ADVERTORIAL: The science of store enablement
According to a recent Deloitte Access Economics report, inflation-adjusted retail sales grew 3.3 per cent during the 2015 fiscal year in Australia – the retail industry’s best performance in seven years.
With NAB’s latest Online Retail Index also estimating that Australians spent $17.4 billion on online retail in the 12 months to July 2015, there is no doubt the Australian retail sector continues to remain buoyant.
While online sales continue to grow (6.2 per cent higher compared to a year ago), traditional bricks and mortar retailers – as measured by the Australian Bureau of Statistics – still accounted for more than 90 per cent of total Australian retail sales, in the same period.
Market conditions and consumer preferences are rapidly changing and they have altered the face of retail indefinitely. However, the importance of bricks and mortar to the overall equation of profitable sales continues to remain incredibly high. The store itself creates the conditions for a sale.The experience that consumers can be given in store is often more immersive, tactile and engaging. These more emotional connections can lead to immediate sales, and to increased loyalty in the long term.
These things do not come automatically though. They are the result of a complex, scientific process. Understanding the science of shopping and more specifically, store enablement is fundamental to continued success.
The first step to store enablement to improve customers’ in-store experience involves a de-centralisation of the distribution process. If the whole organisation gravitates around the distribution centre, it can get sucked in. This is problematic because customers do not see the DC. This creates confusion and frustration when the limitations of the DC negatively impact a customer’s in-store experience.
Bringing stores into your distribution network however, can provide retailers with previously unattainable flexibility. By treating stores as mini distribution centres, retailers can deliver true omni-channel shopping to their customers, letting them click, collect, and return on their terms, wherever their order originated.
In addition, by diffusing control of distribution and inventory throughout the whole organisation – including to stores by enabling them to locate available product from across the network – the fulfilment experience for the customer becomes a positive one even if product is not on the store shelf. Time-to-fulfilment is inversely proportional to success when it comes to customer satisfaction and loyalty.
De-centralisation elevates the store’s status, but that’s only part of the equation for achieving success. Instead of a sequential approach to fulfilment and service, stores also need to evolve from being just the end point in the sales cycle to become product advisory outlets, experience centres, mini-DCs, dispatch centres and collection locations. At the same time, retailers need to embrace the science of marginal gains so this key asset is made to work harder and smarter on a perpetual basis. Reducing stock holding, increasing floor space, speeding up movement of in-demand items and evolving profitability algorithms compound one another to boost sales and margins.
Because the store is no longer the end point, the profitability equation is made more complex. Today, as retailers offer multiple fulfilment options to keep pace with evolving consumer demands, the equation has many more floating variables. Proximity to the customer, capacity and cost to fulfil must all factor into the calculation. There are also more corporate inventory rules that exist today, either to support branding or to manage risk versus cost. The outcome is that rules-based order processing is essential to ensure that the end result is still profit.
This is where Order Management solutions come into play. Retailers are recognising more than ever before, that in order to fight for and retain customer loyalty, fast and seamless omni-channel delivery is critical to success.
Order Management creates a repository of order and customer information, so it’s easy to see the history of every transaction and create a structured approach to calculating and allocating sales revenue. In Australia, many retailers are deciding that orders fulfilled from store stock are store transactions regardless of the purchase or delivery channel. This is just one of the reasons why major retailers in Australia are now using Order Management solutions to integrate store and distribution networks – a scientific approach to bringing customers and products closer together.
Complex algorithms are needed to handle the increasing volume of ifs, whens and buts that occur naturally in the sale-to-fulfilment process. The approach of decentralised distribution, getting more from the stores and a re-assessed profitability equation will help to ensure success. It’s not rocket science; it’s the science of store enablement.
To see Manhattan’s In Store solutions and to hear from some of our local customers visit www.manh.com.au/exchange2015 for information about our executive networking event Manhattan Exchange.