About a dozen years ago, some marketer somewhere had the bright idea to add the prefix “omni” to the concept of “channel,” giving us “omnichannel” as a new descriptor of retail fulfillment. The big idea was that retail had evolved to the point where a customer order could come from anywhere, at any time, and be fulfilled from any channel.
Sounds great, in theory. In practice, however, it has proven to be a difficult competency for retailers to master. This is because retail channels historically have been discrete entities, each with its own inventory, database, and fulfillment process. So let’s talk about what omnichannel excellence is, and how to achieve it.
To make true omnichannel retail fulfillment happen, silos have to be broken down to integrate systems and inventories, prevent channel cannibalization, and keep stock levels optimized. From a customer perspective, nothing is worse than getting an out-of-stock notice, which often chases them away to a competitor. Overstocks eat away at profits with their high carrying costs.
In omnichannel, the customer experience is everything. We consumers have been conditioned to expect convenience, simplicity, and immediacy. You search, you browse, you click, and it shows up in a couple of days. This heightened CX expectation drives everything, including the need to work backward from that point to build integrations across channels.
The importance of omnichannel was thrown into stark relief in the early days of the pandemic, when lockdowns suddenly did away with store shopping. Direct-to-customer (DTC) eCommerce took off in a big way in 2020 and 2021 as both a retailer and consumer lifeline. But orders weren’t just coming from one place. They were shipped from fulfillment and distribution centers, from stores, and from drop ship partners.
Buy online, pick up in-store (BOPIS), or click-and-collect in the UK, had its moment to shine in those days, but has since dropped off. You still see designated curbside pickup spots at your local Best Buy or Home Depot, but not many people are using them – unless they’re cheating to get closer to the front door!
Even with the rise of eCommerce and DTC, brick-and-mortar stores still represent roughly 80% of all retail sales. To steal from Mark Twain, rumors of its demise have been greatly exaggerated. But the store's role has evolved to include ship-from-store and BOPIS. And, of course, every retailer has its own DTC site, with notable exceptions like British discounter holdout Primark, which did accede to BOPIS.
Endless aisle is another fairly new concept to retail fulfillment solutions: letting customers place an order for an out-of-stock item while in store, either via kiosk or their own device, to be shipped to them from another store or an FC.
DTC was all the rage a few years back, championed by major brands such as Nike and hot startups like Allbirds, Casper, and Warby Parker. But while the channel has not been abandoned altogether, there has been some shift to wholesale partnerships due to high fulfillment costs and the need for wider exposure.
Brands and retailers alike take advantage of major online marketplaces like Amazon, Walmart, Tmall and Mercado Libre, but for different reasons. Retailers, especially smaller niche ones without a significant online presence, expand their reach and tap into a vast audience. Brands of course also gain greater access, enhance awareness, and augment their DTC efforts.
For retailers, drop shipping allows them to expand their product assortment economically without physically holding inventory by having brands ship orders sold on their site. However, it’s a lower-margin business, and they’re dependent on suppliers for inventory management.
Both retailers and brands outsource retail fulfillment services to third-party logistics (3PL) providers to achieve omnichannel excellence. This allows them to scale operations, expand their reach, reduce the burden of logistics management, and lower capital costs.
Now that we have all the ducks lined up, so to speak, how do we get them to march in line? What does true omnichannel retail fulfillment look like?
Incoming eCommerce orders are fulfilled from the most logical, efficient channel and location (store, FC, drop-ship partner, marketplace) based on preset rules in an OMS or ERP. At the same time, the transportation management system (TMS) optimizes the shipping route, selecting the most cost-effective option from dock to door.
If a customer opts for BOPIS, the system checks inventory across local stores and finds the closest location for pickup, saving the customer time and adding the convenience of choice and immediacy.
Specialized or out-of-stock SKUs are automatically sourced and shipped directly from the supplier. This reduces lead time and ensures the customer receives exactly what they need.
