In the 1980s, Service Merchandise was a retail force. The “catalog showroom” shopping experience attracted scores of customers. Beyond the “touch and feel” aspect of products on display, the retailer evolved forward-thinking fulfillment strategies using brick-and-mortar satellite order-only centers linked to an off-site warehouse. These suburban locations offered customers convenience and the promise of inventory that is always in-stock.
Retail has changed a lot in nearly four decades since Service Merchandise – and its catalog – was familiar in households across North America. Still, many of the retailers’ leading-edge concepts are just as applicable in an e-commerce age that requires customer service capabilities across multiple channels.
Let’s look at some supply chain practices that can support an omnichannel service that enhances the experience of your customers – whether they are shopping in-store, online at their desktop on their smartphone or by telephone.
Can You Compete with Amazon? Should you Try?
Most retailers are still trying to figure out the right recipe for omnichannel. Revisiting the strategies that anchored the success of Service Merchandise, alongside modern supply chain best practices can help retailers focused on managing fulfillment costs and expanding growth across all sales venues.
Companies have to decide where they want to play. With more service comes more cost. You have to understand your customer base and understand who you want to compete against. Can you compete against Amazon at a national level? Maybe not, and if you try you may bankrupt yourself.
With customers’ rising expectations for free shipping and 2- or 3-day delivery, retailers need to be able to design a distribution network where every customer in the U.S. can be reached within two days.
For companies that have brick and mortar locations, the question becomes: How do you leverage all inventory assets to decrease customer lead time – and do it cost effectively?
That requires analysis, good data, good tools and people who know how to interpret that information.
A 21st Century Hurdle
One obstacle facing today’s retailers that Service Merchandise didn’t have to deal with: massive SKU proliferation. While the retailer probably carried a significant number of SKUs in its backroom, it also knew that most of its customers were not walking in the door with the goal of buying 10+ items.
This didn’t pose a problem until the definition of “convenience” changed. The world’s super centers caught onto the shift and started carrying dozens of different “similar” items – all on the sales floor.
At that point, all that a shopper had to do was walk in, fill a cart, and walk out the door.
In today’s landscape, if you are competing against retail and e-tail giants, it is critical to understand the profit performance of each product you offer, particularly in light of any associated fulfillment and delivery costs.
Model Networks to Manage Mistakes
Modelling exercises help retailers determine cost trade-offs versus service before you start an initiative. This can allow you to determine where to guarantee 2-day delivery in certain areas, while offering longer service time and lower cost in other areas.
One of the core benefits of network modelling: you can do all the what-if scenarios so you know how the network reacts before you invest dollars and make a mistake.
Data-driven network modelling is also an asset when disruption threatens the order-to-cash cycle. This type of proactive modelling allows a shipper to identify response options before disaster occurs and jeopardizes successful final delivery.
Leverage the Right Resources
Most retailers may not have resources to manage massive amounts of data and then turn around to review and reproduce network designs every six months or faster – all while managing a separate returns network and a separate dot-com network.
Many organizations cannot afford to obtain the people, obtain the tools and manage to keep them. If you do have a staff on site, those people may not always be needed for network design or analysis. You end up re-tasking them with other things so they are not staying fresh on their modelling skills, and when it is time to update the model – what if they are working on other critical projects? That work falls by the wayside.
Another downside of an internal modelling team: They get to know your business, and how it works. There’s a tendency to get into a modelling rut, modelling within your constraints rather than challenging “sacred cows”.
Someone outside your organization knows what other companies have done, what works and what doesn’t, – and they’re not limited by your constraints. That’s why consulting companies exist. They can think outside the box and apply your constraints rather than operating under assumptions.
Master Your Domain
Retail companies in particular should focus on their strengths.
Buying the best products and marketing to customers is the core competency of most retailers – not transportation and logistics. In that case, an outside expert can offer an unbiased, view informed by supply chain best practices effective in varied industries and many different retail organizations.
Hire an outside expert that can leverage fulfillment expertise, data and supply chain planning to help take care of customer delivery demands, so you can focus on the retail areas where you excel.
Manage Fulfillment Cost, Support Prime Performance
We are in an era where higher fulfillment costs continue to erode retail margins. It’s time for stores to think harder about how to fulfill orders across all channels, while also factoring in parcel transportation costs and how to package in a way that minimizes dimensional charges.
The complexities of omnichannel fulfillment and all the requirements that come along with it drives many retailers to rethink store layout plans, network design and support partners. Applying the Service Merchandise approach to customer experience in the 1980s could give today’s retailers a competitive advantage in the marketplace.
To help retailers understand how Service Merchandise delivered experience and omnichannel excellence we created “Prime Before Its Time: The Service Merchandise Experience.”
Download the guide to learn how the retail innovations of yesterday can help you deliver a prime performance today.
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