Posts Tagged 'BOPIS'

How omnichannel makes inventory management tougher

RetailWire panelists recently had plenty to say about the supply-chain challenges triggered by stores’ push into omnichannel programs. Here’s my brief comment:

One cause of volatility is the growth of “ship from store” fulfillment of e-commerce orders (rather than shipping from a dedicated distribution center). This makes it harder to track sales and inventories at the individual location level, and makes replenishment more unpredictable. If e-commerce order fulfillment is totally randomized from one brick-and-mortar location to another (depending on who has the goods in stock and the costs of shipping), the customer looking for something on an actual store visit is more likely to be disappointed.

And here’s an additional comment on the same topic, specific to Target’s challenges:

Given Target’s spotty history of in-stock rates in its brick and mortar stores, there is a risk involved in depending too heavily on “ship from store.” As the Braintrust discussed a week ago, using stores as mini-distribution centers makes it tougher to assess actual demand in a given location accurately — in turn making replenishment more unpredictable. So if the “flow center” concept helps Target address this problem…good idea and worth rolling out to other regions.

And, finally, a comment about how Best Buy is successfully addressing the same issues:

Demand planning has become more complicated with the onset of omnichannel initiatives like “Buy online – pickup in store” and “Ship from store.” It makes forecasting by location more difficult if physical stores are also being used as mini-warehouses. Retailers run the risk of alienating customers who have made the effort to shop at a physical store, if they can’t find what they want in stock.

Best Buy has long been a leader in helping customers use the website to identify in-stock levels at their nearest store. But the company obviously decided that this wasn’t enough, and only a boost in stock levels would drive more sales. Retailers often get rewarded by Wall Street for driving down their comp-store inventories, but perhaps Best Buy’s results will point in a smarter direction.

Online grocery sales gaining share quickly

It should come as no surprise (except, perhaps, to traditional grocery chains) that online sales are the fastest growing segment of the industry. Today’s RetailWire panel reflects on whether the major players are ready for this trend. Here’s my opinion:

The wave of online sales that has swamped general merchandising is now catching up to the grocery industry. This shouldn’t come as a surprise to food retailers after watching other industry segments caught flat-footed. It’s only now that general merchandisers have developed omnichannel strategies that are helping them turn a corner.

The key for grocery retailers is to reach the customer where he or she wants to shop. This may mean home delivery or it may mean BOPIS — and it may also mean a simpler shopping experience in-store with less overassortment to choose from. Rest assured that Amazon is going to deliver a more convenient experience (with higher in-stock levels) while traditional food retailers are still trying to figure out if there is a threat.

Omnichannel: Not just a matter of semantics

As retailers continue to grapple with their own definition of “omnichannel,” I thought this RetailWire comment might offer some clarity:

I ordered razor blades from Amazon a few days ago, and I just ordered some K-cups this morning. (They will be here later today.) Would I describe this as “omnichannel,” because it involves commodity items that I might have found in a physical store? No, I would call this purely an e-commerce transaction.

A true “omnichannel” initiative is one that bridges the divide between e-commerce and brick-and-mortar. If I had bought the K-cups from walmart.com (and picked them up at the store), that would be closer to an omnichannel play. And the more seamless the shopping experience, the better … whether I am buying food, consumables or apparel.

Once we get past the semantic distinctions, there is little doubt that programs like BOPIS, BORIS, ship-from-store and curbside pickup are escalating rapidly. The consumer continues to search for the perfect combination of price and convenience — the “blue-eyed unicorn” of today’s retail.

Holiday hiring and the “omnichannel” challenge

Two recent (and related) comments from RetailWire on the subject of holiday hiring and whether stores are prepared to deal with the operational demands of omnichannel. First up, my take on the kinds of stresses on payroll and customer service that stores are trying to manage today:

BOPIS can have an impact on customer service especially in those stores where payroll is being stretched to manage “omnichannel” process instead of the shopper in the store. I’m thinking particularly of department stores (Macy’s, for one) whose higher-touch service standards have slipped while they are asking the same sales associates to cover additional tasks.

But there is another kind of “customer service” (in self-selection stores like Target and many others) that really depends on efficient restocking of fixtures and quick checkout. I don’t see BOPIS having the same kind of stressful effect on these stores’ service standards.

And here’s the second comment, published a few days later after Target and Macy’s revealed their holiday hiring plan:

Target’s hiring forecast vs. 2016 is a healthy sign, and Macy’s announcement is also a positive in light of the smaller store base. What both retailers are signaling is that they are figuring out the manpower requirements of omnichannel initiatives like BOPIS and ship-from-store without sacrificing the service standards they need to maintain in their core brick-and-mortar business. This seems to be a particular challenge at Macy’s, so it’s good to see them recognizing the cost of a solution.

 

 

 

Operations management needs a seat at the omnichannel table

Today’s RetailWire discussion focuses on the operating pressures caused by omnichannel and digital initiatives. Field managers absolutely need to be part of the planning process, and here’s my point of view:

Retailers pushing for omnichannel solutions (BOPIS, ship-from-store and so forth) absolutely have to involve store operations. There is no way to plan the costs of these services (especially in payroll hours) without field management at the table. And store management has a responsibility to speak up when pushed to “do more with less” — otherwise the costs of omnichannel programs erode the customer service that brick-and-mortar shoppers still expect.

