Retailers juggle selection, convenience and speed

By Catherine
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By Catherine Bolgar

Asian woman signing receipt of delivered package

The rise of e-commerce has left brick-and-mortar retailers struggling to catch up. In the latest escalation, the introduction of same-day delivery is further transforming online shoppers’ expectations of serviceyet this development ultimately might be a boon for traditional retailers.

It’s all about the customer. It’s always about the customer, about being able to adapt to the marketplace to satisfy the customer,” says Robert L. Williams, Jr., assistant professor of marketing at Susquehanna University, in Selinsgrove, Pennsylvania.

Since 2005, when the U.S.’s biggest online retailer launched a membership scheme, with customers paying a monthly fee for services like streaming and for free two-day delivery—same-day delivery in certain markets—competitors have scrambled to keep up. Just between January 2014 and May 2016, shipping times fell 46% to 3.4 days from 6.3 days, according to an average of 238 merchants and online sellers surveyed by Slice Technologies Inc., a Palo Alto, California, shopping and package-tracking application. As a result of new technology making tracking easier, “Customers recognize they have that power, and they want to exercise it,” Prof. Williams notes.

Woman shopping online on laptop computer with credit cardA key objective, says Kenneth Cassar, Slice’s principal analyst, is “challenging consumers to think differently about the online channel. In the past, online was the place to go for low prices and broad selection. Increasingly, people are looking to the e-commerce channel for convenience. Convenience is creeping up on price and selection for importance.

Any retailers aiming for same-day delivery face the same problems, according to a white paper published by Quintiq, a supply-chain optimization firm owned by Dassault Systèmes. The usual methods of assigning slots are unable to satisfy both cost savings and customer satisfaction. With regular rounds, customers don’t have enough choice for delivery time, but with dynamic slots, drivers waste time and fuel delivering a package at a certain time for one customer and then, hours later, a package next door for another customer. Quintiq uses forecasts to allocate delivery slots dynamically, updating in real time. That minimizes driving while giving customers maximum choice of delivery time.

Same-day delivery doesn’t apply to all of the millions of items for sale by online retailers, meaning even e-commerce behemoths must juggle convenience vs. selection. They must also invest in warehouses in order to get goods close enough to population centers for quick delivery, notes Daphne Carmeli, chief executive of Deliv. The Menlo Park, California, company works with retailers and businesses to provide same-day delivery in 17 U.S. markets using crowd-sourced drivers.

However, brick-and-mortar retailers already have vast inventory that’s conveniently close to customers—inside their stores. “Much of their inventory sits within a short drive of 90% of the population,” Ms. Carmeli says. “How do you leverage your stores to be the forward-fulfillment centers? Drivers leverage their GPS-enabled smart phones to respond to delivery requests. These technologies that power the supply and demand were not available 10 years ago.”

Retail chains and franchises are using “click and collect” or BOPIS (buy online, pick up in store) to give online shoppers the convenience of quick fulfillment from a store at no charge. Or they leverage the capabilities of BOPIS along with a service like Deliv to offer same-day delivery as an option at checkout. When customers select same-day delivery, Deliv is automatically notified of the order and dispatches a driver to pick up and deliver the order when it is ready, Ms. Carmeli says.

Retailers are “looking for opportunities to create a channel-integrated environment,” says Lars M. Bollweg, researcher at the Competence Center E-Commerce at the South Westphalia University of Applied Sciences in Soest, Germany.

Attractive woman checking bar code in shopping mallOriginally, retailers had a single channel, meaning a brick-and-mortar shop that people visited. That involved one database of customers in the background. With the arrival of the Internet, retailers had a physical shop and an online shop, each with a separate database. But both channels remained strictly separated. If someone ordered in the online shop, the sales clerks in the brick-and-mortar shop knew nothing about it, Mr. Bollweg says.

That improved with cross-channel management software, which let both databases talk to each other a little while remaining separated.

Then came omnichannel, or one big customer database. “Wherever the customer meets the company—by phone, online, in person—the retailer knows the whole history of shopping events,” such as whether the customer purchased frequently, or recently encountered a problem with a purchase, Mr. Bollweg says. “Omnichannel offers more opportunity to deliver more advanced services, but it’s tricky to do. It’s expensive. And it’s very challenging for small shops.” With apps and location services, for example, a store can send you a coupon for a discount just at the moment you’re in the neighborhood.

As a result, local shopping platforms sprang up to implement the strategy for groups of shops that would split the cost. Such shops, often run by individual entrepreneurs who lack technological skills, benefit from the platform’s e-commerce know-how, Mr. Bollweg says.

For example, a public-private initiative in a German city gives local small retailers an omnichannel framework, including centralized delivery of goods and returns. These platforms are a big trend in Germany, and also exist in the U.S. and Switzerland. However, some are only a year old and haven’t yet turned profitable, he says.

While more people are choosing same-day delivery for a bigger assortment of purchases, it’s still “very, very early days,” Mr. Cassar says. “I would be shocked if 20 years from now the majority of online sales were being delivered to consumers on the same day.

The market has “room for everybody,” Dr. Williams concurs, “but with the customer in control, everybody has to step up their game. There’s no room for being complacent.”

