Beyond Retail - whither goes Multi-Channel Commerce?
Every year, eager, enterprising and wide-eyed management graduates join us at our Hyderabad campus, straight from B-school to the Enterprise Solutions Academy (ESA) for a 10-week boot-camp, at the end of which they get deployed in various cities across multiple enterprise packages to kick-off a career in enterprise solutions as Associate Consultants. This May, I was addressing and answering the queries of a set of folks slated to join the SCM practice. One question that caught my eye came was from someone who asked how come Distributed Order Management (from Sterling Commerce, naturally) was so hugely popular among retailers, but didn't cut it in other industry verticals.
Now I can reel off a whole slew of reasons behind a trend like this for retailers. Terms like Cross-Channel Integration, Multi-Channel Selling & Fulfillment and of course Distributed Order Management have been embraced by retailers for so long that there's no surprise to hear multiple initiatives around these themes going on at any point in time. One obvious trigger is the sheer complexity of fulfillment options that retailers end up handling for their end consumers - whether it is drop/direct-ship, merge-in-transit, assemble-to-order, customers cutting across multiple channels as part of their buying behavior, loyalty cards/points, different kinds of promotions to be applied at the same time, high levels of returns (especially in fashion retailing) and their tracking, seasonality and a number of related aspects which make the permutations around selling and fulfillment quite multi-faceted.
Now, traditional manufacturing especially with their B2B sales philosophy didn't have to go through similar challenges in the selling/fulfillment areas considering the fact that the product range had a limited set of buyers who were more contractual rather than transactional. There is less of impulse buying, more thought-through decisions, less overall emotion and switching vendors at the drop of a hat.
But what happens when the manufacturers decide to overstep the traditional boundaries and start looking at connecting with the end customers directly. Think Nokia and the Ovi experiment or Apple and their iStore. Even P&G with their famous crowd-sourcing and innovations funneled through customer perspective (whether complainers or raving fans) is all about directly connecting with your end users. Apparel & CPG companies, especially those with single-brand stores would be another good place to seek out this evolving trend.
In such a scenario, web/store-driven fulfillment becomes a critical medium and hence, the marketplace for web-commerce (B2C-lite, as I put it) is set to increase. In the future, the likes of Apple, Nokia and even some non-cutting-edge product vendors may look at B2C, loyalty programs and variations of the direct-from-Dell model. That's when we would hear more of formal DOM and MCC from the non-retail world. My sense is that it's all going to take-off in a major way in the next year or two itself as the boundaries between retailers and manufacturers increasingly get blurred.
Comments
I found this entry by to be a very interesting and thought provoking read indeed. I have few observations and here is my take on why retail was a super hit and others are following the suit.
The proliferation of web as a channel for sales has been complimentary to the channels that existed before the dot com era. Most organizations went ahead with e-tailing or web trading as an effective marketing tool helping the existing channels like catalogue and mail order. The web served as an effective tool to provide more details of the product in a very interactive manner to the delight of the customer.
If we look at the way Multichannel commerce, (or for that matter Retail evolved) and the DNA of companies who were early adopters of this strategy, these were firms who believed in the power of internet as a tool of the future. They did not want to be a dot com which would go bankrupt tomorrow. Even today most Multi channel initiatives are championed by the customer marketing teams at leading retailers.
Along with this, another reason behind aggregation of other channel /partners could be the way information exchange model evolved from the olden MRP, MRPII and finally our journey towards enterprise wide visibility. This was followed by a need to integrate trading partners breaking the wall between organizations and paving the way for true trading partner collaboration. It is in this context that I see direct vendor shipment as a strategy increasingly being adopted by the retail giants.
The strategies and reasons that were mentioned in the blog including bleeding edge fulfillment strategies, characteristic to the retail industry is very apt in this context.
Also I see an interesting correlation to the classical consumer behavior and attitude formation theories which we learnt at school. The role of internet in the buying process is gaining significance starting as an enabler to recognize need, then as one media facilitating Information search and Evaluation of alternatives. Beyond this point cross channel integration is playing the role, what stores were doing in the past i.e. being point of acquisition. Stores could increasingly become showrooms where customers can touch and feel but can’t take the product with them then and there.
In future in all those models (B2C lite as coined) and all those apples and oranges of the world that would provide the customer with that experience spread across channels could be seen talking about MCC. But the caveat is that every industry has a way of selling and involving different kinds of channels. Which channel works for whom and how it fits into the sales and marketing philosophy would be an interesting development to be observed.
In the end this could be viewed as an example (not yet another example) where the sales and operations organization of a firm collaborate for greater glory
Posted by: Dawn Mathew Varghese | July 8, 2010 4:44 PM