Direct-to-Customer Commerce

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Strategic insights into the direct commerce industry, including ecommerce, direct marketing and related fields

9 Steps to Multichannel Commerce

This is a slide deck, which I produced and uploaded to slideshare.net.  Click here.

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A simplified view of marketing

I realize that what I’m about to say is probably an over-simplification … but sometimes, we can make things so complex that we lose sight of the fundamentals.  That’s the point I’m hoping to make today.

Conceptually, business is pretty simple.  You really only need three things:

  1. a product or service that satisfies a buyer’s needs.
  2. a process to deliver the product or service to the buyer (which may include manufacturing)
  3. something to overcome the buyer’s inertia … that is, the buyer’s tendency not to buy

Point 3 is actually marketing.  And in a very real sense, marketing & sales is about getting the prospective customer to act.  It’s easier, cheaper, less risky for the prospective customer not to buy your product or service.

Perhaps, this explains why so much marketing effort is devoted to promotions.  A promotion is simply intended to provide a prospective buyer with an “out-of-the-ordinary” reason to act … lower price, free shipping, higher quantity for the same money.

JCPenney is currently engaged in an experiment (under their new CEO, Ron Johnson) to see if they can sell as much, without so many promotions, as they could with so many promotions.  It will be interesting to watch the outcome.

However, I expect, the experiment will fail.  Because JCP’s merchandise, by itself, is not a sufficient “draw” to bring in buyers, without promotions.  Promotions give buyers a reason to act … whether the reason is truly “real”, or just “perceived”, promotions provide the motivation to “act now.”  Without the promotion, there is less reason to act.

Product availability is necessary, but it’s table stakes.

Product quality is important, but varies by target market segment.

Overcoming buyer inertia is critical to all business.  Without it every business fails.

Filed under: Ideas, Opinion, , , , , ,

The seventh step to multichannel commerce

We’re getting there, slowly but surely.

This is the step where everyone wants to start … it’s time to set up a web site.

Some of my consulting colleagues have reported there are over 900 ecommerce platforms, from which a merchant can select, upon which they can build an ecommerce store.  The variables seem to go on forever … but don’t forget the previous six steps we’ve outlined.  Those are the non-negotiables (or at least, should be).

After those, nearly everything may negotiable.  Merchants all think their business is unique and needs features or capabilities which other merchants don’t need.  Or they need some feature tweaked.  The only thing I would remind you of is that changes, tweaks and new/modified features cost money.  So, before you go requiring lots of customizing, make sure the customization you need will actually make more money for you than taking the feature, the way it comes.

Consultants love to help clients customize things … often makes them more money.  But many, if not nearly every, merchant asks for things that do not increase sales and may even increase cost or have other negative impacts.

There is a lot to be said for finding an ecommerce platform that has:

  • experience in your industry
  • experience with your other applications, such as Product Master, Inventory, OMS, WMS
  • uses a technology your staff is already familiar with, so you can make minor changes and fixes, yourself
  • an effective user interface, which merchandisers, customer service reps and others can be quickly trained on
  • a plan to stay up-to-date on marketing and technology improvements
  • already supports your current marketing activities
  • supports your current payment processors
  • a good cultural fit with your present staff

When you select your ecommerce platform, you must include every department in the decision.  Don’t let the technology people drive the decision without major input from merchandising, customer service, finance, operations.  It’s very expensive to change ecommerce horses … and the technology itself is not always the most important consideration.

It’s about people and process … the technology is actually less expensive to change.

Then again, take advantage of the technology to improve your processes and perhaps lower your labor costs.

Filed under: Direct Commerce, Ideas, multichannel commerce, Opinion, , , , , , , , , , , ,

The fourth step to multichannel commerce

Step 1 = a single, unified product master

Step 2 = a cross-platform, multi-channel order management system

Step 3 = a single view of inventory, updated in near-real-time.

Step 4 = a warehouse management system capable of item-unit-picking and parcel shipping (fulfillment processing)

More and more warehouse operators are coming to an appreciation of the differences between shipping to stores and shipping to consumer.  For those who don’t, the most typical problem is that both processes use similar terms, but the definition of the term varies with the environment within which you’re working.

