What is Going on in Last Mile Delivery, Omnichannel Retail and Transportation and Logistics?

2019 Update on the Latest Trends in Omnichannel Retail: Part 1

Over the past decade or so, the consumer class has expanded and evolved to have a powerful voice, one that has helped to transform the supply chain.  As mobile phones and access to the Internet have become more affordable and consequently, more widely available, consumers have found new ways to search for information. Brands and retailers built websites and developed highly successful marketing strategies for cattle herding traffic to websites.  Payment gateways and e-commerce platforms were built and now flourish.  The Internet superhighway of online retail opened and has continued to ramp up exponentially year after year.

Consumers began to use every possible channel to gain access to information and buy goods.  Omnichannel retail was born.  The introduction of omnichannel retail meant that customers could shop from any channel seamlessly.  This required the integration of supply chain to connect storefronts, online ordering, distribution centers and fulfillment operations into one seamless flow of data and effective process, all geared to provide a consistent, superior customer experience (CX).  In omnichannel retail, connecting technologies, ecommerce platforms and other systems is essential.

Omnichannel Vs. Multichannel

In case you are confused, omnichannel and multichannel both involve selling across multiple physical and digital channels.  The difference is in the customer experience.  Multichannel retailers keep channels siloed with little interaction between each other.  Inventory in retail stores is separate from that used to fulfill online retailer sales orders.  Returning items is also problematic, frustrating a retailer’s target audience and making the consumer shopping journey one of abject frustration. Consumers can only return goods they purchase in retail stores to a physical brick and mortar store, however often goods purchased online cannot be returned to a brick and mortar store location.  Basically, online and offline sales channels are treated as separate businesses rather than linked to ensure a seamless customer experience.  This can make connecting with customers problematic.

Unfortunately, today this is not the way consumers see the world. To a consumer, interaction with a retailer should not have to occur in numerous separate actions.  They view the world as one company, one experience.  Consumers are likely to have multiple interactions with a respective retailer through different channels (i.e. mobile, in person visits, etc.) and typically do not view the channels as separate entities siloed from each other.  The customer experience should be seamless, not one marked by frustration and barriers. Interacting with a retailer or brand online, whether this involves a mobile device, social media or in person visit to a store should be consistent, easy and unified.  Omnichannel retailers bridge the divide between the various channels to create a smooth customer experience, one without friction.

Often companies are hampered by the culture of their business, willingness or ability to invest in new technology when it comes to implementing an omnichannel retail strategy.  Companies that operate on a multichannel basis may experience resistance from in store sales teams who view the company’s online business as a direct competitor.  Using the appropriate technology and developing the proper incentive program can go a long way towards solving these challenges.

Retailers Typically Have Embraced a Multichannel Approach

Today retailers have primarily embraced multichannel as part of a broader retail strategy.  The brick and mortar bloodbath continues as retailers closed 23 percent more stores this year than at the beginning of 2018.  Yet as this is happening, there are retail brands that are expanding.

Today, multichannel retail is still the norm as retailers find it challenging to maintain active presences on numerous channels and facilitate effective order fulfillment.  Integration across all the various channels including social media, websites, brick and mortar stores, marketplaces and more is required to create the seamless customer experience identified as omnichannel.

 

Omnichannel Retail in 2019

Today, consumers are savvy.  They know how to search for information on brands, including how and where goods are made, sourcing and production of goods.  Millennial consumers are especially concerned about sustainability, environment and ethical concerns and often use this information when making buying decisions.  Millennials have demonstrated a distinct preference for a different kind of retail, one that provides a memorable, meaningful or pleasurable experience.  This influence may originate from Millennials’ preference for experiences over accumulation of goods.  Omnichannel retail is alive and well, thank you very much.  The challenge, however is how to provide exceptional customer service across a myriad of touch points, from social media to online retail and in brick and mortar stores.

2018 Omnichannel Retail Recap

Consumer confidence, a low unemployment rate and the beginnings of wage growth spurred sales for some U.S. retailers, including Walmart, Target, Home Depot and Nordstrom.  Posting the highest growth rate in holiday retail sales in 2018 since the Great Recession, consumers fueled retail sales by shopping online, on mobile devices and phones as well as in brick and mortar retail stores.

