THE CHANGING LANDSCAPE OF RETAIL

As in the rest of the word, the landscape of Retail in Mexico is in a state of change. Thanks to the incessant progress of interconnectivity and access to consumer information, as well as the growing expectation of having a more customized purchasing experience no matter the means used, Mexican Retail companies today have to learn not only to sell in new ways, but also to operate in ways for which their Supply Chains were not designed.

There will even be those who believe that those Retail Chains that are not working on migrating towards an Omni-channel vision of their Customer Experience Management (CEM) are now too late as opposed to their competitors and light years away from creating an innovative experience in the purchase process.

But what exactly is an Omni-channel focus? Is it the same as an Omnichannel operation (many companies now handle both physical stores as well as platforms on their web pages such as Shopping Carts)? And what implications does it have as far as the configuration and operation of the Supply Chain? To answer these questions, let´s begin by clearly understanding what the term Omni-channel is about and how it is different from Multi-channel

MULTI-CHANNEL VS. OMNI-CHANNEL

The term Multi-channel refers to arriving to the market through multiple sales and distribution channels that operate independently, with no
interaction between them. For example, within a Chain we can find that on one hand clients are attended to at physical sales points; on the other hand, they can receive orders in a Call Center for articles included in a printed catalog. In this example, it is possible that not all articles available at sales points are included in the catalog, and at the same time, some promotions offered in the catalog may not be enabled for clients that visit the sales points.

Typically, in the best case scenario, Chains with a focus such as this evolved from a Uni-channel distribution model (supposing that the Chain was originally planned to attend only at physical Sales Points) to a configuration with dedicated capacities for the new channels – for example opting to purchase warehouses and distribution operations dedicated to the delivery of catalog orders from an independent inventory from that which is used to stock stores.

A Multi-channel operation model such as that described in the previous example is effective attending to the needs of the clients whenever the Value Offers for each channel and client type are independent and the expectations of the “less” attended channels do not begin to get complicated regarding the extent of the products portfolio and brands required, more diverse payment methods and even delivery options of the merchandise purchased (such as the “express” home delivery or in-store collection of a purchase made through another channel).

However, reality tells us that to the consumers, the distinctions between the new sales channels that enable Electronic Commerce have become increasingly blurred between: specialized internet pages, virtual stores (e.g. Amazon), the use of tablets or Smart-phones and even sales through Social Networking (“Social Commerce”); and it is precisely in this new complexity in which the Multi-channel Strategy for configuring and operating the Chains begins to fall short.

In contrast, the Omni-channel focus seeks to evolve the Multi-channel concept to reach a unique and consistent purchasing experience for the clients attended from the different channels, and better yet, no matter what channel is used. Ensuring the simplicity of the use, reliability of the process and a service that allows them to satisfy their client how and when they want. The clients must perceive an offer integrated and focused on the brands and not the channel.

To achieve it, it is necessary to first unify the information and messages at each “touch-point” with the client to transcend the individual activity per channel, and for the purchasing experience of these new channels to generate incremental sales rather than cannibalize current sales. An in a second step, internally exploit that information gathered ensuring that it reaches the different actors of the Supply Chain Involved in timely and effectively delivering those orders.

For the clients, real time visibility of in-stock items at any point of the Chain, as well as the committed delivery times are the minimum required to give them enough confidence to make their purchase. For the Chains, this confidence will translate into an enormous benefit – the real-world results of the Omni-channel focus have already shown increases in total sales and “full price” sales (ensuring the availability of the inventories at the moment and place required), as well as improvements in client retention rates.

A SUBSTANTIAL CHANGE IN THE SUPPLY CHAIN: EVERYTHING WITHIN THE CLIENT´S REACH.

To be able to capitalize on these benefits towards the market, it is necessary to reconsider the Strategy behind the configuration and operation of the Supply Chain to create new capacities of how to process client´s orders, better identify the manner of delivering the merchandise (considering the committed delivery time and seeking to optimize the total cost of distributing the order), perfectly make the delivery and, if necessary, process returns through all channels within the client´s reach. This without a doubt implies deep redesigning of Processes, Enablers and Organizational Capacities, and it must be based on future requirements of the Market to define how to reconfigure the Supply Chain. First, a new Supply Strategy must be agreed on which enables the Value Offer for the new Channels and which is aligned with the long term Business Drivers as far as what international competencies will be internally developed and what things will be outsourced.

Subsequently, it must be clearly understood how the current process will be affected and what new processes must be implemented to support the gathering of information, decision making, the mobilization of the merchandise throughout the entire Chain and the real time visibility and management of the operation that will be necessary for the new vision of the Omni-channel chain. Once the To-Be operation is mapped, select the technological tools that best support the required functionalities.

Regarding decisions of both configuration and Distribution Network capacities (to be made depending on the operational model to be implemented) as well as the technology processes and tools to be implemented, a very important point is to consider not only the future growth of the categories and sales volumes, but also the tendencies that are on the horizon for already identified Channels, increasingly seeking the sophistication of the Value Offers and Customized Marketing.