 

 

Catherine Bolgar is a former managing editor of The Wall Street Journal Europe, now working as a freelance writer and editor with WSJ. Custom Studios in EMEA. For more from Catherine Bolgar, along with other industry experts, join the Future Realities discussion on LinkedIn.

Photos courtesy of iStock

The Shocking Secret of Fashion Consumers

By Lauriane
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There’s a secret held by every consumer that is nearly unknown to brands. It’s the shocking truth that almost every fashion house and sport products company ignores. Because of the blindfold that they have chosen to wear, they have lost billions of dollars in potential revenue. Each day, individuals look less and less at what a brand is trying to sell them and, instead, focus on their own curated tastes. Every person has their favorite pair of jeans, their most comfortable pair of shoes, and their go-to t-shirt.
As individuals, we have collectively decided what will be our “look” and what we prefer to wear on a daily basis. This has resulted one simple truth: Consumers do not shop from a single brand.

Consider this; one male consumer might wear the following outfit:
• Chuck Taylor low-tops from Converse
• 501 jeans from Levi’s
• Tee shirt from H&M

Another male consumer may wear a similar outfit to achieve an entirely different look:
• Chuck Taylor low-tops from Converse
• 511 slim fit jeans from Levi’s
• Slim fit dress shirt from Calvin Klein
• Ludlow blazer from J. Crew

But the sad fact is that these brands may never share consumer data, nor may they ever try to cooperate in any way in order to increase their respective sales figures. The consumer has moved to a true omnichannel model where they have created their own personal consumer “brand”, with their unique set of preferences and data, and are expecting traditional corporate brands to meet their needs. Unfortunately, the modern fashion industry simply isn’t set up to meet these expectations.

Product Development

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If these brands are going to change, and start embracing this new consumer model, they need to start at the beginning; with the product development process. Today, fashion companies focus on creating a single product that can reach as many different consumers as possible. In the future, however, customers will be expecting product that they can tailor to their own specific tastes. Therefore, companies who are eager to differentiate themselves are now shifting to tools and processes that allow for easy product customization. This is especially true in the footwear industry where each runner has a specific stride, foot strike, and comfort preference.
Tools are now starting to arrive that will allow footwear to be designed so that it can be easily customized at the point of sale. The next step would be to allow customization, of color and material, that might allow a pair of shoes to better coordinate with the pants from another brand being worn by the consumer. Here again, this may require brands to cooperate in their design approach to the consumer.

Changing Face of Retail

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Traditionally, companies have drawn a sharp division between their online stores and their brick and mortar counterparts; each selling product using completely different methods. At brick and mortar retail, the consumer is free to browse a small, fixed collection of products and soak in the brand identity. Online however, the consumer has to give up much of the brand identity, but are given access to a much larger, searchable set of inventory.
Looking forward however, some companies are breaking out of this model and mixing the best of the online experience with the best of brick and mortar. These companies are starting to bring the online experience into stores so that, while consumers may be able to browse key items and colors in store, they have access to the entire online inventory at the same time. They can also use these tools to build outfits, predict fit, and customize products; perhaps even customizing the product directly in the store. Finally, consumer preferences can be captured by these digital devices and fed directly back to the product teams via analytics built into modern PLM systems. But what’s still missing is the ability for the consumer to build a virtual closet of all their favorite products, regardless of brand, and have it travel with them from store to store; whether that store be physical or online.

Consumer Customization

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© Julien Fournié

Product customization is nothing new; especially in footwear. Many of the major footwear brands have offered customization for years: Adidas, Nike , and New Balance all offer online product customization. But this is typically just color and material customization and doesn’t allow for changes to fit or cushioning. Some brands, such as New Balance, are just starting to use modern 3D tools to provide customized outsoles to the elite athletes and, eventually, consumers. Once again, however, this begs the question of customization across brands. Will I be able to print the authentic Vans checkerboard pattern on my Gap t-shirt? Will I be able to customize the color of my 3D printed New Balance outsole to coordinate with my faded Levi’s 501s? Probably not. But the marketplace is changing and what was unthinkable in the past, may just become commonplace in the future.

Want to know more about how to engage consumers in the ultimate personalized product and purchase experience?

How a leading Furniture company can implement design-for-cost strategies and launch products faster?

By Lauriane
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Nowy Styl Group is a European leader in comprehensive furniture solutions and the third largest manufacturer of office furniture in Europe. They have selected “My Product Portfolio”, a Dassault Systèmes industry solution experience, to design, develop and deliver more innovative products and accelerate new product introductions.

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“Dassault Systèmes’ industry solution experience helps our technical departments, personnel, partners and suppliers better communicate and monitor and detect issues early in the development process to optimize product quality. These capabilities reduce development and manufacturing time and costs and improve our time to market.” said Tomasz Bardzik, CTO Nowy Styl Group.

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To understand how Nowy Styl Group can implement design-for-cost strategies and launch products faster and in compliance with sustainability targets and safety norms, Watch the video and Listen to Tomasz Bardzik, CTO of Nowy Styl Group

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Discover More

Read the Full Press Release

Watch the video and Listen to Tomasz Bardzik, CTO of Nowy Styl Group

Discover more about “My Product Portfolio” Industry Solution Experience

Find more about Dassault Systèmes’ in the Consumer Goods & Retail industry

 



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