Comment: Moving toward omni-channel in the fashion industry
By Bob McKee | 6 August 2012
Bob McKee, fashion industry strategy director at Infor.
Fashion brands and retailers need to start now if they are to integrate and evolve their online, mobile and multi-channel activities into a coherent "omni-channel" strategy, advises Bob McKee, fashion industry strategy director at Infor.
The rapid evolution of multi-channel challenges
Armed with a smartphone, iPad or even just a mobile phone, consumers can now cross channels with ease. For example, 70% of shoppers now check websites actually in the store. They can look up a friend's Facebook page, product reviews or a fashion blog to find out more about what they are looking at, or looking for. This can drastically change buying behaviour.
Some consumers now browse and buy online, picking up the item at a shop, while others use traditional shopping (albeit augmented with a smartphone and QR scanning codes) to browse and identify what they like, then access apps to compare prices and find the cheapest local stockist.
Alternatively they may simply head home and use a PC to visit more price comparison sites and order based on price.
The pay-off for adapting to this new environment is not just survival, it is healthy growth. Because while it is undoubtedly more challenging to fish in these cross-channel waters, in Europe, for example, a multichannel shopper is - on average - likely to spend 15-30% more than someone who only uses just one channel.
Integrating e-commerce and ERP to evolve
But the issues of multi-channel are not confined to the front end of the experience. An equally pressing concern is that fashion businesses need to develop digital commerce that can not only deliver a great customer experience, regardless of platform, but also link to back-end systems.
One of the truisms of the fashion industry is that businesses cannot sell what they cannot get, so the e-commerce system has to have accurate, up-to-date product choice, availability and pricing information. That brings it into the realms of ERP.
By integrating the e-commerce system that takes an order with the ERP solution that satisfies it, fashion businesses can solve one of the biggest issues to threaten profitability: the inability to deliver on an order.
Accurate information on the inventory available - specifically quantity and location - is the critical building block of the "capability to promise" an accurate delivery date. At a more sophisticated level, this needs to include the time needed for transit and a range of other factors.
However, none of these factors can be experimented with in the real world, so the capability to accurately model and simulate a supply chain, and then apply the lessons to its "real world" equivalent is critical. Again, in order to do this, businesses systems must use the data and workflows of an ERP solution that governs the manufacture and movement of goods and resources, and feed it into the e-commerce system.
This integration also provides visibility over an entire supply chain inventory, which can help reduce total inventory levels, minimise stock-out situations and shorten delivery lead times.
One of the lessons of the European market is that if an e-commerce application is integrated with inventory applications or ERP, it is much easier to create, maintain and exploit profitable links with customers.
The end game here would be a process with so few steps that products are sent directly from manufacturing to customer, with no one in the chain any the wiser.
But such integration systems must still be agile. Fashion retailers and brands need a flexible framework and product catalogue that can be easily customised to change with collections and seasons.
Why? To reflect the second truism of fashion: that fashion businesses cannot sell what people don't want. The number one source of profit dilution in the fashion industry is unwanted inventory and the largest source of that, is unplanned markdowns.
It is a basic but often overlooked point that every markdown to make a sale is less profit. In a retail consumer environment this is a matter of a few less profitable sales (though those losses per sale soon add up). In a B2B context, this can mean thousands of pounds difference, with profound impact upon cash flow.
Another key consideration is the cash drain on a business from customer returns. Around 30% of all online fashion sales are simply returned by a customer, so ensuring the exact right product is shipped in the first place will help to minimise this cost, especially as returns often have to be free to the consumer.
So if an e-commerce system can relay WHAT a customer is more likely to buy (in terms of preferences of size, fabric, colour, quantity etc) and also HOW they are more likely to buy (via which channel) then a fashion brand, manufacturer or retailer is in a stronger position. They can exploit not only the burgeoning opportunities of the mobile internet and apps, but also avenues such as interactive television. Multi-channel becomes omni-channel.
Omni-channel retail: opportunity throughout the supply chain
There is however, one further evolution. If this customer information is available at any point throughout the entire supply chain - made possible by integrated systems spanning retailers, distributors and manufacturers - then an accurate capability to promise can be made more easily.
Essentially, it's possible to capitalise on what that customer wants at the point where and when they want it the most.
What lies ahead is an "always on" world with a universal remote control device for commerce - probably a smartphone - in the hands of half the world's population. There's a world of opportunity; there's a world of threat. And it will be the most agile, integrated fashion businesses that seize the opportunity.
Other channels are rising quickly. In an interview at CES, Steve Koenig of the Consumer Electronics Association said that by 2013, 55% of shipped televisions will be Internet-ready (by contrast, as of April 2010, this figure was only 18%), so it is pretty clear interactive TV will need some consideration.
As a result it is time to get strategic about cross-channel targeting and marketing. The diligent use of analytics to mine business intelligence and truly understand customers and segments will be critical.
Omni-channel retail offers this incredible detail and the agility to capitalise on the possible transactions.
Whilst mobile will likely be the dominant technology platform for this "ownership", fashion brands and retailers need to start now by looking at evolving their online, mobile and multi-channel activities into a coherent "omni-channel" strategy.
View next/previous articles
Currently reading -
Comment: Moving toward omni-channel in the fashion industry