Podcast: Online retail and the essentials of omnichannel optimization

In the first half of 2020, necessity rapidly drove online retail to a higher level than it would have seen otherwise. In this episode of the Symphony RetailAI podcast, two of our own supply chain experts, Patty McDonald and Shaina Finch, sit down to discuss how retail responded to the disruption, what we’re observing about possible permanent shifts in behavior and how retailers can ensure that they are able to effectively meet the needs of omnichannel consumers moving forward.

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    Sean:                          Thank you for joining us. In this episode, we’ll be talking with Symphony RetailAI supply chain experts, Patty McDonald and Shaina Finch, who will be discussing how online shopping rapidly became a necessity in the first half of 2020 and how retailers can ensure that they are able to effectively meet the needs of omni-channel consumers moving forward.

    Patty McDonald:              Hi everyone. Patty McDonald here from Symphony RetailAI. I work in solution marketing. I’m really excited to be here today with Shaina Finch to talk about omni commerce.

    Shaina Finch:                     Thanks, Patty. Hi everyone. My name is Shaina Finch. I’m Head of Solutions Consulting, focused on the supply chain products, and I’m really looking forward to discuss further with Patty the importance of omni-channel within supply chain. So Patty, I think let’s take it away.

    Patty McDonald:              Great.

    Shaina Finch:                     I think that the retailers that were already heavy into supporting the online ordering process had an obvious advantage than those that were not as advanced on a clean solution or no solution to support that at all. By having a online and clicking solution in place, I felt that it really enabled them to grow their sales tremendously versus other retailers that were just getting started, likely had to focus their attention on more important tasks such as restocking shelves as fast as possible, or sourcing down where to order to fulfill these items. So retailers with a click and collect solution integrated with inventory management have succeeded the best in preventing lost sales as much as possible, while also fulfilling demand and growing those sales.

    Patty McDonald:              I think that even the ones that were prepared still had a really hard time keeping up because there’s just a whole myriad of things that these retailers face every day. So I think it’s more than just keeping up with click and collect in the econ, but all the pieces that are connected with that. So what we also saw during COVID-19 is choices and category shifts as well. So for a retailer, just keeping up with that demand is one piece of it, but they have to look at the entire picture, the space, the type of channel of e-commerce, and the product and the store layout as well. If we continue to see the rise in click and collect, and I think there’s still a lot of things that retailers need to do to keep up with that shift.

    Shaina Finch:                     I think that’s a really great point, especially when you look at different types of products, you know, chilled or frozen, you may not have the cooler capacity. So, you can’t just put it somewhere else that’s not going to be temperature controlled. So being able to modify on the fly your supply chain flow, for example, to indicate, we have this capacity constraints of do not order above this capacity and to be able to send and store more at the closest neighboring DC, or to be able to allow for that type of supply chain change, whether it’s temporary, given these certain circumstances in surge and demand or to permanently change it. So I think that’s a great point for fresh, perishable and chilled foods.

    But then also if you look at dry goods, you saw in the grocery store certain shelves that were out of stock for a long time, let’s say toilet paper, but they were able to get extra cleaning supplies in, and you have that oversupply of clean supplies that max out its original shelf space to be able to modify and say, “Okay, I do have a secondary location when I can store these goods because we know we are going to sell them,” and have that indicated to the store associates, to know that you carry these different Lysol or cleaning products at one shelf address, but it’s also available in another shelf address that consumers can pick from or the store associate.

    Patty McDonald:              Yeah, that’s a great point, just making sure that the store associate has the intelligence to understand those kinds of things. And also back to the chilled point as well, to understand what the timeframe is for not just moving the product from the shelf, but to the pickup zone, if it’s click and collect, and how long it would have to sit there based on either shelf date or the sensitivity of the temperature until the customer comes to pick it up.

    Shaina Finch:                     Yep, exactly. Yeah. So to talk about an example, we saw a European retailer that saw 600% increase in order growth during the pandemic and was able to support this increase in demand with an integrated solution for not just click and collect, but end-to-end distributed order management. So supporting the click and collect order and store operations process along with store order fulfillment to make sure that those goods were getting to the store in time and you’re able to support your customers arriving to the store and also placing orders online. And they manage that within one integrated platform.

    Patty McDonald:              Yeah, and I think that’s a really great point, Shaina, because most vendors on the market don’t support all those pieces. And I think when, like we were talking before, retailers have so many things to consider, and if you look at just the e-commerce piece and being digital around that, there’s so many different components from looking at the channel of forecast, to looking at the fulfillment and the availability of inventory, down to the operational pieces. That’s only a small part of supply chain, but it’s a big, important part. So, having a platform that can look at all those things cohesively is really important, and I think that the retailers during COVID-19 that had a more strategic approach and more of those pieces together on one platform were much more successful.

    Shaina Finch:                     Yep. I totally agree. Being able to tie all of those together.

    Patty McDonald:              I think that, and especially for retail grocers, because they have very low margins, it’s such a challenge because the operational costs for supporting click and collect is so high that I think they need to really be looking and be laser focused at being more mature.

    Shaina Finch:                     Yeah. I think for those that weren’t using online and are looking to start using online to also ensure that they’re going to pair with it an inventory management system. For example, a lot of websites of different retailers weren’t up to date. They would say items were in stock and consumers would go to the store to buy the item in person and they were out of stock, and it was due to not having that real time inventory view. So to be able to also tie together with the actual click and collect processes in order management system, the true visibility of end-to-end inventory.