Picking for a shipment to a store, is often at the case level.  Picking for a consumer is almost always at the unit level.  A case contains multiple units of a single item.  Pallets contain multiple cases, which may be of a single unit or mixed units — but all in cases.

Fulfillment of consumer orders usually requires:

  • more complicated picking instructions
  • variable picking strategies
  • more difficult packing (read “slower”)
  • slotting optimization (to reduce picker travel time)
  • more sensitive cut-offs for picking orders
  • coordination with multiple parcel carriers (USPS, UPS, FedEx, DHL and others) for pick ups based upon class of service (ground or expedited)
  • near-real-time updating of order status and inventory status

These are just the highlights … the actual list goes on much longer.  I’m only trying to highlight the differences between retail fulfillment and consumer fulfillment.

More and more Warehouse Management Systems (WMS) are capable of handling both retail and consumer fulfillment.  So, the more difficult matter is personnel management and scheduling.  In a typical retail operation, staff peaks in August-September for shipping Christmas inventory to stores.  And the staff increase is 20-30 percent over base levels.

However, for consumer fulfillment the increase in staff may reach 200-500 percent and run from early November thru mid- to late-December.  This dramatic increase puts a premium on the ability of Human Resources to hire quickly and well; plus the ability to train new people on any specialized tasks.

Filed under: Ideas, Opinion, , , , , , , , , , , , , ,

The third step to multichannel commerce

Step 1 = a single, unified product master

Step 2 = a cross-platform, multi-channel order management system

Step 3 = a single view of inventory, updated in near-real-time.

This really is a tall order, because, unless you’ve bought into a major software solution, which has this capability built-in, it’s a pretty complicated process.  You have to set up numerous rules about inventory allocation, updating various channels (do you treat all channels the same or do some channels get priority over other channels).

Many merchants find it difficult (if not counter productive) to try to sell the “last available unit” on a web site, but will sell it from a store or the call center.  However, optimal inventory utilization calls for making inventory available where demand is … so you have to find the right balance for your business.  And it may take you time to get comfortable with all of the implications of this problem.

If you can sell any unit thru any channel, you’re most likely to get the highest value for that unit.  And that is likely one of your objectives.

However — and this bears repeating — synchronizing inventory across multiple channels (especially, if it includes brick & mortar stores) is a tall order.  High five to you, if you’ve put this in place.

Filed under: Ideas, Opinion, , , ,

What will likely happen in Q4

Press reports are starting to come out that:

  • retailers are not hiring as many seasonal employees for 2009Q4.
  • merchandise orders for Q4 may be as much as 20 percent lower than in previous years

What can we concluded from these two facts:

  • customer service in retail, brick & mortar stores may reach an all-time low.  There simply won’t be anyone around to help you.  You’ll probably have a hard time just finding someone to take your money.
  • e-commerce sites will gain sales faster than ever before — for multiple reasons:

First, because you can check yourself out and don’t have to rely on finding someone to help you.

Second, retailers will likely make sure inventory for their online store is broad and deep.  Because they can sell to anyone, anywhere at anytime.  Thus, they will more likely sell thru online store inventory than physical store inventory.  Plus, they can replenish inventory for the online store faster than they can to physical stores (at least, in most cases).

Third, buying online is less frustrating and annoying than going to a store.  This will be especially true, because there will be fewer sales discounts in physical stores (due to lower inventories) and fewer people to help (see “First”).

*  *  *  *  *

Now, don’t get me wrong.  Total direct commerce sales (as reported by the Commerce Dept) remains about five percent of retail sales, but direct commerce sales are growing reliably, while total retail sales has been in decline for most of the past 12 months.  The bottom-line:  We will see direct commerce (online & catalog) take a big jump forward in Q4.

That in turn will cause at least a short-term increase in activity during the first half of 2010 by companies who will seek to upgrade their online store, or maybe even finally set one up.

Filed under: Direct Commerce, Opinion, , , , ,

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