Companies that engage customers across many channels, earn trust and repeat business. In fact, there are some indications that multichannel customers spend even 50 percent or more during the holiday season than their traditional single-channel counterparts. For instance, Amazon.com is reportedly celebrating its best ever holiday season with record sales and bullish claims about the number of orders it was able to successfully fulfill. Yet, despite the affability of multichannels, except for a few groundbreaking companies, this is still uncharted territory.
Part Three of the Retailers Join Forces for a "Make or Break" Attempt Their Competitive Landscape series.
Better Web design and wider selections of products offered on-line are important to multichannel success; however it is crucial to understand that factors mitigating revenues and to ability to fulfill Web orders are also key. A good Web site design—one that has streamlined site navigation, search, and checkout processes—enables the kind of sales process that best fits the customer's and retailer's needs, as does good site performance, and a well-designed user interface. One will indeed never achieve proper order fulfillment without a self-evident navigational structure, the right search, help, linking of the site to the support center for synchronous user support, etc. Front-end business-to-customer (B2C) e-commerce success also requires good product information and pricing, because it is easy for Internet customers to comparison-shop. A $2 or so difference in the retail price of a DVD can have a large impact on sales volume when the competition is only one click away.
For a detailed discussion multi-channel sales see "Consumers Shop Everywhere: Understanding Multi-Channel Sales".
Once the retailer has designed its process to take advantage of the multi-channel sales opportunities, it must build a strong infrastructure that supports on-time delivery handles returns, instead of simply focusing on reducing costs. Multichannel retailers must be able to flawlessly execute a full range of services to engage, transact, and fulfill Web placed orders. Hence, most successful multichannel retailers of today had to either build a complete set o in-house or outsource some or all of them.
What's more, traditional brick and mortar retail stores still rely on store clerks and managers to support customers, while multichannel retailers must provide similar support via call centers that are adequately staffed so that customers are not on hold for too long. Additionally, these centers should be available around the clock. There should also be a number of appropriate financial services available, such as payment gateways, merchant accounts, fraud screening, and business payment services. For more information, see Differences in Complexity between B2C and B2B E-commerce.
Apart from Amazon as the Internet retailer pioneer, the likes of Best Buy, Staples, Ahold, Target, and Lowe's have also been carving out their niches. They are capturing growth and profits from multichannel, customer-centric marketing in a competitive market dominated by Wal-Mart's well-oiled retail machine. While Wal-Mart can match the growth of these retailers in absolute numbers just by opening new stores, it will hardly take more business in the competitive multichannel market serving customers with individual, personalized shopping experiences and by delivering on their complex requirements.
Considering the use of technology for supply chain effectiveness and differentiation, new technology will be indispensable for Sears Holdings, which will be created when Kmart Holding Corporation (NASDAQ:KMRT) and Sears, Roebuck and Co. (NASDAQ:S) complete their merger. Yet, so far, neither merging party has been a dominant force in any retail segment and neither are they known for their respective IT or supply chain management (SCM) proficiency. They have only had sporadic investments in some applications with less than limited success (to put it mildly). An astute IT strategy should help any company develop a strong competitive advantage whether it be improved time-to-market, better insights about customers behavior and preferences, or devising a more efficient supply chain.
But, with the impending merger, the two giants will likely be preoccupied with rationalizing their numerous diverse IT assets, decommissioning redundant ones, and integrating the rest without losing crucial sales and inventory data, that there will be little time and resources to pursue anything else. Already lagging behind the competition technology-wise, it is difficult for us to see how Sears Holding will not fall further behind, let alone overtake the competition.