    Patty McDonald:              So, like you said, having that end-to-end platform and the inventory visibility is really important, but I think they need to look at their overall process and make sure that they have a platform that can support all those business processes. And it just makes them better prepared and more agile. And as we saw the huge spike in click and collect and e-commerce during COVID-19, it was sort of a wake up call for them to scramble and get better prepared.

    Shaina Finch:                     So, my advice would be to move forward digitally, take a look at that end-to-end approach.

    Patty McDonald:              One thing we didn’t talk about, I was hoping that we would, was the cost from the operational perspective, being able to execute multiple customer orders, giving the store associate the power basically to understand the most efficient way to move through the store, to pick multiple orders, because I think that’s a high cost center for retail grocers.

    Shaina Finch:                     Yeah, definitely. To be able to have savings on labor. For example, if you have three customer orders that are going to be picked up close in time together, to allow the store associate to be able to optimize his or her time and prepare multiple orders at once and be able to put those away into the pick-up zone and then focus on their next prioritized tasks.

    Patty McDonald:              Well, I think that ties into the overall end-to-end piece, right? Because in the beginning we talked about looking from an econ perspective from the channel demand into the ordering, the order fulfillment and then the execution. And then when you get down to the store operational piece, that’s where it gets expensive for retailers.

    Shaina Finch:                     Yep. Absolutely.

    Patty McDonald:              We saw a lot of retailers connecting with the Instacarts to help in the execution of the e-commerce. I think that’s a separate piece, but it’s an important part of retailers figuring out how they can have the whole picture put together with fulfilling e-comm and the click and collect. So instead of them going through the execution and let’s say delivering it to the customer’s home, they’re having somebody else do that because it’s a huge cost. I mean, I was surprised when I looked at the margin loss and how much it costs to actually execute on all of this click and collect stuff.

    Shaina Finch:                     Yep. It’s important of course, to have that front end, so the consumer can place their order online, but also to be able to tie the back end to it, so to have the backend come through to understand, is this item supplied within this specific store? What are the inventory levels? Is it in stock or out of stock? All of that important information. And then again, to tie it back to what we discussed earlier with having a full end-to-end inventory visibility capability, because by having that with order fulfillment, they would be able to say, “Okay, we can supply eight of these line items, but two of them, we cannot from your preferred store, but perhaps if you change your pick-up time, they’ll be available then, or two of them can be shipped to your house from a close by DC,” to be able to manage those type of exceptions.

    Patty McDonald:              Yeah. That’s a great point. And I think also expanding on that too, the retailers that might not have the space. I think the micro fulfillment centers, a lot of them are looking at that as a way to help them, or the dark stores. If they don’t have enough space to execute, then going to alternate sources of pick-up. I think we’re going to see a lot of that happening.

    Shaina Finch:                     I think as we’ve returned to a more normalized pattern of shopping, it’s still not the same, and I think that we’re going to see that a lot of consumers that had never tried online shopping before have tried it and are going to decide to stay with it. So we’ll still see that now that many retailers have gotten used to the increase in demand for online shopping and be able to fulfill that, that now that it’s available, that customers will continue to do online shopping, or at least a very large percentage of them.

    Patty McDonald:              I agree, Shaina, definitely. We saw that with some of our customers, where one in two of their e-commerce customers were new and then that e-commerce demand continued to increase even after the pandemic started to stabilize. So I think that it was a wake up call for both retailers and the consumer. Me personally, I’ve done more shopping online, and I think that the preferences will continue to shift. We’re still seeing retailers trying to figure that out, even though the demand for click and collect increased, they’re still trying to understand what constitutes that demand. For example, the baskets actually went up in price for some of our customers.

    Shaina Finch:                     Yeah, I absolutely agree.

    Patty McDonald:              We’ve run into many retailers that have had different solutions in play to support forecasting for fresh or for the center store, and that makes it very challenging to see the full picture.

    Shaina Finch:                     So it’s really critical to be able to leverage a demand forecasting engine that can forecast all different item types, from fresh to center store items in one engine and be able to understand the impacts of changing demand and to be able to predict that to automatically detect links between items to see whether specific sales or trends have positive or negative impacts to other selling items.

    Patty McDonald:              That’s a great point, Shaina, especially when, as we were talking about getting down to the execution of e-commerce in store. So having everything on one platform just makes it easier from the beginning. So if retailers have multiple systems that do all of that for a fresh item and then a separate system that does it for center store, it just makes it that much harder, and the cost of ownership goes up, which is not a good thing.

    Shaina Finch:                     Exactly. And that’s a great point too, because some fresh items can be supplied for multiple different vendors or sourced through your DC, or maybe both. And perhaps you want to be able to substitute some of these fresh items with semi fresh or center store items. So having that in one engine to be able to understand, when one is out of stock, by being able to apply the demand and the execution in the one engine, I think really will help support the stores and give them visibility.

    Patty McDonald:              Agree 100 or 200%. I think that’s an essential point that retailers need to look at when they’re looking for solutions.

    Sean:                          Thank you, Patty and Shaina, for today’s conversation. For more insights and information about optimizing for omni channel retail, please visit bit.ly/omnichannel2020. That’s bit.ly/omnichannel2020.

     

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