brick is the new black

Brick Is The New Black HOW STORE FULFILLMENT IS MAKING BRICK-‐AND-‐MORTAR THE NEW STAR OF

OMNICHANNEL RETAILING

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Panelists

Scott Moreland Director of Product

Management JDA Software

MODERATOR

Leslie Hand VP of Retail Insights IDC Retail Insights

Alicia Fiorletta Senior Editor

Retail TouchPoints

Brick is the New Black JDA Fulfillment Webinar

November 6, 2014 Leslie Hand

Vice President, IDC Retail Insights

Objectives

§  Reinventing the Brick-and-mortar Experience

§  The Central Challenge – Product Visibility

§  Omni-channel Retailing With In-Store Fulfillment

§  Essential Guidance

© IDC Visit us at IDC.com and follow us on Twitter: @IDC 7

Reinvent the Brick-and-Mortar Experience

Omni-channel

Customer

Stores Outlets

Kiosk Brand shops

Sales associates

Other staff

CX Call center

Online chat

Internet TV

Portals

Facebook

Social networking

Email

Website

Mobile Site Mobile Apps

Virtual Stores

Twitter

Pinterest

Location based interactions

IoT

Competitive data

Collaboration

Fulfillment partners

XML/EDI Affiliates

Market research TV placements

Online auctions

Marketplaces Magazines

Marketing collateral

Catalogues

Integrators Dealers

Agents

Franchisees Resellers

Logistics Partners

Retailers

Home advisors/installers

Shop in Shop

Pop up store

0 2 4 6 8 10

Concierge services, in store fittings and 3D body scans

Location based interaction

Special events

Personalized offers

Accurate inventory information

Friendly and helpful associates

Value

Price

¥  Consumers rank price higher than everything else when it comes to what makes them more loyal, but in reality resultant loyalty is tenuous.

¥  Consumers answer with their intellect.

¥  Shopping missions and journeys are not all created equal.

¥  Emotion and an aggregation of impressions, and the ultimate inspiration to buy play an important role in consumer purchase behavior.

¥  Personalization and interaction increase the likelihood that loyalty will grow, and that the customer will buy when purchase inspiration strikes!

¥  Trustworthiness of data provided leaves a lasting impression!

9

Source: Consumer Survey: IDC Insights – Retail, Health & Banking, June 2014 • N=1500

What Does the Customer Want?

What makes customers more loyal? (0-10 scale)

The Central Challenge - Can I get what I want the way I want it

Products

Fulfillment Flexibility

Service Consistency

Product Availability

Shopping Ease


PRODUCT FULFILLMENT OPPORTUNITY (fulfilling the need for a product with the right combination of availability, price and convenience)

CONSUMER INCLINATION (the right level of desire influenced by

need, affinity, and a confluence of impressions / engagement, including

most recent trigger)

RIGHT TIME (enough time to shop, consumer readiness, and spending power)

Enabled by: Triangulation of persistent, consistent personalized and contextualized interactions aided by all of the above

Purchase Influences

Business Value Reduced supply chain cost (efficiency ) Increased revenue (product visibility and flow) Increased profitability (maximize full margin sales; cut losses)

Business Value Reduced operations cost (automation and communication) Increased revenue (customer engagement, satisfaction and loyalty) Increased profitability (maximize full margin sales; bigger baskets)

Business Value Reduced supply chain and operations cost (efficiency and effectiveness) Increased revenue (customer engagement, satisfaction and loyalty) Increased profitability (maximize full margin sales; cut losses)

Source: IDC Retail Insights, July, 2014

Be the Customers First Stop By Creating the Last Best Experience

Top 3 Retail Supply Chain Priorities

.0 50.0 100.0

Other

Improve collaboration with suppliers and customers (B2B commerce networks)

Improve product compliance, Quality, safety, or environmental sustainability

Respond more Quickly to supply disruptions or changes

Move our supply capabilities closer to demand

Improve supply chain visibility

Support omni-channel fulfillment through direct-to-consumer or postponement capabilities

