The customer who connects today to the website of a major sports brand can immediately view all the available offer for delivery to their home or to the collection point of their choice, and the stock in each of the stores on the territory. In a few clicks, he can choose the product that suits him, reserve it or have it delivered and pay for the purchase. A few hours later, he will take possession of it without difficulty. How did we get here and what are the key points of the organization that supports this flawless service?
Omnichannel commerce, what are the challenges for the Supply Chain? Below is an article published in the Revue des Centraliens at the beginning of January 2023.
TRADE IS HISTORICALLY LOCALIZED AND SINGLE-CHANNEL
Historically, trade is a localized activity. Each consumer has access to a limited number of stores, close to their home or place of work. And the available offer is structured by the shops he frequents, whether they are independent or integrated into a structured chain. This offer is wide in the centers of the big cities. On the other hand, it is reduced in the suburbs or in medium-sized towns. Similarly, it is limited to daily needs in small towns and villages.
At the end of the 20th century, the chains were mainly structured around a network of warehouses, sometimes a single national warehouse. And they deliver to all of the brand’s points of sale at a defined frequency. As for distance selling, it is until the beginning of the 21st century a separate channel. And it is mainly present in the personal equipment segment.
THE INTERNET EXPLODES THE CAPACITY TO SHARING INFORMATION IN REAL TIME
The Internet is essentially revolutionizing access to information and its sharing. Thanks to the Internet, in particular with the deployment of broadband in the early 2000s, distance selling players are replacing their historical paper catalog with the online presentation of their offer. All the brands are undertaking their transformation to in turn offer their offer online and deliver home purchases made remotely. They often start by dedicating a limited stock in a warehouse to this new activity. Traditional commerce – unity of place, time and action of the act of purchase – is giving way to digitized commerce. And the act of buying – choosing, taking, paying – is dissociated in time and space.
OMNICHANNEL IS ABOVE ALL ACCESS TO THE WIDEST OFFER AND STOCK
The development of complete and sophisticated information systems gives each merchant an accurate and real-time view of the stock available in all of their warehouses. And increasingly also in its network of stores. He can thus offer his customers the widest offer and minimize the risk of unavailability of a reference. The ordered product can be shipped from a warehouse or a store to the home, the place of work or a collection point (partner trade, deposit), at the customer’s choice. However, this retail omnichannel materializes differently depending on the size and value density of the product ordered. The cost of the service must however remain bearable for the brand if it wants to ensure the sustainability of its economic model.
PERSONAL EQUIPMENT, THE MOST OMNICHANNEL BUSINESS
Clothing products, portable electronic equipment, cultural products and luxury accessories overwhelmingly combine two characteristics that make them easy to ship and deliver. First, they have a modest size, often less than 30 x 20 x 20 cm and 5 kg. Secondly, they have a high value density, almost always above €3/l or €20/kg, even for products with a low face value. Packaging and delivery remain inexpensive as a percentage of product value. These products make up the bulk of online purchases. The challenge of the service is then to promote impulse buying without constraint.
EVERYDAY FOOD, LARGE QUANTITIES AND LOW VALUES
Unlike the previous example, the implementation of omnichannel commerce for food is limited by purchasing characteristics. A food shopping order for a family, as soon as you get out of repairs, has a density of less than 3 €/kg and a mass of more than 20 kg. Home delivery therefore becomes very expensive (dedicated vehicle, appointment booking) and the locker is ineffective. Most of the turnover achieved in France goes through the drive formula. The consumer withdraws his order directly from a point of withdrawal of the sign upstream from which the delivery has been consolidated. The challenge is then to build customer loyalty through a good quality-price ratio and impeccable service (no breakage, appropriate withdrawal window).
DIY, ASSEMBLED FURNITURE, HOUSEHOLD APPLIANCES AND AUTO PARTS, LE GRAND ÉCART
Here, there is no single rule and a wide variety of options. Omnichannel is only possible for the part of the offer with a sufficiently high value density and a modest size. As for the most heterogeneous products – building materials, large household appliances, large furniture – home delivery is part of the economic model. The customer is most often unable to transport it. The challenge in this case is simply to make the sale possible. These products were already delivered to homes long before the appearance of the Internet.
EACH BRAND ADAPTS ITS MODEL
The panorama of French commerce shows almost as many models as brands. Integrated brands (the points of sale are the property of the central company) can often better optimize the service offered. But the groups of independents can have the commercial reflex and offer services more suited to their local customers.
The variety of products and services on offer is what makes the trade rich!
Léandre BOULEZ
Partner at DIAGMA
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