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The sum of all retail’s parts

As consumers demand fast deliveries and full product availability, retailers are having to bundle all their shopping channels into one technology concept. Welcome to omnichannel, the future of retail.

Speaking at the Drapers Fashion Summit in November last year, Aurora Fashions chief executive Mike Shearwood heralded “omnichannel” as the future of fashion retailing. Retailers are now switching on to the omnichannel concept – a process by which all channels for online and offline marketing are integrated to incorporate new technology – as retailers bid to compete in an age when consumers want everything now.

Department store chain House of Fraser expanded its multichannel offer in 2011 by opening its first two click-and-collect stores, in Aberdeen in October and Liverpool in November.

Robin Terrell, executive director of multichannel and international for House of Fraser, says retailers need to find ways to fit in with the demands of consumers leading busy lifestyles. “I think you’re at the stage where it’s actually about the customer. It’s about making sure you’re interacting with that customer in a relevant way,” he says.

There’s no doubt that when it comes to innovation in terms of in-store technology and delivery proposition, Aurora Fashions is leading the pack. In May last year the group, which owns the Warehouse, Oasis and Coast chains and runs Karen Millen as a separate business, introduced iPad technology into its stores and offered a 90-minute delivery service for the London area, which it plans to roll out nationwide in the first half of 2012.

This month, Aurora launched a decentralised stock management system to fulfil online orders, which it calls Anywhere, Everywhere. It has invested in a systems upgrade to enable better real-time stock reporting to facilitate its common stock pool. The initiative led to a 28% increase in availability of online products and yielded a £2.5m sales increase during its trial at selected stores over the six weeks to December 9. In fact, demand was so high that Karen Millen used up two weeks’ worth of packaging materials in just two hours.

Richard Glanville, chief financial officer at Aurora, says the initiative has helped improve the business’s sell-through rates by getting product to where it is most needed. “We were finding that our best-sellers were only achieving an 80% full-price sell-through, and we’d end up marking down these wonderful best-sellers because we had bits and pieces of various sizes in all sorts of different locations,” he says.

The move is now delivering a 98% sell-through on certain full-price items, and Glanville says that next year the business is planning to restructure the way it allocates stock as a result. “What we plan to do next year is to allocate much less to online and retain much less safety stock, and to allow the stores or the web to pull the product according to demand, to soak up any imbalance or any inefficiency in distribution. That will also allow us to over-stock our standalone stores,” he says.

Mini-distribution centres

The retailer’s larger stores will act as mini-distribution centres, and staff will be trained to pick and pack during quiet periods.

Premium chain Reiss launched a click-and-collect service nationwide and iPads in store in 2010. Ecommerce director Dan Lumb says it hopes to open up its own store inventories for fulfilment and introduce a 90-minute delivery service next year. “We’re definitely going to move towards it. I think we need to as a business,” he says.

Using local courier services such as UK Shuttle means larger retailers are able to offer this service without the need to invest in regional distribution centres that would be cost-prohibitive.

Moving towards one stock pool, instead of ring-fencing stock for wholesale, retail and online, means retailers – and the logistics firms they work with – can manage distribution centres more efficiently by allowing just one pick sweep. Stewart Firth, head of operations at Torque Logistics, says his firm helped one retailer achieve a 25% saving by consolidating two stock areas into one.

Freeing up store inventories is a sure way to drive up sales, but a retailer’s failure to provide a suite of delivery options that are convenient and fit around people’s lifestyles will lead to dissatisfied customers. 

Terrell says: “It’s amazing how many people almost forget about everything post-order, whereas actually the delivery proposition is the key battleground. You’ve got to be able to supply to your customer when they want it and how they want it.”

Parcel firm DPD and its sister company Interlink Express won £40m of new business in 2011, including with Aurora, after launching its Predict delivery service which texts consumers a one-hour timed delivery slot. “Shoppers resent the inconvenience of taking time off work to wait in all day for a delivery,” says Dwain McDonald, chief executive of Interlink Express and DPD.

This is supported by survey research from discount website, which asked which delivery methods consumers find most useful: 63% said accurate delivery tracking within 15 minutes; 42% wanted designated delivery time slots; and 39% said specified return and collection posts were most important to them.

Free returns

Retailers are rushing to offer deliveries and returns via local collection points. Reiss is offering free returns via DHL, which comes to collect unwanted items from customers at their convenience, while House of Fraser has been offering returns via Collect+, which offers pick-up points in 4,500 convenience stores across the UK. 

“The ability to offer more convenience and delivery options and pick-up locations is critical going forward,” says Terrell. While increased flexibility will add cost to the supply chain, the boost in sales should make it a sound investment. 

Firth says retailers should look at the wider picture. “If merchandisers don’t get the stock in the right place at the right time, then you’re left with markdowns; 50% off a product can be a damn sight more expensive than spending a few extra pounds on the transport,” he says.

This is just what happened at shirting retailer Thomas Pink, which experienced a 98% incremental sales increase after launching a collect-in-store option last year. Peter Mila, information, ecommerce and logistics director at Thomas Pink, says the investment has been worth it: “The extra cost has been offset by the fact you’re getting dramatically increased sales.”

Mike Danby, chief executive of logistics firm Advanced Supply Chain, says there are ways of managing delivery costs down, and advises consolidating the number of logistics partners that retailers work with. “I would advise consolidating down to one logistics provider. That one company can then deliver four times as often for the same cost,” he says.

Sean Fahey, group IT and project director at logistics provider Clipper, says costs can be managed down further by swapping staff at shared user sites to cope with peaks in demand. 

There is no doubt that today’s consumers are more demanding, and retailers need to match those expectations. The early results from Aurora show that taking an omnichannel approach, investing in IT systems to free up store inventories, and increasing the number of deliveries, and delivery methods, can make a significant difference to a retailers’ bottom line. 

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