Respond more Quickly to demand volatility or changes (supply chain agility)

Improve the process of bringing new products to market

Continue to modernize/update IT related supply chain infrastructure

Become more customer centric/improve service performance

Reduce costs/eliminate waste

Next 2-3 YRS Next 12 MTHS2


Source: SCM Survey, IDC, May, 2014 N=153 retailers

Always the short term goal

Need for agility, responsiveness and resilience

Always the long term goal

Increasingly important YOY

Top 3 Retail Improvement Priorities

.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 180.0 200.0

Global trade management

Product compliance

Field service

Supplier management/Procurement/ B2B networks

Innovation management

Demand sensing

Supply chain execution (transportation, warehousing)

Omni-channel distributed order orchestration (fulfillment to the consumer from anywhere)

Supply chain planning (demand planning, S&OP, etc.)

Food Stores General Merchandise Apparel and Accessory Stores Other


Source: SCM Survey, IDC, May, 2014 N=153

Big focus for specialty fashion

SC Execution huge focus for food, other and gen merch

3 Critical Omni-channel Fulfillment Tenets

3 things to keep in mind when designing for omni-channel fulfillment going forward:

1.  Flexible predictive demand modeling is better than modeling based solely on historic trends & is a prerequisite for everything else

2.  Extra moves are expensive – reducing costs are critical, so you have to take extra care to put product in the right places in your supply network, and to leverage partners wherever possible

3.  The need to satisfy customers often overall concerns 1 and 2; make sure your partners know this


Retailers are Redesigning Omni-channel Fulfillment

§  Redesigning supply networks •  Balance of regional vs. national fulfillment centers •  Tiered store fulfillment by segment, category and velocity •  Direct fulfillment through supply partners •  Dark stores & bigger back rooms •  Pop up DCs to support seasonal demand •  Ship from store / site to store / returns •  Flexible fulfillment w/partners (eBay, Amazon, Jagged Peak,

Commerce Hub, UPS, USPS)

§  Last mile delivery •  3PL •  Shutl, eBay Now, Uber, EBay Now, Shutl, Deliv, Postmates,

Instacart, USPS, Amazon, Alibaba)


CONTAINER STORE EXAMPLE

§  Click & Pick Up §  Consistent Omni-channel pricing §  New loyalty program – Pop §  Online appointment scheduler §  Shift to personalization & segmentation §  Special segment specific tools including

3D planning

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Example 1: Retailers are Innovating by Adding Segment Specific Utility

Photo: containerstore.com

NEIMAN MARCUS EXAMPLE Typical Omni-channel

Progression 1. Identify and fill gaps 2. Innovate for the customer 3. Enable omni-channel supply chain 4. Transform business

•  People •  Process •  Product •  Technology

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Example 2: Retailers are Moving to the Next Level of Omni-channel Retailing

PERFORMANCE: ¥  Stores Revenue Growth through Q314: 5.9% comp sales ¥  Online Revenue Growth through Q314: 11% comp sales

Example 3: Retailers are Embracing Broader Ecosystems

Why Amazon is such a threat:

§  Amazon offers: •  Biggest selection of product •  Optimized prices (not

lowest) •  Best in class customer

experience §  Innovating ahead of

competitors §  Fulfills 30% of Marketplace

orders directly §  Lower margins, but high

return on investment


Ø Retailers with MarketPlaces Ø Amazon Ø eBay Ø Walmart Ø Sears Ø Costco

Learn from the travel industry!

