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Putting supply chain at the heart of multichannel strategy

At a recent roundtable on supply chain, multichannel leader John Lewis highlighted how vital this unsung part of retail is to delivering omnichannel success.

That John Lewis is leading the way in terms of multichannel retailing will come as no surprise to anyone in the industry. Its online sales, which surpassed the £1bn mark earlier this year, account for 28% of total sales, while click-and-collect makes up around 30% of those sales. Furthermore, 40% of its web traffic now comes from mobile phones or tablets.

Head of supply chain development Berangere Michel outlined some of the key pillars for delivering a first class multichannel service at a Drapers and Retail Week roundtable last month, sponsored by marine terminal operator DP World London Gateway.

Customer interactions

According to Michel, omnichannel is about allowing customers to interact with them anyway they choose at any stage of the buying process: from placing the order, to changing it, receiving it and returning it.

She explained that the retailer’s research indicates that two thirds of its customers interact with them in “an omnichannel way”. The study also found that 29% of customers research in shop and buy online; 63% research online and buy in a shop; and 19% of shoppers use mobile to research before they purchase.

John Lewis’ definition of omnichannel is a progressive one, but to offer a shopper this type of flexibility, such as returning anything anywhere, creates challenges behind the scenes at a supply chain level. Michel said: “Some challenges mean a lot of effort and that means a lot of cost, or more complexity in the way we interact with customer. For John Lewis the customer is always first, so we will do everything for them, but it creates challenges for our supply chain.”

Physical locations

Having a physical presence has emerged as a crucial component for selling online. Even well-known online players are looking at locations for fulfillment. Recently eBay agreed a click-and-collect deal with Argos and Amazon has partnered with a range of bricks-and-mortar retailers to house its collection lockers. For John Lewis, locations are key for its click-and-collect operations, with the service already available in all 39 John Lewis and around 200 Waitrose stores.

However, the business has also begun a trial with CollectPlus to allow customers to pick up products bought online at local convenience stores and petrol stations. Michel explains: “The reason we are doing this is that John Lewis’ physical [store] presence is not quite as great as our competitors and therefore we want to provide customers with the convenience that they seek.”

Online director Mark Lewis has previously highlighted that when John Lewis opens a store, online sales made in the surrounding area are driven up. To account for the stores contribution to online revenue, web sales are allocated back to a store within the geographic catchment. For instance, if a customer concludes a purchase online, then the retailer’s systems take the postcode attached to the credit card and allocate the sale to the store nearest that area.

According to Michel, this means the distinction between online sales and store sales is becoming less defined. “The growth of bricks means the growth of the online proposition. In John Lewis we do measure our store sales and online sales, but it’s becoming more and more irrelevant,” she added.

Stock availability and speed

One of the challenges to offering multichannel fulfillment options such as click-and-collect and next day delivery includes ensuring the stock is available for customers at the time they want it. John Lewis fulfills all online orders from its warehouses rather than its stores as it has greater stock visibility in its distribution centres. Michel explains: “You need to make sure that if you offered your customer something that they want for tomorrow, then it is there.”

A second factor Michel underlined was speed, adding: “In John Lewis we have national distribution centres, which means if you accept orders up to the evening and have your stock delivered into the stores of your choice by the next day, you need to be able to process and transport the orders very, very quickly.”

End-to-end supply chain considerations

To excel in accurate and speedy fulfillment, it’s important to consider the supply chain ramifications when making strategic decisions company-wide, according to Michel. This is why for the last three years John Lewis’ executive board has included operations director Dino Rocos. Michel emphasised: “The fundamental difference in an omnichannel world is that supply chain has to have a say in those decisions.”

Part of that decision-making process is deciding whether the cost of offering a customer service will decrease the margin too much to be worthwhile. John Lewis currently uses a cost-to-serve model to analyse costs in the supply chain to find out what drives the company’s profit the most and what erodes it.

Michel concluded: “It helps us decide how much things are truly costing and determines what the scale is we need to gain to make it a successful offer.”

John Lewis’ insights demonstrate that making the entire end-to-end supply chain a priority and giving it flexibility and speed are key to delivering a first-rate multichannel offer.

Click here to read more on the Drapers and Retail Week Supply Chain roundtable.

 

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