commerce fulfillment tend to peak at different times, the investment in equipment and people can be leveraged to improve the operations of both store replenishment and fulfillment.

Store Fulfillment: Brick-and-mortar retailers need to leverage their store network to fulfill customer orders, serve as pick-up points for orders, and to handle returns for items purchased in stores and online. Successfully using stores to fulfill orders can reduce the amount of time it takes for a customer to pick up or receive an order, which reduces overall cost and enhances customer satisfaction.

Local Carriers: In many cases, local carriers and couriers are the right answer to improving service and reducing cost. The professionalism and technology amongst the local carriers has improved significantly, making them a very viable option.  Dimensional pricing being adopted by UPS and FedEx is going to raise traditional shipping costs by 25 percent to 30 percent over time, making local carriers and couriers more attractive from a cost perspective.

Improved Packaging: To keep shipping costs reasonable, it is necessary to get the air out of e-commerce packages while providing adequate protection. There will be a movement toward using more bags, more box sizes, and on-demand box creation strategies to right -size packaging to minimize dimensional pricing strategies that are being adopted by UPS and FedEx.

Marketplace Participation: The more places a company can sell its products, the greater the opportunity for increased sales and growth. However, companies need to resist the race to the bottom by having unique product offerings that are not easily matched by competitors. Most marketplace orders will be processed as e-commerce orders in either the FC or in a store, so companies need to have the right strategy to fulfill, ship and offer returns for product purchased through marketplaces.

The Outlook

Expectations that have been in place for years are becoming obsolete and being replaced by a new level of demands for cost reduction, service improvements and enhanced quality. Each company’s specific situation is different and there is no right answer, although, there are wrong answers that could be disastrous to a company’s bottom line. Adopting the right distribution strategy and operational best practices is critical to achieving omnichannel success in this age of rapid change and growth.

Successfully Navigating the E-Commerce and Omnichannel Landscape