2018 witnessed the continual progressive shift in the retail industry towards online sales.  Macy’s reported both improved sales in retail stores as well as double-digit increases on its digital platforms.  With the closure of 7,000 retail brick and mortar stores in 2017 and bankruptcy filings by Gymboree, BCBG Max Azria and RadioShack, the industry seemed to be at a tipping point.

Omnichannel retail in 2019 seems poised to be impacted by emerging technologies, consumer confidence and the evolution of online shopping.  Here is a quick look at what is going on in the world of omnichannel retail sales.

The Connected World Fuels the Shift from Black Box to Glass Box

We have reached the age in which consumers care about how the brands they patronize produce, market and ship the products that they buy.  Historically, a business used to operate inside a black box, obscuring the view to all those outside the organization.  Painted outside of the black box was the impression of the brand that the company wanted the outside world to experience.  Consumers experienced a “take it or leave it” mentality.

Today, business is different, changing to meet the expectations of consumers with the power and money to move industries.  Now a business operates in a glass box.  Those outside the box have the visibility to see the people, processes and values.  Often, those outside the box even have a view of what the people inside the glass box think and feel.

Radical transparency is a trend that is revolutionizing business, politics, government, education, software design and other fields.  Technology has powered new visibility into operations and companies.  Questions inspired by consumer curiosity can now be posed and answered to provide new clarity and understanding of how companies operate, common on social media forums, blogs and other sites. This, in turn, is increasing pressure on companies and organizations to operate with greater clarity of vision and purpose as well as to ensure adherence to ethical values including sustainability, product quality and safety, human and animal rights and other issues. 

Consumers no longer need to check their curiosity at the door.  With a few taps of a finger and a swipe or two, a consumer can usually have access to a wide array of product information about a brand in less than five minutes.  No more wondering or worry.  Consumers no longer blindly trust brands.  How did the erosion of trust begin?  Hard to tell, but somewhere in between rampant product recalls, ready access to an Internet filled with both facts and fictional reviews and information, along the way, consumers decided to take greater control over their buying decisions.  Now consumers search and share on social media, often several times a day and even across numerous social media channels.

Visibility and transparency now help build consumer trust of retailers.  Consumers, especially younger buyers, want to support brands that are demonstrating positive virtues and adherence to the values they personally espouse including ensuring fair labor practices, sustainable resourcing and respect for a diversity of cultures.  Trying to win back the trust of disillusioned consumers, brands are going to new lengths to demonstrate brand value and report on social and environmental impact.  One only needs to look at social media for confirmation.  The glass box paradigm has also resulted in a shift to brands’ creating cultures that dovetail with consumer perspectives, including world views and cultural perspectives.

 

Expediting E-Commerce Shipments to Consumers

In 2019, most major brands have an online presence and usually compete with one another on pricing.  What differentiates these brands in the minds of consumers?  Often it is shipping.  Consumers have continually reported greater impatience over the time it takes to receive the goods that they order. Consumers have accepted the two-day shipping standard established by Amazon Prime and use it as the yardstick against which all other brands are measured.  Cutting shipping time is crucial for online businesses, as is the ability to keep costs down.

Supply chain technology industry disruptors such as ShipBob are now forging new paths into the online retail wilderness, desiring to capture consumer interest.  New business startups are empowering entrepreneurs to service consumers in the manner in which they want to be treated.

The Birth of Retail-as-a-Service

 

As part of the experiential trend, consumers want retailers to personalize their service.  According to research conducted by Accenture and the Retail Industry Leaders Association (R) Tech Center in 2018, shopping has become embedded into everyday life in simple, yet sometimes surprising ways.    Savvy retailers collect, analyze and consolidate data from an array of consumer channels in order to develop a 360-degree perspective of consumers. This helps them to better understand the motivation and preferences driving purchases so that they can design the needed touchpoints to connect buyers to the omnichannel retail journey.  From cashier-less shopping using RFID tags to in-store check out using mobile devices or kiosks, omnichannel retailers are working hard to reduce friction and provide consumers with a more enjoyable customer experience.

 

The next phase of omnichannel retail, sometimes referred to as omnichannel 2.0 seeks to streamline technology a bit further to improve customer service, personalize the shopping experience and create a more unified enterprise rather than simply uniting legacy systems.

