GUEST COMMENT Unlocking a unified marketplace for the ‘now economy’

As Chris Koeppel puts it: In the Now Economy, customers are adopting the “I see it, I want it, I’ve got it” retail model – while at the same time they’re more intent than ever on making purchases that support their personal values…they not only want the perfect pair of black sneakers delivered to their door in 24 hours – they may want those sneakers to come from a company with a low carbon footprint, or from a minority-owned business in their local area.

What does this mean for retailers? It means there’s a need to offer a wider choice – and to do so cost effectively. 

More options, more colours, more sizes, and more products – while remaining profitable. But there’s an opportunity too – it’s a chance to build your own brand, by offering more products, carefully curated to align with your brand personality and values. 

Targeted range expansion has the advantage of lowering supply chain costs and avoiding taking large risks on buying and managing inventory. The secret to making it work well is to synchronise retailers and brands in a fast, accurate and efficient way.

This is important in today’s retail climate because it is one of the few ways to generate incremental growth from your existing customer base. Retailers end up getting extra revenue by selling more products to the same customers, who buy more than usual while on their website. It also brings extra people into a retailer’s ecosystem, positively influencing search results and creating a halo effect. This helps brands, too. At one key US retailer, brands selling under both wholesale and an extended range estimate that they have achieved a 14% uplift across their total business.

Think instead about brand fulfilment

Brand fulfilment is a term used to describe the practice of brands delivering orders that are placed on a retailer’s website. So, where a retailer is selling products other than their own brand, the brand owner fulfils the order direct to the customer, rather than it being routed through the retailer’s supply chain.

For example, traditionally if a shopper placed an order for a pair of branded sneakers on Foot Locker’s website, the product would be delivered – and possibly eventually returned – via the retailer’s own distribution and fulfilment centres. Today, under the concept of “brand fulfilment”, that has changed. Now, certain brands collaborate with Foot Locker and deliver product directly to the shopper on its behalf.

As macroeconomic challenges put yet more pressure on both fashion brands and retailers, and customer demands continue to evolve, smart businesses such as Foot Locker are finding new ways to collaborate with partners to deliver more products, remove fulfilment friction and exceed shopper expectations.

There are many iterations of brand fulfilment, including marketplace, drop ship and digital concessions.   The first thing to note is that most retailers and brands are after curated range expansion, not an “endless aisle.” This allows greater choice and reflects the differences in the personal tastes and values of their shoppers, but which also allows them to stay true to their brand story.  

In almost every conversation with retailers and brands, we are hearing concerns over profitability coupled with inventory efficiency. Optimised brand fulfilment, when implemented at scale, can help retailers and brands address both issues.

This idea is not new, but it has really taken off in the last year with examples such as The Very Group’s Flexible Fulfilment Model, and Asos’s Partner Fulfilled programme. These approaches use unified brand fulfilment capabilities to deliver greater choice for consumers, and at the same time reflect the retailers’ unique brand promise. 

Another beneficial concept is the idea of connected inventory, taking brand fulfilment a stage further. It is the sharing of inventory for the same product, inside and outside your own network, by location.  

Creating shared visibility of where stock is, by location, allows a brand to backfill the retailer’s wholesale stock – sometimes called “a never out of stock” model – and/or potentially fulfil more quickly or economically if the product is physically closer to the consumer.

Again, this can profit brands as well as retailers. Nike has said its connected inventory model gives it knowledge of its retailers’ stock, and vice versa. With some of the larger brands we work with, this practice represents as much as 40% of the business case for doing brand fulfilment.

Brand fulfilment benefits for retailers are:

• The ability to offer the consumer greater choice under a faster and lower-risk model, thus enabling revenue growth, even under challenging circumstances
• The ability to provide connected inventory to optimise availability
• And at scale, the possibility of lowering further capital spend on supply chain, leading to more profitable growth.

For brands, the benefits include:

• The ability to operate delivery under a common stock pool
• The opportunity to encourage retailers to test and learn on new products at much lower risk
• Under certain circumstances they can exercise greater influence over assortment, content, and price.

What are we seeing?

As a leading SaaS ecommerce solutions provider with a commerce network of over 18,000 retailers and brands, our experience is that most businesses want to create a flexible platform to stimulate and meet customer demand and allows them to collaborate flexibly in a way that suits their business model.

The good news is, if you’re looking at how to do brand fulfilment better, whether through a marketplace, drop ship or related program, you don’t need to reinvent the wheel. Instead, leverage the tools and systems you already have in place and work out the best way to extend them in line with your business model. Think about:

• How do you make unified marketplace or brand fulfilment part of a wider strategy which will enable you to leverage the power of collaborating with more brands and suppliers?
• How can you ensure you have the means to grow your business profitably under this model?
• What are you willing to give up in terms of control and/ or which parts of your business does it makes sense for?
• How it might impact the customer experience and your brand? 
• Remember, marketplaces only affect the online purchasing capability for your customer, you need to consider their overall experience.

What are the challenges of brand fulfilment for retailers, and how to avoid them?

Four common pitfalls we see of brand fulfilment:

• The customer experience is fragmented
• There is not enough flexibility to accommodate brand preferences
• The brand fulfilment programme takes too long to scale
• Profitability does not meet expectations.

Our advice here is simple: solutions should not constrain you to a specific fulfilment type or specific commercial model offer. If you are omnichannel, don’t select or design a mono-channel solution.  Consider the impact on your customers of not integrating click and collect, and returns, when these are embedded in shopping behaviour. 

Also ensure the brand-fulfilled product competes equally with your owned inventory on standards such as delivery promise, and that post-purchase communication does not fall into a void. Retailers that have successfully integrated this have seen NPS [net promoter scores for customer satisfaction] ratings for brand fulfilment on par with their mainstream business.

In summary

Most retailers are coming round the fact that adding more suppliers and outsourcing the inventory makes sense. But rather than buy a straight up, marketplace-only solution, perhaps you need to consider a unified platform which can work for you as a growth enabler? One that builds on top of your current capabilities and that allows you to add more of the best things about a marketplace to your existing program – but that doesn’t require a complete rip and replace or for you to invest in a ground-up solution?  Why start again from zero when you’ve probably spent years building an unowned inventory partnership program which could be evolved to fit the needs of your ever-changing business?

The key is to be clear what you want, what your customers want and what you’re prepared to give up control over. And bear in mind, your customers want you to own the process. They’re buying from you. If a supplier doesn’t manage a return well, customers will stop doing business with you.

So whatever fulfilment model you are considering, make sure it can deliver the great experiences your customers are relying on you for, regardless of where you’re selling. 

Author

Philip Hall is Managing Director, Europe, CommerceHub