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GUEST COMMENT Knocking down barriers to omnichannel profitability

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GUEST COMMENT Knocking down barriers to omnichannel profitability

Brian Green, head of commerce sales, EMEA at Magento
Brian Green, head of commerce sales, EMEA at Magento

Multichannel is the new reality. Bricks and-mortar retailers are working to improve their digital capabilities to navigate the evolving landscape; and pure-play online sellers are enhancing their influence by opening physical locations. But, as customers grow increasingly channel-agnostic, retailers are forced to blur the lines between store and online to deliver a unified commerce experience. Reaching and delighting customers wherever they shop means stretching budgets to fulfil their demands across all viable sales channels. It’s not surprising that merchants are going the extra mile to make this possible when nearly six out of ten customers are unsatisfied if they can’t access the information they seek via their preferred channel.

 

That being said, an omnichannel approach to sales is also a costly one. With a staggering variety of order paths, nuances related to the various channels such as ambitious delivery times or expensive in-store tech – to allow online orders from store, for example – keeping profit margins high is a challenge. However, if retailers want to increase their market share, omnichannel is the only option: merchants who engage shoppers through different channels see a 32% increase in sales. So, what measures can they implement and what processes can they optimise in order to remain profitable?

 

Centralised order management system (OMS) for optimised fulfilment

The focus on order fulfilment has grown exponentially. No longer an afterthought, it has become a core component of the shopping experience and retailers are pulling out all the stops to meet their customers’ expectations in terms of delivery. This naturally leads to an increase in costs. That’s why retail businesses are working to refine their fulfilment processes by optimising their logistics and inventory management strategies. From a back-end perspective, a successful omnichannel sales plan goes hand in hand with a centralised order management system.

 

Customers make orders via desktop, mobile and in-store kiosks, requesting deliveries to urban and rural areas all over the region. A centralised OMS can ensure orders are completed in the most profitable manner by provide full inventory visibility across the different warehouses and stores, find the correct item and initiate the fulfilment process from the optimal location.

In order to grant their customers’ every wish, retailers are shipping products faster than ever, working around buyers’ schedules, delivering to homes and alternative locations, all at an affordable price – or at no cost at all. Because this is costing them a good chunk of their revenues, they should avoid any additional, unnecessary expenses. Ensuring that order picking and shipping procedures run like clockwork, and that stock counts are always on point is vital: merchants must ensure these aspects are coordinated correctly so as to prevent erroneous or failed deliveries.

 

Reducing the cost of returns

When consumers are mainly buying online, without experiencing the product first hand, returns are simply inevitable. Aside from the frustration of losing revenue, returns also increase logistics and transport costs. That’s why retail businesses should work to manage these processes effectively or attempt to reduce them.

 

Many retailers have a strict policy which only allows online purchases to be returned via mail and store-bought items to be brought back in store. However, merchants who switch to a more integrated approach will quickly see significant benefits. Encouraging in-store returns for items bought online will help save on the cost of shipping which most shoppers expect the seller to pay for. Moreover, a flexible returns strategy empowers the customer to handle the return how they prefer and can lure them in store where they might purchase alternative items and the refund could turn into a straight exchange.

 

There are many things retailers can do to prevent returns, for example, improving the product page by equipping it with extensive information on size, weight – material and fit, for clothing – can help the customer make more informed buying decisions and lead to fewer returns. Implementing a modern product information management (PIM) solution can facilitate this process.

 

Boosting profit by increasing revenue

Another great way retailers can boost their profits and make their omnichannel investments worthwhile is by looking to increase the value of each transaction. The higher the value of the order, the higher the profit margin and the less the cost of shipping also becomes less of a is a burden When each order brings in more money, the cost of shipping it is suddenly less of a burden and the profit margin is higher.

 

Possible tactics include upselling and cross-selling with personalised product recommendations and ‘also bought’ item suggestions. Implementing a BOPUS strategy, also known as “click and collect”, will not only reduce order delivery costs but will entice customers to make further purchases. Fifty three per cent of customers buy when collecting in store so vendors have the potential to hugely increase their revenue by offering this service.

 

Bricks-and-mortar sellers shouldn’t let their physical locations limit their stock capacity and miss out on sales. The concept of the endless aisle refers to selling items that are unavailable in location. Customers might come in looking for items that are sold out, yet to hit the shelves or exclusive to online: to prevent them from walking out empty-handed, retailers can enable pre-ordering, backordering or simply purchasing online-only stock from in-store kiosks.

 

Finally, an omnichannel data sharing method can also avoid missing sales opportunities and increase profit. For example, having information such as a customer’s order history at their fingertips can help store staff deliver a more tailored service, create a more personalised experience and ultimately be significantly more helpful.

 

Delivering a seamless omnichannel experience whilst increasing profits profitable might seem daunting ambition for many retail businesses. However, if they devise and fine-tune a clever sales strategy, looking carefully at where they can cut costs and increase earnings, they can put themselves on the path to success.

 

Brian Green is head of commerce sales EMEA at Magento, an Adobe company

 

Image: Fotolia

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