Large legacy retailers such as Macy’s or Kohls that became large retailers based in most part on their store network and capabilities have a large challenge now in direct to consumer delivery. The challenge is not the ability to delivery directly to the consumer, it is the delivery service level. In my most recent orders I was dumbfounded to be informed my order would arrive in 7 - 10 business days. This speaks to the profound impact of Amazon Prime on consumer expectations. This also speaks to the strategy and implementation of the omni channel marketplace support capabilities of these retailers. The omni channel retail experience requires changes across the supply chain to deliver a cohesive experience across channels and this requires changes to the extended retail supply chain.
From the outside my suspicion is that these retailers are struggling with their supply chain systems and processes to support a cohesive consumer delivery capability, whether from the retail store or eCommerce. I base this on the direct to consumer timeframe provided to me for my order, I cannot believe that these large retailers take 7 - 10 days to replenish inventory to a store and to provide this type of service level in the direct to consumer delivery is unconscionable. This displays a strategy of delivery to channels from different distribution centers in order to increase the efficiency of the distribution centers. Retailers can no longer afford to follow this strategy and survive. Amazon has blown up the market and changed consumer expectations with the Prime service. This means that retailers must change their extended supply chain to support standard 2 day delivery to all channels and not just the store.
Another suspicion of mine is these retailers are struggling with inventory accuracy and control across channels. The challenge for these large retailers is a combination of legacy systems that do not support omni channel inventory management, inventory control challenges in a large store environment legacy and finally legacy processes and procedures that do not support omni channel requirements. Simply adding new systems will not resolve these issues. This requires a redesign of both the store and the processes and procedures in order to address the inventory control challenges. A redesign of the store to reduce the open stock inventory on the floor and increase the storage will go a long way to addressing these issues and as a result improve the delivery service levels.
The retail market has shifted to a true omni channel market and eCommerce purchasing is increasing while store sales have flattened and decreased. The legacy retailer supply chain strategy must also change to a true omni channel supply chain in order to meet these needs. This requires a change in their inventory strategy to follow a multi-echelon inventory location strategy that supports fulfillment of sales from any channel to any channel.
And now for the audience participation portion of the show…
ECommerce will have wide ranging impacts on both the retail and manufacturing sectors. How can you focus these abilities to improve the consumer's experience? Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes. In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas. How can you support these continuously changing requirements?