Unified Commerce Part One

Unified Commerce, What Have You Done? Part One

Brian Monaco
Vice President of Retail Services

Unified commerce goes by many names, such as e-commerce, online ordering, click-and-collect and more. Regardless, unified commerce is “an upsetting force”1 in retail. It is here to stay, as evidenced in upward trending census figures over recent years2. Customers love unified commerce because it increases the ease of buying and reduces delivery time. Over the last decade, companies like Amazon made this the industry norm, forcing minor and mega retailers alike to quickly adapt to omnichannel distribution. Consumers want “one-click” type functionality across the board.

Many patrons understand how unified commerce works. Customers order products online or via an app and choose their preferences for delivery. As convenient as this is for shoppers, many brick-and-mortar companies are wrestling with providing cost-effective services while maintaining customer service expectations. This must occur on top of competing with online-only retailers. One inquiry that experts are asking is: will brick-and-mortar organizations survive the fourth industrial revolution?

Let me explain. The fourth industrial revolution, or Industry 4.0, is a term used by economists and other professionals to describe the dawn of artificial intelligence, big data, digital supply chains, augmented reality, machine learning and more3. “Essential to Industry 4.0 is the Internet of Things (IoT)” 1. The IoT spawned out of technology allowing machines to inform machines, creating a more streamlined consumer world. The IoT is making services like next-day delivery and cashierless retail possible.

Hence, we come to the most important question within part one in this series. Why is it so hard for traditional retailers to provide unified commerce? We see a lot of brick-and-mortar companies trying to match the services that Amazon delivers without fully understanding their costs. Processing an online order and executing product delivery or pick up add new steps to the sales process. Each additional step comes with a price that retailers did not include in previous in-store purchases. Only years ago, this was not needed.

With retailers attempting to stay competitive, co-branding and partnerships are more appealing. Take the recent merger between CVS and Aetna, creating a new retail health care model “blurring traditionally distinct lines”4. Other retailers are collaborating with vendors like Ship It, Instacart and Shopify to provide products directly to customers. That said, retailers are uncovering hidden issues here. Customer experience, accuracy and time constraints can have negative impacts on unified commerce if handled inappropriately.

Some retailers try to tackle everything within their control. Retailers will often attempt one of three things. They might:

  • Try to uncover costs within each step. Retailers can choose to assign a fixed time or cost per order. They can also break expenses down into tasks required to fulfill one product.
  • Brainstorm ways to reduce the total cost. This sometimes requires reducing ordering windows or pickup and delivery windows.
  • Review their labor cost for one product. In most cases, retailers have a fixed coverage schedule for the unified commerce area. Thus, they focus on other areas to cut costs. These reductions reduce their overall footprint.

For brick-and-mortar retailers to sustain unified commerce in the long term, they must review solutions to reduce overall costs without impacting customer experience. There are several opportunities. One particular solution many retailers elect is optimizing their labor model. To do that, one might consider improving:

  • Data mining. Take a deep look into the data to understand how customer needs and wants form online purchases.
  • Forecasting. Retailers must forecast above par. World-class forecasting engines investigate data across multiple sources. Some sources should include loyalty programs, order history, promotions, holidays and special events along with point-of-sale data.
  • Scheduling. A scheduling solution that incorporates staffing and demand requirements is pivotal. It must schedule at the labor task level and incorporate cross scheduling into the total store schedule.
  • Mobile solutions. Using mobile solutions that adapt to cover scheduling peaks as well as reduce staffing during slow periods will bolster staffing needs.

There are many ways to strategize for unified commerce over the next three to five years. With the onset of Industry 4.0, robotic staffing and drone delivery may become the status quo. Until then, let us plan for reducing costs and providing great customer service. Stay-tuned for upcoming blog posts. In Part Two of our series, we discuss the incredible benefits of accurate forecasting and scheduling on store planning.

References

  1. Borhauer, S. (2018, January 11). The role of e-commerce in the fourth industrial revolution. com. Retrieved from https://www.digitalcommerce360.com/2018/01/11/role-e-commerce-fourth-industrial-revolution/
  2. United States Census Bureau. (2018, May 24). 2016 e-commerce multisector data tables. gov. Retrieved from https://www.census.gov/data/tables/2016/econ/e-stats/2016-e-stats.html
  3. [KPMG]. (2017, December 4). Industry 4.0 [Video file]. Retrieved from https://www.youtube.com/watch?v=IMmnSZ7U1qM
  4. LaVito, A. (2018, November 28). CVS creates a new health care giant as $69 billion merger with Aetna officially closes. com. Retrieved from https://www.cnbc.com/2018/11/28/cvs-creates-new-health-care-giant-as-69-billion-aetna-merger-closes.html