 

Experiential Retail Woos Consumers to Brick and Mortar Stores

 

With the mad rush of millennials joining the throes of consumers, a shift has started.  Using immersive technologies including virtual reality (VR), augmented reality (AR) and mixed reality (MR), consumers can be shown digital representations of how products would look in the home or on a person.  These technologies can also be used to provide support for employee training and to increase the efficiency of warehouse operations.

 

In industry surveys, consumers have demonstrated a desire for retailers to provide experts who can act as trusted advisors.  From design ideas to advice on makeup and skincare, consumers crave meaningful, genuine interactions with experts and personalized advice.  Whether on mobile devices or social media, in retail stores and through other channels, consumers are hungry for interaction.  This requires technologies to connect the various touchpoints so that the consumer remains connected to the retailer throughout the entire sales journey.

 

According to a 2018 report by Accenture and RILA’s (R) Tech Center for Innovation, 63 percent of the consumers surveyed reported an interest in personalized recommendations.  The majority of these consumers indicated a willingness to share their data in order to obtain coupons, loyalty points, access to exclusive deals and other benefits.

 

Successful Experiential Retail Brands

 

Re-imagining an engaging retail experience, these two popular brands incorporated technology yet removed the focus on making in-store purchases.  Using innovations including smart IoT devices and Bluetooth enables these brands to add an entirely new “look and feel” to the traditional retail model.

 

In January 2019, Microsoft and Kroger announced a new partnership to market a commercial retail-as-a-service (RaaS) product for the retail industry.  As the largest supermarket company in the United States with 2,800 stores, Kroger has amassed insight-rich data that can be monetized to innovate and enhance technologies for retailers.

The new RaaS will use Microsoft’s Azure cloud platform to provide an array of front and back-end functionality for retailers, including a smart technology system using IoT sensors.  The RaaS product will provide pilot stores with access to cloud applications including solutions that include or aid with:

  • KPIs
  • Merchandising plans
  • Consumer data insight gathering
  • Reducing inventory out-of-stocks
  • Workforce productivity enhancement
  • EDGE shelf for personalization to consumers
  • Pick-to-light for store use in filling curbside pickup orders
  • Personalized ads and guided shopping

On the flipside, companies such as RaaS Leap are transforming retail for the next generation of leading direct to consumer brands by providing a full-service platform that covers the life cycle of a brand’s brick and mortar launch.  Leap owns the lease and associated financial commitments and covers staffing experiential store design, technology integrations and daily operations.  This helps online brands to move into physical stores with less risk and provides new ways to enhance consumer engagement with the brand.

 

Sephora 

 

Sephora has successfully melded the brick and mortar retail shopping experience with the digital world in its 400 U.S. retail stores.  By adopting cutting edge technology for use in the real world shopping experience and marrying it to e-commerce and digital advertising, Sephora has found the optimal formula to engage consumers and convert them to both brand enthusiasts and buyers.  This new immersive experience relies on the transformation of Sephora into a modern tech company.

 In-store software Color IQ scans consumers’ skin to determine the optimal shades of foundation, concealer, powder and lipstick.  “Virtual Artist”, an artificial intelligence tool within the Sephora mobile app uses facial recognition capabilities to virtually try on makeup products.  The “Beauty Insider Community” facilitates the sharing of consumer reviews, images and conversations about beauty products within the community setting.

Sephora has carefully designed the retail experience to be controlled within its own applications and sites.  This provides a wealth of data as well as the ability to control products that are recommended.  In harnessing technology, Sephora acknowledges that their consumers value and use both brick-and-mortar retail as well as e-commerce in a seamless, harmonious way.  With the success of this hybrid experience, Sephora has worked to refine the concept, trimming back the size of retail stores and on site inventory but balancing this with an increase in technology.  Sephora employees use smartphones to find and ship additional products online using the company website.  Some locations do not even use have cash registers on site but rather utilize cell phones for check out.

Instead of relying on a typical holiday print catalog sent directly to a million loyalty program members, Sephora came up with an innovative idea.  The new concept leveraged Facebook Collection advertising and videos positioned above a product carousel for easy scrolling.  The digital catalog reportedly reached 20 times more people than the print version.

