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Given the promise of multi-channel retailing for increasing customer relationships and revenues, it certainly makes sense for merchants to move their operations in that direction. Within any multi-channel strategy, however, one of the largest, most fundamental building blocks is a subset of so-called consumer direct operations that enables customers to bypass store-based retail. While these operations are necessary for achieving multi-channel retailing, the complexities inherent in consumer direct models can present some unexpected hurdles especially for traditional brick and mortar stores and branded manufacturers. To meet the challenges, merchants will need the ability to implement customer direct models that allow them to retain brand control while outsourcing costly and time-consuming tasks.
Because consumer direct models are, by nature, remote, the operational process of satisfying customers via these channels is very different than it is in stores. It requires operational experience and core capabilities such as customer interaction centers, e-commerce storefronts and order management, to name a few. Where direct marketers, like catalogers and pure-play e-commerce retailers, have oriented around servicing the individual with call centers and fulfillment warehouses optimized to ship individual orders, traditional store-based retailers and branded manufacturers often find these functions require significant development.
As a result, traditional stores and branded manufacturers with no history of serving individual customers remotely face new merchandizing and operational challenges. They must create a great deal of content on each product and re-merchandise their inventory for a different audience. They need response teams and/or call centers customers can contact directly for order information or questions, as well as fulfillment operations. In addition, the content, call center and e-commerce channels must all be on the same page.
Traditionally, merchants implementing consumer direct models have either done it themselves in house (designing the business processes, building/integrating applications) or outsourced everything. Unfortunately, both of these approaches have serious drawbacks and represent uneasy compromises in the consumer direct world.
Do-it-yourself approaches might ensure brand control, but they are costly, and time consuming. These approaches not only involve the headache and expense of staffing, handling the warehouse and running all of the operations, but more importantly, require retailers to operate outside of their area of core expertise, which is merchandising and managing customer relationships. While very large retailers may have the resources for such operations, few small and medium size businesses do.
Outsourcing of the whole operation might save the time, cost and trouble of do-it-yourself approaches, but effectively cedes control of the brand to a third party. This includes control of the merchandising, which is the heart and soul of the brand. In essence, the third party takes over control of the day-to-day customer relationship activities that are critical to promoting product brand value and differentiation to targeted customers. Merchants who lose their core brand in this way will never achieve true multi-channel retailing or reap its benefits.
Clearly, retailers need a new approach that allows them to retain control of their brands (primarily through e-commerce backed up by content/catalogues), while outsourcing the logistics/call centers. In this scenario, retailers control the rules and merchandizing, but outsource the complex processes associated with executing comprehensive consumer direct deployments.
Today, Software-as-a-Service (SaaS) enabled commerce is emerging as the most viable means for building the kind of solid customer direct models necessary for true multi-channel retailing. The availability of a broader scope of SaaS capabilities including order management and e-commerce provides the right blend of in-sourced merchandising control and the advantages of selective business process and/or IT outsourcing. In this model, merchants can control the user experience, set promotions and pricing calendars, and keep online storefronts current with the latest and best merchandizing techniques to drive conversion and higher order values. SaaS also can increase brand loyalty by improving direct sales response; lower total cost of ownership by moving from fixed to variable costs; and improve productivity by leveraging existing resources more efficiently.
With the ability of well-executed, multi-channel retailing to positively impact the bottom line for merchants, the trend toward implementing these strategies is likely to continue for some time. But unless the consumer direct component is done correctly, a large piece of the multi-channel operation will be missing. Solid consumer direct models that offload complexities, while keeping brand and merchandizing control in the hands of retailers, are vital to making good on the multi-channel promise.
Stephan Schambach is President and CEO of Demandware, a Woburn, MA-based provider of e-commerce systems that provide merchandising control.