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Balance CX Innovation and Supply Chain Efficiency My Macy’s localization Omnichannel integration Magic selling customer engagement

Example 4: Retailers are Optimizing Price and Inventory

Given the pace of change and mobility in our society, we will never be “finished” with My Macy’s. - Macy’s 2013 Annual Report

Guidance – Actions to Take

§  Overcome investment barriers •  Change organizational culture •  Deploy cloud & managed service options •  Engage project champions and sponsors

§  Redefining the customer value proposition •  Define how your customer shops •  Redefine fulfillment “flow” •  Partner for success

§  Deploy new supply chain capabilities •  Identify new supply chain “nodes” •  Know where your inventory is •  Perform “best fit” JIT distribution orchestration


What to look for in new technologies

•  Inventory •  Customer •  Products

Visible

•  Service •  Responsiveness •  Product

Introductions

Fast

•  Processes •  Interactions •  Execution

Automated

•  Interfaces •  Processes •  Interactions

Intuitive

•  Demand •  Orders •  Offers

Anticipatory

•  Product development

•  Collective intelligence

•  Social networking Participatory


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Plan to Deliver AnScipate, Align and Adapt to Evolving Market CondiSons to Win the BaEle for Omni-‐Channel Loyalty

ScoE Moreland Product Director, OperaSons & Mobility Follow us on TwiEer @jdaso[ware

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Flexible, Simple, Seamless Shoppers’ Omni-‐Channel Mandate:

83% of consumers are more likely to shop with brands that allow them to control where, when and how they interact Source: InsStute of Customer Service

Image: ShuEerstock

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81% of consumers say it is important to be able to pick up or have purchases shipped regardless of how purchased Source: Accenture

Flexible, Simple, Seamless Shoppers’ Omni-‐Channel Mandate:

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CompeEEve OpportuniEes Store fulfillment opEons represent

36% of retailers offering in-‐store fulfillment programs have seen an increase in foot traffic Source: RIS News

32% of retailers offering in-‐store fulfillment programs have increased store revenue via up-‐sell and cross-‐sell Source: RIS News

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Profitable Fulfillment OpEons Today, the Majority of Retailers Struggle to Offer

60% of retailers do not understand what it costs them to pick orders from the back room of the store Source: DC Velocity

71% of retailers do not understand what it costs them to pick orders from the front of the store Source: DC Velocity

4.5% The lack of omni-‐channel

integraSon is cosSng retailers

of annual revenues in missed sales opportuniSes

Source: RIS News

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Sales O

utlet

Service Ce

nter

Show

room

Consumers Expect The Role of the Store to Expand…

Fulfiilm

ent C

enter

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And Now The Bar Has Been Raised, Again…

Image courtesy Wikipedia

Apparel

Electronics

Health & Beauty

Home & Garden

Office Supplies

SporSng Goods

Toys & Games

Is Same Day Delivery Important?

22%

24%

18%

16%

29%

18%

28%

Consider Abandoning if No Same Day Delivery?

7%

5%

5%

6%

5%

8%

6%

Source: Bizrate Insights (n = 100,000 global consumers)

average across categories!

Already…

>6%

Shopper ExpectaEons Have Definitely Been Elevated

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Many Retailers Are Struggling with Many Challenges…

“My business can’t keep up with shi[ing customer demands.”

“How do I determine the best sourcing opEon for each order?

“How do I balance the costs of in-‐store versus DC versus transportaSon?”

“How much is it cosEng me to fulfill orders from the store?”

“On-‐Sme fill rates for store orders are low; customers are frustrated.”

“How can I make every piece of inventory available to every store,

shopper and channel?”

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Buy Online Pick Up in Store Buy in Store Ship to Home

Buy Online Same Day Delivery Buy Online One Hour Delivery Buy in Store Ship from 2nd Store Buy Online Return in Store

Inventory Availability Everywhere

Profitable Sourcing Enterprise Inventory Management

Cycle Times and Lead Times Order Staging & Picking in Store

Employee ProducSvity Parcel Management

CompeSng Store PrioriSes Space AllocaSon

OpEmizing the operaEonal realiEes

at the intersecEon of omni-‐channel promises

and real-‐world delivery

to drive greater effecEveness and profitability

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End-‐to-‐End ExecuSon Fuels EffecSveness

DISTRIBUTED

ORDER MANAGEMENT

STORE OPERATIONS

INTELLIGENT FULFILLMENT

RETAIL PLANNING

CATEGORY MANAGEMENT

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Accurate Sourcing Leads to OpSmized Fulfillment

