Addressing the high cost of omnichannel retail

A new ebook on omnichannel commerce questions the sustainability of current practices in the retail trade. Titled Threat … or Opportunity: Seven Steps to Overcoming the Shockingly High Costs of the Order Management Lifecycle and based on a survey conducted by EKN Research in partnership with Aptos Inc., the book alleges infrastructure costs are undermining profits at numerous omnichannel retailers.

EKN Research, a boutique firm based in Deerfield, Ill., and focused on business-technology insights in consumer industries, reported that retailers spend as much as 18 cents of every dollar earned struggling to fulfill customer buy-anywhere, pick-up-anywhere expectations. Additionally, 8 in 10 retailers surveyed reported an increase in order management and fulfillment costs compared to the previous year, reflecting an increase of 5.07 percent. Nearly half of survey respondents cited free shipping policies as a major business challenge.

"A lack of end-to-end order management visibility severely inhibits effective decision making, productivity and enterprise effectiveness," said Sahir Anand, EKN Vice President Research and Principal Analyst. "Many of the retailers surveyed recognize this must quickly become a priority investment, with almost half of respondents (48 percent) identifying improvements to end-to-end order management visibility as a key area of focus in 2016."

Retail's wake-up call

"This study is a huge wakeup call to retailers," added Noel Goggin, Chief Executive Officer and culture leader at Aptos, an Atlanta-based retail technology provider. "As traditional store-based purchases continue to decrease and omnichannel transactions continue to increase, 'runaway' order management and fulfillment costs have the potential to devastate the bottom line of retailers in virtually every category."

Goggin noted that retailers need new skill sets to survive and thrive in the multifaceted, complex world of omnichannel commerce. At minimum, retailers need to improve order cycle time, order function transparency and inventory, and order and supply chain alignment, he said. Aptos can help accomplish these objectives by providing a range of logistics and personalization services designed to help retailers "engage customers differently" by "understanding who they are, what they want and why they buy," according to the company's website.

"Real-time inventory visibility from across the enterprise, combined with powerful order brokering and sourcing logic, ensures that every order is sourced from the most profitable location," Goggin said. "This also enables powerful competitive advantage through lower prices, improved margins and consumer service."

Seven steps

EKN and Aptos created a QuickScan interactive tool to help retail and restaurant merchants assess network and order management system capabilities. A thorough evaluation of existing logistics frameworks is a prerequisite for successfully developing and implementing system optimization strategies before successfully reducing the cost of order management and fulfillment, the authors stated.

Following are seven approaches the authors recommend for implementing intelligent logistics systems:

1. Allocate based on fulfillment. Account for orders from all channels ‒ in-store, online and mobile ‒ in order to accurately measure demand.

2. Connect the channels. The biggest cost-saving opportunities are often found through cross-channel integration of order processes and technology.

3. Automate, rank, route. Advanced order brokering and routing systems facilitate informed order fulfillment decisions, enabling retailers to balance inventory handling costs with customer expectations.

4. Think one customer, one enterprise, one order. Efficient order management requires a single access view of all orders across an enterprise.

5. Start splitting orders. Retailers that successfully contain order management and fulfillment costs can split orders, using order management systems that treat each order line as a separate entity as well as a part of an entire order. Managing individual order lines can mitigate "all or nothing" decisions at the order level.

6. Get to the cloud. Cloud-based order management and fulfillment processes enable omnichannel teams to improve their processes, introduce rapid-change management, which benefits business users and consumers alike.

7. Support the store. Store operations need to support changing business conditions by becoming more efficient at fulfillment. Studies have found that up to two-thirds of customers who come into a store to pick up an item will purchase more items while in the store. It's critical for store associates to have visibility into orders from all channels, via every POS station and device.

Raise awareness, lower costs

Payments analysts have noted an increase in nontraditional payment methods due to increasing popularity of e-commerce and mobile payment technologies. Marc Beauchamp, President of Payment Processing Technologies LLC, an Indiana-based registered ISO known as PayProTec, has seen merchants accept payments via a variety of customer engagement points, including social media networks, web stores, physical stores and mobile devices. "MLS are offering more integrated solutions to meet these needs and also working with software providers to integrate payment acceptance on their platforms," he said. "I see more of a push to integrated platforms and cloud based systems."

In their book, Aptos and EKN warn retailers against implementing fulfillment services without fully committing to process optimization. Developing efficient, scalable and repeatable processes can help merchants lower costs, improve margins, boost earnings, provide a consistent service experience, and pass through lower fees and prices to consumers, the authors noted.

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