One should also bear in mind that poorly leveraged technology had been a major reason for Kmart's bankruptcy. Since the 1980s, Kmart seemed fall into complacency. It failed to stick to the traditional tenets of business—impressive customer service, constant innovation that keeps customers' attention, and cost savings. Moreover, while Kmart attempted to harness technology to address supply chain efficiency, it did not follow through to get value out of its solutions. For example, in mid 2000, Kmart deployed a number of SCM products including i2 Technologies and former EXE Technologies (now part of SSA Global), to launch an ambitious renovation attempt worth $1.4 billion (USD) of software to improve its supply chain systems. It aim to reduce store-level out-of-stocks and to increase inventory turns (see i2 Will Come Out Ahead in Kmart Deal). Unfortunately, Kmart had seemingly fallen prey to the misperception that packaged applications, in plain "vanilla mode," and without significant modification could run a complex organization of its size. The project had all but stalled. A year and a half later, before the systems ever went live, the company announced that it was abandoning most of its software and was instead buying a warehouse management system (WMS) worth $600 million (USD) from Manhattan Associates. This too apparently failed to solve the company's supply chain problems, and it went into bankruptcy in early 2002.
Yet, a significant software investment is necessary to effectively meet the needs of multichannel shoppers. Once can hardly imagine the success of Amazon.com without a significant application investment. Complex organizations need a level of applications customization. Given the potential of multichannels, the need for technology and of all these factors, Sears Holding must become more technically daring and innovative as it strives for a possible differentiation. Unlike the chaotic moves Kmart undertook a few years ago, at the same time the company was faltering, Sears must view IT as the enabler for business success, not the "be all, end all". A mitigating factor to Kmart's faulty forays may very well be that Sears seems to be more innovative and aggressive when it comes to leveraging technology to achieve operational efficiency.
Indeed, behind many success stories in American business lies an innovation. Going back a century, in the case of Sears, the innovation was the mail order catalog. At the time the company began in the late nineteenth century, rural general stores were ripping customers off by often charging 100 percent mark-ups on goods. Rural customers eventually rebelled by spending their dollars with mail-order pioneers, especially with Sears, whose model supported cheaper prices and higher volumes than the rural stores. Further, the system was backed by an ever-improving postal service. When Sears' catalog sales were at their peak, customers often ordered from the catalog over the telephone and picked up the goods at the nearest store. Since its introduction a few decades ago, the catalog pick-up area has always been very busy.
Fast forward to the 1990s. Sears did not sell anything on-line until 1997, and until 1999, it offered only one product category. From the beginning of the Internet revolution, Sears' strategy was to maintain at least one face to the customer. It wanted to ensure there were no rifts between "on-line" and "off-line" Sears. Today, products bought on-line can be picked up and returned to the stores, if necessary. Customers can also schedule in-store service visits on-line. Sears also provides near real-time inventory visibility across all stores.
Part Three of the Retailers Join Forces for a "Make or Break" Attempt Their Competitive Landscape series.
Better Web design and wider selections of products offered on-line are important to multichannel success; however it is crucial to understand that factors mitigating revenues and to ability to fulfill Web orders are also key. A good Web site design—one that has streamlined site navigation, search, and checkout processes—enables the kind of sales process that best fits the customer's and retailer's needs, as does good site performance, and a well-designed user interface. One will indeed never achieve proper order fulfillment without a self-evident navigational structure, the right search, help, linking of the site to the support center for synchronous user support, etc. Front-end business-to-customer (B2C) e-commerce success also requires good product information and pricing, because it is easy for Internet customers to comparison-shop. A $2 or so difference in the retail price of a DVD can have a large impact on sales volume when the competition is only one click away.
For a detailed discussion multi-channel sales see "Consumers Shop Everywhere: Understanding Multi-Channel Sales".
Once the retailer has designed its process to take advantage of the multi-channel sales opportunities, it must build a strong infrastructure that supports on-time delivery handles returns, instead of simply focusing on reducing costs. Multichannel retailers must be able to flawlessly execute a full range of services to engage, transact, and fulfill Web placed orders. Hence, most successful multichannel retailers of today had to either build a complete set o in-house or outsource some or all of them.
What's more, traditional brick and mortar retail stores still rely on store clerks and managers to support customers, while multichannel retailers must provide similar support via call centers that are adequately staffed so that customers are not on hold for too long. Additionally, these centers should be available around the clock. There should also be a number of appropriate financial services available, such as payment gateways, merchant accounts, fraud screening, and business payment services. For more information, see Differences in Complexity between B2C and B2B E-commerce.