AFTER

-‐Inefficient inventory sourcing -‐Limited inventory visibility -‐Increased labor costs due to

poor demand planning -‐Flawed order execuSon decisions lead to higher transportaSon costs

BEFORE

Out of Stocks | Low Fill Rates | Lost Sales Higher Fill Rates | Good Experiences | Fewer Out of Stocks

-‐Strategic posiSoning of inventory -‐Accurate inventory visibility to in-‐stock and in-‐transit -‐Reduced labor costs

-‐Efficient order fulfillment based on demand

and labor availability

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ImplicaSons to the Store Omni-‐Channel Places New Demands on Retail

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The Race to Catch Up

Retailers that provide store fulfillment are ocen scrambling to meet elevated customer expectaEons for lead Emes and service opEons

•  StarEng off slow •  Paper-‐based, manual picking •  Serial Order Processing • No Labor Planning •  Long Lead Times •  Poor ExcepEon Handling

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Challenges at Scale

Current Processes Work Only at Low Volumes

As Volumes Scale: •  Risk of fulfillment

inaccuracies •  Lead times

increasingly difficult to meet

•  More execution complications

•  Customer service and operations may suffer

•  Increasing store labor expenses

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SpecializaEon Required

The Customer-Facing Associate •  Understands customers, products,

prices, and promotions •  Skilled in using new technologies

and tools to gather and share information about customer’s needs

•  Acts as a customer ambassador •  May be called on as a “part-time picker”

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New Roles: New Skills, New Tools

The Fulfillment-Centric Associate •  Acts as a personal shopper for the online customer

•  Supports the store’s fulfillment center model by picking, packing, and shipping

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Driving a Variety of In-‐Store Picking Scenarios

MOBILIZING STORE FULFILLMENT AND PICKING Single Item Quickly find and pull a single item from inventory, usually with timely communication to confirm availability and demonstrate compliance Multiple Item For a single order, find and pull multiple items from inventory. This use case demands knowledge of store layout to efficiently sort selection sequence Multiple Order Similar to multiple item picking, except orders are now merged and sequenced together to drive a single efficient path through the store.

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72% Source: Integrated SoluSons for Retail

of store managers indicate that their labor budget has stayed the same or decreased in the past year

While Store Payrolls Keep Shrinking

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ImpacSng the EnSre Business Plan to Deliver

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SoluSon Suites that Execute A Proven Formula for Omni-‐Channel Fulfillment

CONSUMER-‐CENTRIC MERCHANDISING

EXCEPTIONAL SUPPLY CHAIN EXECUTION

PRODUCTIVE & INTEGRATED STORE OPERATIONS

Scheduling OpEmizaEon Task Management

Store Fulfillment OperaEons Inventory Visibility

Dynamic AllocaEon Distributed Order Management

Order Flow OrchestraEon DisrupEon Response

Time-‐Phased ForecasEng Localized Assortments

Omnipresent and Omni-‐channel Fulfillment-‐based Pricing

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Bridging the Gap Between Customer ExpectaSons and Profitable Omni-‐channel Fulfillment

PLANNING & REPLENISHMENT

TRANSPORTATION MANAGEMENT

WAREHOUSE/LABOR MANAGEMENT

DISTRIBUTED ORDER MGMT

IN-‐STORE PICKING

Integrated, HolisSc Forecasts

Align and OpSmize Transport Models

Maximize Assets and Resources

Ensure Profitable Fulfillment

EffecSve Associates

Follow us on TwiEer @jdaso[ware

#BrickIsBack

Q & A // Panelists

Scott Moreland Director of Product

Management JDA Software

MODERATOR

Leslie Hand VP of Retail Insights IDC Retail Insights

Alicia Fiorletta Senior Editor

Retail TouchPoints

#BrickIsBack

Thanks for aEending!

View and download this presentaEon at:

hlp://rtou.ch/brickisback All aEendee’s will receive a complimentary copy of the “Brick Is The New Black” e-‐book via email.

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leslie handvice president

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