Are “same store sales” still meaningful?

In a recent RetailWire discussion, panelists commented on an article about same-store sales. The issue is whether this metric means anything in today’s world of “omnichannel” and stores closures. Here’s my perspective:

The article brings up a key point about the impact of omnichannel on same-store sales metrics. If a customer uses BOPIS (buy online, pick up in store), does the sales credit belong to the company’s e-commerce site or to the store that fulfilled the order? Is it a fair metric when store A might have the merchandise in stock and location B might not? And, bottom line, does it or should it matter to a true omnichannel retailer?

There is another issue casting a shadow on the validity of same-store sales: The increasing speed of store closures. At one point “comp sales” was a valuable tool as a lot of retailers were in a go-go expansion mode, but just the opposite is the case now. As companies close overlapping locations, the remaining stores may benefit from a spike in same-store sales without actually reflecting on the health of the business.

Omnichannel: Driving sales, or just efficiency?

As stores have seen underperforming locations and declining comp-store sales, their response has been a case of circular reasoning. The thought process of converting physical stores to “omnichannel” centers has led stores like Macy’s in some directions that are actually hastening the sales shortfalls.

Just in the past week, RetailWire panelists have discussed the risk of trying to perform multiple functions (including omnichannel initiatives like BOPIS) without adding payroll — putting stress on the existing associates and cutting into expected levels of customer service. I’ve been in several mall anchors recently (not just Macy’s) where the store needs a physical refresh, or more sales associates, or more competent restocking of the selling floor.

It’s not a simple question of how to manage competing expenses, but neglect of a company’s core mission can only cut into its topline sales and profits.

The hidden costs of omnichannel

There is growing discussion (especially at RetailWire) about brick and mortar stores struggling with the cost and complexity of “omnichannel.” In particular, department stores are finding it hard to operate as fulfillment centers and places for customers to shop — as long as they are unwilling to add payroll. Here’s my opinion, gathered from two recent blog posts.

First:

I have an acquaintance who sells shoes in a local department store, and who found herself spending time during the holiday season fulfilling BOPIS orders instead of serving customers in her own department. The company paid her time-and-a-half but the extra income didn’t offset her lost commission on her shoe sales. The program didn’t help the store’s reputation for customer service, nor associate morale.

Retailers (as in this example) need to figure out the true costs of omnichannel initiatives like BOPIS or ship-from-store in an environment where brick-and-mortar sales are flat or worse. They are compounding the sales problem by stealing store payroll to execute tasks unrelated to serving the customer or restocking the selling floor. Companies may push back by saying, “We can’t afford to add payroll”…but growing evidence suggests that they can’t afford not to, either.

Second:

As stores have seen underperforming locations and declining comp-store sales, their response has been a case of circular reasoning. The thought process of converting physical stores to “omnichannel” centers has led stores like Macy’s in some directions that are actually hastening the sales shortfalls.

Just in the past week, BrainTrust panelists have discussed the risk of trying to perform multiple functions (including omnichannel initiatives like BOPIS) without adding payroll — putting stress on the existing associates and cutting into expected levels of customer service. I’ve been in several mall anchors recently (not just Macy’s) where the store needs a physical refresh, or more sales associates, or more competent restocking of the selling floor.

It’s not a simple question of how to manage competing expenses, but neglect of a company’s core mission can only cut into its topline sales and profits.

BOPIS: Be careful what you wish for

From a recent RetailWire discussion, I comment on the move toward omnichannel initiatives like “Buy online, pick up in store” (BOPIS). I think there are two broader challenges brought on by BOPIS specifically and stores’ rush to create an “omnichannel” experience in general:

First, brick and mortar stores are devoting more of their associates’ hours to off-the-floor activity (such as pulling and readying BOPIS orders) instead of face-to-face customer interaction still expected in most physical stores. And, since store payrolls are unlikely to grow in a flat sales environment, this trend is eroding one of the key reasons why shoppers visit brick-and-mortar locations in the first place.

Second, stores are trying to emulate in their physical locations the breadth of assortment found on their websites. This is meant to make the BOPIS fulfillment process easier, or at least to offer the customer more choices. But sometimes the customer wants more editing, not more assortment, and the resultant clutter and lack of focus does nothing to make the shipping trip more appealing.

Omnichannel: A logistical double-edged sword?

Amongh the challenges facing retailers as they try to convert to an omnichannel model, what do they do with the products that customers order online but return to their stores? Here’s a thought, borrowed from a recent RetailWire panel discussion on the subject:

As stores strive for more omnichannel integration, it becomes a double-edged sword when customers return goods to brick-and-mortar locations that are only carried online. (And this is true for most retailers, who don’t have the space for the breadth of assortment they can offer on their websites.) What happens to this merchandise, which was never planogrammed and will simply clog the aisles with more clearance?

Kohl’s is testing a concept (“Off Aisle”) intended to absorb this merchandise but is rolling it out slowly. Obviously it’s an issue that most national retailers with liberal return policies need to deal with more aggressively.