Khaos Control Immediacy & visibility soundbites
Soundbite 1: Be Better than Amazon
Amazon has set the standard – from up to date stock to good packaging, on time delivery and efficient returns processes, customers expect every retailer to be as good as Amazon. But, argues, Andy Richley, Marketing Manager, Khaos Control Solutions, smaller eCommerce companies have the chance to look beyond the ‘like Amazon’ model and offer something different, something special to gain customer loyalty.
Whether selling direct or through a marketplace, every retailer is subject to the same level of customer expectation. Amazon sets the standard – from turnaround times to packaging, money back guarantees and effective returns, customers know what they are getting. Add in options such as Prime with goods fulfilled on the same day as ordered and, irrespective of size, product or location, customers demand an Amazon like experience.
But for smaller retailers trying to carve out a niche why aim so low? There is a chance to do more; to go beyond the efficient and faceless to provide customers with something far more personal, far more memorable. Those companies that have opted to retain their own fulfilment, rather than become part of the Fulfilled by Amazon model, can be more innovative, more personal.
Simple steps such as a hand-written note thanking the customer for shopping, a picture of the team, even a small gift, are becoming more common amongst smaller retailers looking to build a deeper customer connection. Additional options are creating hand-made, sustainable packaging – something that will play well to those concerned about the well-publicised inefficiency of big eCommerce players’ packaging. Or promoting the use of specific courier companies due to their ethical values.
There are also chances to focus on the local customer base – what about offering personalised click and collect in store or using services such as Deliveroo to offer same day local delivery? Emphasising the local nature of the business can also reinforce that customer connection.
Automated Retail Model
Underpinning all of this, of course, must be incredibly efficient processes. Adding the personal touch will be of little value if the company cannot deliver on its same or next day promise; if the wrong item is shipped; or the product that appeared to be available on the website was actually out of stock because inventory information hadn’t been updated.
An ERP system delivering end to end automation is key to achieving the slick processes that can support a ‘Better than Amazon’ model. With a single source of all stock, order and finance information across the business, including direct integration to the major eCommerce platforms, pricing and inventory is always up to date and consistent and orders are automatically registered within the system. And with picking lists automatically created based on the business’ priorities, the retailer can confidently offer same day local delivery, for example.
With complete visibility of the process a retailer can measure and track both the cost of these personal touches and the impact on customers – from retention to order value. Understanding the way customers respond to a hand-written note or a recipe card, for example, or assessing the amount they are prepared to pay for a local service can help to refine the strategy and support the continual evolution of a more personal retail model.
Amazon is not the standard to aim for; it is a baseline. And the effective retailers of the future will be those willing and able to move beyond efficient processes with a personal touch that customers will love.
Soundbite 2: Rate of Return
The retail returns policy has become an increasingly divisive issue. Whilst the online only fashion retailers seem prepared to offer free returns as a loss leader, a way to get customers to buy more and stay loyal, this is a model that is simply unaffordable for smaller organisations. But what do customers expect? Andy Richley, Marketing Manager, Khaos Control Solutions, considers the future of online returns.
Are returns policies destroying online retail? Certainly, the sheer cost of managing returns can devastate profitability – even if a retailer is making a token charge. The issue is not just the – often significant – cost associated with processing the returned item and getting it back into the supply chain to resell. Organisations also have to factor in the cost of the lost sale and the cost to the business of not following the top eCommerce names, of not being able to meet the expectations of the ‘it’s all free’ indoctrinated customer base.
But let’s get some perspective here: many of the fashion retailers, especially at the low cost end of the market, are running on such tiny margins that they don’t even attempt to repatriate returns in to the supply chain – it is too expensive, too complicated. Instead, these items are bundled up, palletised and either sold at auction or given to charity. Even putting aside for one minute the ethical questions raised by a business model based on the design, manufacture and global transport of goods that are effectively thrown away by the retailer – few smaller eCommerce sites can afford to follow that approach.
And nor should they – that is a fast track to business failure.
Counting the Cost
Offering a comprehensive returns policy is clearly a requirement for any online retailer – indeed, the latest generation to enter the consumer base, Generation Z, now actively seeks out a site’s terms and conditions before even considering making a purchase. The key, therefore, is to ensure returns processes are as efficient and effective as possible.
