Creating a common language is often an important first step to understanding new retail supply chain approaches, so we wanted to clarify the difference between multichannel, omnichannel and unified commerce.
As shoppers use technology more frequently during their buying journey, their expectation of service increases. Retailers are forced to transform their business to keep up. It seems that just as one strategy is created to take advantage of (or at least deal with) the situation, another set of circumstances comes along requiring new ways of thinking. Here is an explanation of three common strategies.
Multichannel – This business model is based on having multiple channels such as physical stores or the web. It can even be a B2B channel or an overstock channel. In this scenario customers engage with a retailer primarily through one channel at a time. There is little crossover. Each operation is managed as a silo, with its own processes, infrastructure, inventory and revenue targets. The messaging, offers and experience may be inconsistent across the brand.
Omnichannel – This business model consolidates customer-facing operations to provide a more consistent experience across the channels. In omnichannel a customer can shop on the web, a mobile device or at a physical location and expect the same look and feel and offers, regardless of entry point. However, behind the scenes, separate silos managing each channel still exist and may not be well connected. So, the while the front end looks great, the shopping outcomes may not always be successful due to poor internal optimization, including inventory management and demand forecasting.
Unified Commerce - In 2016, Gartner introduced a new business model called Unified Commerce. It also provides a consistent front-end experience, but manages transactions and touchpoints from a single software platform. Reducing the silos and managing supply chain planning from one platform provides real-time visibility into operations and the ability to respond to market demand more quickly and profitably.
Adding an optimized back end to the customer-facing omnichannel front end helps ensure delivery of an item once a shopper decides to buy, rather than and running the risk that you can’t get them what they want and they leave for a competitor, possibly never to return. It maximizes merchandise availability through more accurate demand forecasting and more optimized inventory planning. Additionally, it reduces unsold inventory, goods sold at drastic markdowns, and lost sales due to out of stocks, which all impact margins and the bottom line.
Ken Morris of Boston Retail Partners explains, “Saddled with legacy systems that are not designed to accommodate today’s retail environment, retailers have scrambled to cobble things together in attempts to deliver the omnichannel capabilities customers expect. Retailers need to invest in infrastructure, networks and service oriented architecture (SOA) layer and do it right.’“The risk of losing customers due to disappointing shopping experiences caused by flawed omnichannel architecture is deadly,” he adds. “The solution is unified commerce with a platform supporting all customer touchpoints and channels [which] eliminates integration issues and supports real-time visibility.”
Gartner Comments on eCommerce Fulfillment Metrics
In Best Practices to Improve Retail Product Availability (July 2017) Gartner’s Mike Griswold says that “with the store playing a more prominent role in unified commerce fulfillment, in-store product availability becomes more important than ever.” Therefore he recommends retailers evolve from using On-Shelf Availability (OSA) as a shopper fulfillment metric to E-Commerce Fill Rate (ECFR) and Online Availability (OLA).
ECFR is a % measure of online orders filled, complete and shipped from store locations within promised SLA time frame (e.g., same day, next day, one-to-three business days).
OLA is a % measure of items that a shopper is able to find and order online where the shopper experiences the SKU to be available at the point of making an online transaction (e.g., purchase, add to basket, add to favorites list).
Griswold states that ECFR and OLA provide a more accurate method of reporting fulfillment performance than traditional OSA reporting, due to the following benefits:
- Increased Efficiency: In-store fulfillment requires a visit to the shelf to pull inventory. When the item is selected as part of the order, its availability is captured. There is no need for separate trips through the store just to count holes or verify inventory.
- Reduced Latency in Feedback: With unified commerce orders fulfilled daily, stores have the opportunity to receive daily feedback on ECFR performance. Traditional OSA generally only provided weekly insights, often one to two weeks in arrears.
- More Accuracy: Each order requires a visit to a specific item for fulfillment where accuracy can be measured. Traditional OSA reporting required people to roam the store using subjective criteria (high, low) to signal an OSA issue.
- Collection of Value-Added Information: ECFR provides better insight into BOH accuracy and substitution requirements. It also begins to provide insights into shopper decision tree when shoppers provide substitution directions for in-store associates