Clicks Versus Bricks: Where does Supply Chain Stand?

In 2018, we’re no strangers to the concept of buying online. Countless sources have cited that the peak season ranging from Black Friday to Christmas of 2017, was record breaking for online sales. Amazon stole the show, leaving other large competitors in the dust. In Dotcom Distribution: Retailers Rake it in, Supply Chain Dish it Out  we discuss the vast adjustments that retailers had to make in order to please their customers and keep ‘business as usual’. Except, business was not as usual. It was better. The supply chain industry, from Third Party Logistics (3PLS), Electronic Data Interchange (EDI) providers to shipping, had to prepare for what was then to come. After an exciting year end and an analysis at what worked, where does that leave us? We all contribute to the battle of clicks versus bricks. Will online shopping continue to dominate the retail industry or will physical locations keep its slice of the pie? What kind of adjustments will be made in the supply industry? In a digital age and competitive market, there are many changing factors and we’ll now explore.

With the list of retail locations that are shutting down, the pressure is on for the traditional retail location to provide value to it’s customers. However, the online market also presents it’s own set of issues and limitations that customers feel when interacting with their digital devices. Customer service can be more satisfying for some shoppers in-person. Getting a prompt resolution for your issues can be lengthier over the phone or via online ticket. As the saying goes: “It’s all fun and games until…” you have to return a substandard product and aren’t getting the quality of service you expect Online consumers living in rural or remote areas face a distinct challenge with online shopping. Often, shipping is expensive and may take an extra length of time to be delivered, if shipping is even offered to their locations.

For this reason, avenues of purchasing and receiving goods are varied. It only makes sense. People want options tailored to their best interest. Being able to order online with in-store pickup, access to full inventory on all mediums, free returns and the best price guaranteed. Not to mention: If competitors are doing it, your favourite retailer has to as well. Piece of cake, right?

“More retailers with physical stores are investing in omnichannel , whether that’s where they’re putting items in their cart and completing the transaction, or simply doing research and planning,” Polk says. “We’re seeing more and more traditional retailers investing in techniques like buy or reserve online, pick up in store. Even if a customer is in-store, they’re offering the ability to place an order for something that’s out of stock or not the right color and having it shipped directly to the customer. Retailers are trying to break down and overcome any barriers that consumers have had.” –  Jennifer Polk. Gartner, Research Director.

Aside from the functionality of purchasing and immediate possession of goods, the traditional brick and mortar location also represents a consumer experience. Now, more than ever, merchandisers can be creative with their locations and provide an immersive shopping environment that emphasizes and strengthens their brand image. Successfully done, the store now becomes a focal point for the consumers experience.  This will now be passed on to friends, family and strangers by word of mouth or possibly through a multitude of available social media platforms. Having accomplished this, CEO of the Urban Land Institute, Patrick Phillips believes retail locations will bounce back within the next decade. Retail locations and online shops will work together for the good of the retailer, serving their prospective focuses. While this conclusion proposes a win-win scenario, retailers are not yet off the hook.

Some retailer’s supply chain structures are not setup to handle these kinds of demands. Implementation on the supply chain level is another beast. To begin, distribution centres need to be multiplied to keep up with next day shipping demands or would likely assume additional shipping costs for expedited orders. Alternativelysome retailers will occupy the role of both selling and fulfillment by using anything from back rooms to underperforming locations to ship from. Mid-sized retailers might opt for third party providers to handle this for them. These decisions are all made to cater to fast shipping at minimal cost.

On the other hand, inventory and SKU coordination need to be audited and organized in such a way that services a multi-channel retail structure, which would reduce out-of-stock items and excessive markdown. By allowing inventory to be visible in the company’s ERP Enterprise Resource Planning (ERP) system, across channels, it’s said up to 15% more products can be sold at regular price as opposed to being marked down. 

Nordstrom is one such retailer that has enabled end-to-end visibility and inventory sharing across its online and retail networks. To make this integration happen, retailers will also need to restructure business processes and metrics, adopting uniform standards for shipping or for allocating credit for sales between online and in-store operations. But retailers should bear in mind that trying to arrive at the perfect answer can often take too much time up front. When Nordstrom rolled out its multichannel offering, it simply deferred decisions about incentives, instead focusing on meeting the customer’s needs now while worrying about allocating revenues later.” Nitin Chaturvedi, Mirko Martich, Brian Ruwadi, Nursen Ulker. “The Future of Retail Supply Chains.”

To get this process flowing, communication in each sector of the retailer’s supply chain would be of the utmost importance. With multiple avenues of processing an order and a limited timeframe, the retailers ERP system should be well organized and accompanied by a reliable EDI provider. Many company’s use an integrated platform to process purchase orders, advanced shipment notices and invoices, promptly and seamlessly to/from their ERP system. Small and mid-sized businesses without an ERP or EDI provider may opt for a Web-EDI solution or look to their 3PL to handle this. Either which way, to reduce errors, communication of this sort is usually highly recommended and often required by the retailer for smooth processing. 

In circling back to our topic, we believe like most things: there is room for everyone. The clicks versus bricks debate might become obsolete as the two avenues of retail merge to better serve the shopper. Where supply chain stands might be up for further debate as it’s processes will constantly move towards improvement and meeting high customer expectations.