Marketplace orders can be seamlessly integrated into the retailer’s own tech stack. This provides consistent inventory management and a uniform customer experience, regardless of where the purchase was made.
In all these scenarios, the system uses AI and machine learning algorithms to make real-time decisions based on inventory levels, proximity to the customer, shipping costs, and delivery speed. The aim is to make the process as efficient and cost-effective as possible while creating loyal, satisfied customers.
Ensuring compatibility and communication between OMS, TMS, CRM, ERP, etc., can be costly and complex, often involving the use of system integrators and technical consultants. Inventory management is another critical challenge, requiring accurate, real-time data across channels to prevent out-of-stocks and overstocks.
The logistical difficulty of coordinating fulfillment from multiple sources is demanding, especially when your marching orders call for cost-effectively hitting delivery SLAs. This includes managing ship-from-store, BOPIS, FCs, and DCs, etc.
Lastly, customer expectations for fast, convenient service are higher than ever. This requires a robust, well-integrated system that’s responsive to their needs across all channels. This demands strategic planning, state-of-the-art technology, and continuous improvement to make it succeed on a consistent basis.
Data and data management lie at the heart of executing a successful omnichannel strategy, enabling retailers to manage multi-source inventory properly. As mentioned earlier, legacy systems create data silos that wall off information between retail channels. That has to go away in order to make omnichannel function properly.
Optimizing how inventory is allocated across channels requires a sophisticated approach. Retailers must balance demand forecasting, inventory visibility, and agile logistics. Advanced data analytics that incorporate artificial intelligence and machine learning are needed to accurately predict demand and rebalance stock levels across channels.
Effective inventory allocation optimizes stock levels and distribution by pulling from a single data pool. This aligns supply with demand across channels and locations, ensuring faster inventory velocity, and the rate at which it “turns.” It involves a complex process of tracking stock levels daily, in every location, and across every channel. Demand signals and buying patterns are analyzed, driving strategic inventory reallocation as needed.
This process prevents an excess of both stockouts and costly overstocks. It also drives greater supply chain efficiency, increasing your ability to respond quickly to changes in market conditions or consumer preferences. Efficient inventory allocation also reduces the need for frequent transfers between locations or expedited shipments to fulfill orders, lowering transportation costs.
Inventory management software that incorporates AI-based analytics can examine historical and current sales data, market trends, and customer patterns to drive smarter allocation decisions. This happens in real time, preventing discrepancies that naturally occur between data syncs in an ERP's master records.
If all of this is beyond your budget or capabilities, partnering with a leading 3PL is a great cost-effective option for executing a successful omnichannel strategy. Many 3PLs have invested heavily in advanced systems to track and manage cross-channel inventory in real time, ensuring order accuracy and availability.
They also have sophisticated fulfillment processes, including automation tools that power highly efficient picking, packing, and shipping. Orders are routed to the optimal network node (store, warehouse, or drop-ship supplier) to save on transportation costs.
A top 3PL’s optimized logistics and coast-to-coast delivery network ensure fast, cost-effective shipping. This marriage of technology, process, and industry savvy allows you to meet heightened customer expectations for speed and convenience without a heavy capital investment.
Achieving omnichannel excellence requires breaking down silos, integrating systems, and optimizing inventory management to meet heightened customer expectations. Given the challenges — technology, logistics, and real-time data needs — success hinges on strategic planning and advanced technology.
By aligning data-driven inventory management with optimized fulfillment and logistics, retailers and brands can create a winning omnichannel customer experience. Partnering with an experienced 3PL can improve scalability and efficiency at a lower total cost per order (TCO).
Shipbots, a 3PL specializing in LA fulfillment, has a nationwide network for fast order fulfillment, and a wide range of flexible, scalable solutions. Our variable cost model and no-contract advantage mean significant savings on warehouse space, staffing, and logistics. This frees you up to focus time and resources on growing your business. Get in touch today for a free quote.