Of course, the margin on any product needs to be high enough to make any additional processing worthwhile - but there are few smaller eCommerce vendors going head to head with the big names in low cost fashion. A healthy margin is key to business growth, and most smaller retailers have carved out a niche; the quality of the returns process, therefore, should be part of an overall quality of service and delivery model that increases customer loyalty.
A high quality returns process cannot be delivered at the expense of profitability, of course, and to determine what is achievable a business must have complete visibility of the cost model. Therefore, the retailer needs a fast, efficient way to assess the returned item and determine the next step. Can it can be resold as new? Sold as a second? Or sent off to eBay? Using a robust ERP solution that delivers end to end visibility, organisations can to make those decisions, quickly.
In addition, fast growing businesses will often want to vary returns models for different brands or product types. A highly competitive product might require a free return, using the standard freepost label; the policy for a more expensive item might demand the customer contacts the business to arrange pick up. With the ability to support multiple returns model within one business, a retailer can both understand the cost of different returns models and confidently respond to customer expectation.
Clearly, customers will continue to expect the right to return – and many will expect to do this for free or a minimal fee. But the returns policy is just part of an overall retail offer - by combining good processes, good product and a great customer experience, a retailer will be best placed to determine and deliver the right returns model for the business.
Soundbite 3: Making the Leap – Achieving Retail at Scale
Has it ever been easier to set up a new retail business? From eBay to Amazon and NotOnTheHighstreet, the marketplace model has transformed the cost of entry and provides new retailers with immediate access to global market. But as sales pick up, the scalability of the new business model comes under huge pressure. From out of date online stock information leading to customer disappointment to inevitable errors resulting in a spike in returns and the sheer inability to process orders fast enough to meet delivery expectations, Andy Richley, Marketing Manager, Khaos Control Solutions, explores the challenges of retail growth.
Taking an innovative idea to market has never been simpler. But success can be a retailer’s Achilles heel – especially in a market increasingly expecting a raft of delivery and returns options. What happens when orders grow faster than expected? When the business cannot hit Amazon’s delivery and returns deadlines? The speed with which a successful online business starts to spiral out of control can be devastating.
The problem is scale, especially for companies that have managed the initial phase of business growth with manual processes. Simply adding more people to cope with increased demand just doesn’t work – and that can be a shock.
Adding staff to process orders, for example, is not only expensive but also inherently inefficient and risks inevitable error and delay. Late shipping or sending the wrong product is not only going to destroy the customer relationship but also add significant cost and time to the business in processing returns. Furthermore, at a time when the new normal for ecommerce is next day delivery – and growing numbers offering same day – how many bodies will the business need to add to keep up with that kind of pressure? The cost is untenable; the model unsustainable.
For every business there comes a tipping point. Whether is it the runaway success of a new product line or the big holiday system sales peak, at some point a successful online retailer will realise that the manual model simply does not scale. The pain of discovering at some point in January that the 18-hour days and manic stress of the peak holiday trading season resulted in minimal profit due to additional staffing costs, inefficient picking, packing and distribution models and a spike in customer returns is enough to make anyone weep.
And yet this is an inherently scalable business model – with the right approach. Automating order entry and customer communication, for example, transforms every aspect of the process. Rather than a team of people manually transferring customer orders into the system, with direct integration between one or more marketplaces and an ERP system, orders are automatically processed and customers emailed.
Critically, by automatically processing orders into the ERP systems, customers are ordering products based on accurate stock information. There is no need for painful customer phone calls or emails to apologise for the fact that the product ordered will be out of stock for a week – or longer; or being forced to offer a more expensive alternative at a discounted price in a bid to retain that customer.
In addition to eradicating errors – which will reduce returns – this integration delivers the essential visibility required to improve warehouse operations, enabling companies to offer the increasingly essential next or same day delivery options.
Indeed, the pick lists can be based on a number of factors. Whether a retailer wants to offer a Prime-style delivery service or simply pick efficiently based on different courier collection times, the entire warehouse operation can be defined to meet specific business objectives.
The low start-up costs make online retail incredibly compelling to an entrepreneur; but it is those that embrace automation sooner rather than later that can make the leap and achieve a truly scalable and profitable long term business model.
by Khaos Control