Apart from Amazon as the Internet retailer pioneer, the likes of Best Buy, Staples, Ahold, Target, and Lowe's have also been carving out their niches. They are capturing growth and profits from multichannel, customer-centric marketing in a competitive market dominated by Wal-Mart's well-oiled retail machine. While Wal-Mart can match the growth of these retailers in absolute numbers just by opening new stores, it will hardly take more business in the competitive multichannel market serving customers with individual, personalized shopping experiences and by delivering on their complex requirements.
Considering the use of technology for supply chain effectiveness and differentiation, new technology will be indispensable for Sears Holdings, which will be created when Kmart Holding Corporation (NASDAQ:KMRT) and Sears, Roebuck and Co. (NASDAQ:S) complete their merger. Yet, so far, neither merging party has been a dominant force in any retail segment and neither are they known for their respective IT or supply chain management (SCM) proficiency. They have only had sporadic investments in some applications with less than limited success (to put it mildly). An astute IT strategy should help any company develop a strong competitive advantage whether it be improved time-to-market, better insights about customers behavior and preferences, or devising a more efficient supply chain.
But, with the impending merger, the two giants will likely be preoccupied with rationalizing their numerous diverse IT assets, decommissioning redundant ones, and integrating the rest without losing crucial sales and inventory data, that there will be little time and resources to pursue anything else. Already lagging behind the competition technology-wise, it is difficult for us to see how Sears Holding will not fall further behind, let alone overtake the competition.
One should also bear in mind that poorly leveraged technology had been a major reason for Kmart's bankruptcy. Since the 1980s, Kmart seemed fall into complacency. It failed to stick to the traditional tenets of business—impressive customer service, constant innovation that keeps customers' attention, and cost savings. Moreover, while Kmart attempted to harness technology to address supply chain efficiency, it did not follow through to get value out of its solutions. For example, in mid 2000, Kmart deployed a number of SCM products including i2 Technologies and former EXE Technologies (now part of SSA Global), to launch an ambitious renovation attempt worth $1.4 billion (USD) of software to improve its supply chain systems. It aim to reduce store-level out-of-stocks and to increase inventory turns (see i2 Will Come Out Ahead in Kmart Deal). Unfortunately, Kmart had seemingly fallen prey to the misperception that packaged applications, in plain "vanilla mode," and without significant modification could run a complex organization of its size. The project had all but stalled. A year and a half later, before the systems ever went live, the company announced that it was abandoning most of its software and was instead buying a warehouse management system (WMS) worth $600 million (USD) from Manhattan Associates. This too apparently failed to solve the company's supply chain problems, and it went into bankruptcy in early 2002.
Yet, a significant software investment is necessary to effectively meet the needs of multichannel shoppers. Once can hardly imagine the success of Amazon.com without a significant application investment. Complex organizations need a level of applications customization. Given the potential of multichannels, the need for technology and of all these factors, Sears Holding must become more technically daring and innovative as it strives for a possible differentiation. Unlike the chaotic moves Kmart undertook a few years ago, at the same time the company was faltering, Sears must view IT as the enabler for business success, not the "be all, end all". A mitigating factor to Kmart's faulty forays may very well be that Sears seems to be more innovative and aggressive when it comes to leveraging technology to achieve operational efficiency.
Indeed, behind many success stories in American business lies an innovation. Going back a century, in the case of Sears, the innovation was the mail order catalog. At the time the company began in the late nineteenth century, rural general stores were ripping customers off by often charging 100 percent mark-ups on goods. Rural customers eventually rebelled by spending their dollars with mail-order pioneers, especially with Sears, whose model supported cheaper prices and higher volumes than the rural stores. Further, the system was backed by an ever-improving postal service. When Sears' catalog sales were at their peak, customers often ordered from the catalog over the telephone and picked up the goods at the nearest store. Since its introduction a few decades ago, the catalog pick-up area has always been very busy.
Fast forward to the 1990s. Sears did not sell anything on-line until 1997, and until 1999, it offered only one product category. From the beginning of the Internet revolution, Sears' strategy was to maintain at least one face to the customer. It wanted to ensure there were no rifts between "on-line" and "off-line" Sears. Today, products bought on-line can be picked up and returned to the stores, if necessary. Customers can also schedule in-store service visits on-line. Sears also provides near real-time inventory visibility across all stores.
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