Samsung

Developed to rival mobile device competitor Apple, Samsung launched an experiential retail store in New York in February 2019.  The effort builds on a foundation of Samsung’s creation of experiential “store within a store” retail concepts, including one at Macy’s Herald Square.

The unique digital playground includes a myriad of touchpoints for consumer engagement, including a ride in a 4-D virtual reality roller coaster using Samsung Oculus.  Also included is an integrated Samsung ecosystem, developed to simplify every day life.  A next innovation television wall features “The Frame”, a device that seamlessly transforms into a gallery-type art display from a 4K UHD TV.

Consumers can test and purchase the latest Samsung technology including wearables, SmartThings hubs, outlets and sensors and much more.  Samsung currently has three experiential retail stores located in malls in Glendale, CA, Long Island, NY and Houston TX.

In 2016, the company opened Samsung 837, a brick-and-mortar retail store “where technology and culture collide”.  Samsung 837 is a showcase of innovative new ideas, experiences and technology designed to showcase art, fashion, technology and sport.  The space includes a DJ booth and recording studio, light and sound wall, amphitheater area, café, and experience zone.  Samsung 837 energizes consumers with concerts, real time encounters with a 3-story main stage screen on which art, live streams and product demos jump to life.

How 3PLs Support Omnichannel Retailers

Many retailers have enlisted the aid of third party logistics providers for their warehousing, transportation and logistics industry expertise as well as for access to the technology they use.  Concerned about ensuring a superior customer experience, retailers are often concerned about being able to provide real time, accurate information on inventory.  Outdated inventory information can lead to both the over or under-purchasing of stock as well as to consumer dissatisfaction.  If you have ever shopped online with the intention of purchasing an item in the store only to find that the inventory information was inaccurate, you know how aggravating it can be!  Inventory issues can damage a brand’s reputation.  Inaccurate reports and lack or real time information visibility can reduce a consumer’s trust in a brand and diminish ongoing loyalty.

3PLs typically use an array of technologies including warehouse management systems with mobile devices to capture and use inventory and operations data across channels, the warehouse enterprise and the supply chain.  Outsourcing to a 3PL means that your retail business and your shoppers can have real time, accurate inventory data at their fingertips, essential to making purchases and scheduling deliveries.  In today’s “want it now” culture, having real time accurate data visibility can mean the difference between building a brand or successful omnichannel retail operation and failure.

3PLs have established relationships with shipping carriers, are able to rate shop and leverage economies of scale to help ensure cost effective order fulfillment.  Selecting a 3PL that uses technology to facilitate order and shipment transparency is also useful in crafting a superior customer experience for retail consumers.  Today, shoppers want to be able to view, change and submit orders online and get automated updates about order processing, shipments and deliveries.  This is one of the key issues to consumers, one that helps to build a solid bond of trust and brand loyalty.

Technology used by third party logistics providers can also provide vital insights that help retailers make better informed decisions in a timely manner.  This can help brands and retailers be well-positioned to adapt to trends, gain perspective on buying habits and effectiveness of sales promotions and provide general insight on consumers.  Outsourcing to a 3PL can help you be able to scale your business up or down as needed without significant capital investment or the ongoing responsibility of managing a workforce or day-to-day operations. As 3PLs have multiple clients, they can leverage economies of scale for labor, transportation and logistics and other needs critical to the success of your business. With the hectic need for more fulfillment centers nationwide, omnichannel retailers that outsource to logistics providers alleviate the stress and cost of investing in real estate for new warehouses. 

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Conclusion

What started out in brick and mortar retail stores now involves Google shopping, online shopping carts and sophisticated mobile marketing strategies.  Retail sales and customer success now depend upon a superior customer experience.  Retail business models have exceeded merely selling online and offering loyalty programs and support for the mobile wallet.  The customer journey must be connected through digital channels and the physical retail sales channel to create a seamless brand experience for the consumer.

Today online retailers are expanding offline, opening brick and mortar retail stores, often with the help of Retail-as-a-Service experts.  Creating and maintaining an amazing shopping experience requires investments of imagination, technology and personalized attention but pays off in loyal customers.

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