Why retail logistics should start with customer experience

How do you maintain a personal touch when you cannot meet your customers anymore? For Harry Rosen, the leading Canadian high-end men’s clothing speciality retailer, personalised service has always been a central tenet of its business model, designed to cultivate long- term relationships. The company has been using a loyalty programme underpinned by artificial intelligence (AI) to predict what products and styles may resonate with clients, but its biggest source of insights has been its team of more than 1,000 clothing advisers who look after the clientele.

The pandemic forced the temporary closure of the firm’s stores and precipitated a dramatic shift to online business. “Covid-19 has truly been a black swan event. Our website exploded with traffic. Some weeks we were 800-900% over last year,” says Ian Rosen, vice-president of digital and strategy at Harry Rosen.

On demand

Prior to the outbreak, for many retailers the online sales channel was a small piece of their overall business, notes Jason Goldberg, chief strategy officer at Publicis Communications and chair of the board of directors of shop.org, a division of the National Retail Federation. Now, digital has moved to the centre of the retail experience in many cases.

More than half of Walmart’s top-spending familiars are Amazon Prime members, and its recent innovations are testament to this shift to digital. Walmart is in the process of redesigning its stores to look like its app in an attempt to meet customer demand for a seamless offline-to-online experience.

The company believes that this will help shoppers navigate the aisles and purchase on the go via the app. That is, if they visit the store at all. Even when not shopping online, consumers often use websites to check for product availability and opening hours, Mr Goldberg remarks.

When Walmart launched the app for hands-free shopping, it also unveiled a subscription that offers unlimited free delivery, some of it same-day. “If you’re a retailer, the digital experience is your front door,” Mr Goldberg observes.

The second critical element of the customer experience is the delivery of the products. Part of the challenge is making it look easy to customers. In fact, industry heavyweight Amazon tasked its vice-president of global customer fulfilment Alicia Boler Davis to also oversee customer service.

E-commerce boosted its share of overall retail sales from 16% to 31%, according to Mr Goldberg. The covid-19 crisis has accelerated trends. The race for ever shorter delivery times gave way to a differentiated approach as delivery companies struggled under a tsunami of parcels and supply chains suffered disruptions from plant closures to congested cargo gateways and transport capacity shortages.

As well as the delivery of goods to consumers, retailers also had to adjust the flow of inventory, notes Joyce Rong Yang, regional operational programme manager at Maersk. And according to Mr Rosen, “we need a central source of truth in inventory”. One important step for this has been the integration of Harry Rosen’s warehouse management system with its order management system. “When it comes to inventory visibility, you want everybody to be on the same page,” he explains.

End-to-end transformation is key; factory closures and transport bottlenecks required the use of alternative suppliers or routings, while delivery speed to consumers dictated the positioning of inventory in distribution centres or mini fulfilment hubs located closer to consumers.

These mini fulfilment hubs are an important piece of the puzzle to guarantee speedy delivery to consumers, says Mr Goldberg, adding that many retailers are using brick-and-mortar stores for order fulfilment. Harry Rosen uses its stores to that end, while more of the high-velocity products are funnelled through its central warehouse where it is easier to pick, pack and ship them.

Faced with a highly volatile situation, most retailers had to shorten forecasting windows and order cycles and migrate from a well-planned supply chain to a more flexible and resilient approach to meet customer expectations. “There are a lot of elements across the supply chain that we can work on,” says Ms Rong Yang. “It’s important that we have the right visibility.”

The acceleration of the shift to online shopping has been a catalyst for the faster adoption of digitisation in the retail industry. Inevitably, this extends into the logistics arena. Supply chain resilience geared to operate across multiple channels at all times can help create diversity in the customer experience, says Ms Rong Yang.

Digital problem-solving

Apart from a more agreeable shopping experience and a better handle on logistics, digitisation enables retailers to employ AI to discern market trends and changing customer preferences. According to Mr Goldberg, “looking at last year’s demand has become irrelevant. Retailers need real-time signals to predict demand and to make good recommendations for products”.

He adds that the use of AI for product recommendations and substitutions is still in its early days, but he expects this to develop rapidly. For some consumer staples such as dishwashing detergent or toilet paper this will move towards auto replenishment, where systems anticipate a customer’s need for replacement and automatically send fresh supplies, he adds.

For Mr Rosen, a horror scenario would be having to call a customer and tell them, “your package is sitting in a warehouse and we don’t know when we can get to it.” Ultimately, visibility—made possible by emerging technology—needs to extend along the supply chain, although few retailers can make that claim at this point, observes Mr Goldberg.

Retailers that have embarked on this journey have found the going tough initially, he says. When Target first started shipping goods from its stores there was considerable discrepancy between items on the shelves and their status in the inventory system, he recalls.

How can retailers identify the best solution for them? One avenue to achieve deeper visibility is through TradeLens, an open and neutral industry platform underpinned by blockchain technology that was developed by IBM in partnership with Maersk.

The velocity and complexity of a retailer’s supply chain dictates whether they require real-time visibility at SKU (stock-keeping unit) level or daily updates at container level, says Ms Rong Yang.

Leaders must understand this to determine the level of detail and the speed of updates needed. For now, real-time visibility is still seen largely as a nice-to-have feature, but since the emergence of covid-19 it has trended a bit differently, she notes.

Customers first

Although putting customers at the heart of business is an age-old adage, we are only just starting to scratch the surface of possibilities by putting them at the heart of the supply chain.

Retail businesses have the opportunity to optimise their operations and logistics by championing end-to-end visibility via emerging technology and measuring client expectations in real time. Staying one step ahead is about to get personal.

Looking at last year’s demand has become irrelevant. Retailers need real-time signals to predict demand and to make good recommendations for products.

Jason Goldberg
Chief strategy officer at Publicis Communications and chair of the board of directors of shop.org

Disclaimer:

Produced by (E) BrandConnect, a commercial division of The Economist Group, which operates separately from the editorial staffs of The Economist and The Economist Intelligence Unit. Neither (E) BrandConnect nor its affiliates accept any responsibility or liability for reliance by any party on this content.

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