Mastering Multichannel Retail

Multichannel retailing

Whether you’re a retailer, or a wholesaler taking advantage of dropshipping, consumers are choosing to shop from an ever increasing array of outlets.

While many still like to browse traditional brick and mortar shop spaces, others choose to shop online via a myriad of marketplaces including a company’s own website, Facebook, Pinterest, Etsy, eBay and Amazon to name but a few.

With increasing numbers of consumers making marketplaces like Amazon the starting point for their shopping journey, the increased exposure can be second to none. The same goes for similar marketplaces such as eBay.

But running a multichannel business requires managing a whole host of complex processes – from ordering and receiving to pricing and invoicing, and from selling and tracking to shipping and servicing – plus so much more.

When you move into new channels, you multiply all of those tasks by the number of channels you sell on, whether it’s two, three or ten. It’s no wonder multichannel selling can be so difficult, yet selling across multiple channels increases your opportunities as well. And there are ways to simplify and streamline.

In order to provide a convenient experience to your customers, each channel needs to be fully integrated and easy to manage. By using order management software to integrate orders from all your channels, you can make the whole process seamless – from gaining orders to maintaining inventory levels and pricing, as well as managing the financials.

If you sell on a variety of sales channels, you’ll want to be able to update your inventory levels in real time across the channels to prevent overselling. Equally, those inventory levels will only be updated if your orders download into a central hub so that they can be allocated and fulfilled. The orders should seamlessly link with your accounting system (in real time) so that profits and financials are up-to-the-minute and easy to see at a glance.

Achieving success using multiple channels can be daunting, so this article aims to help you win in the world of multichannel retail.

What’s in this article?

This article is designed to help you turn a busy retail operation into a successful, sustainable and profitable business. It’s packed with practical advice to help you survive and thrive in the increasingly complex multichannel retail environment.

This advice falls broadly into three categories:

• Tips to help you take control of your business

• Ideas for increasing operational efficiency

• Tricks to help you develop the insight you need to inform good decisions

We hope that this manual will help you escape the hamster wheel and rediscover the passion that drove you to set up your retail business in the first place.

Selling on multiple retail channels

• Give your customers more opportunities to buy your products

• Maximize your margins

• Gain competitive advantage through great service

1. Manage orders from multiple channels in a single place

Selling through more than one channel immediately creates complexity.

At very low volumes, you can pick up and process your orders on each individual platform using spreadsheets, but this becomes unmanageable very quickly as orders for the same products accumulate in different places.

The most valuable thing you can do to take control is to create a central location for all your orders and a unified workflow for managing them through to delivery.

• Integrate your sales channels to your order management system and automate order download.

• Set up a simple workflow for all orders which reflects your business practice.

• Ensure everyone involved understands and follows the workflow and that orders are clearly flagged with where they are in the process, e.g. quote, new order, paid, inventory allocated, picked, packed and shipped.

• Allow everyone who needs it access to this order data but maintain control by restricting who can make particular changes.

• Flag exceptions and focus your valuable management time on these.

With a system that interlinks our website, eBay, Amazon, warehousing and accounts… there’s no double selling, our inventory levels are always up-to-date, we even have the time to speak to our customers just to see how they are doing.

Lee Adams, Spy Camera CCTV

2. Keep your inventory levels synchronized

Taking an order for an item you no longer have in stock is expensive, both in terms of the missed opportunity and the time and effort it takes to communicate with the customer and avoid ill will.

Equally, it’s expensive to be carrying inventory that’s not offered for sale across all channels.

• Automate the updating of product availability so any change in the current inventory level is immediately reflected across all channels.

• Ensure any bundle products reflect the inventory level of the scarcest component part.

• Allocate inventory to orders as they come in and ensure that the allocation triggers an update to all channels.

• Ensure newly delivered inventory immediately triggers updates to the channels to maximize the opportunity for sales.

Finding products out of stock is the number one issue that has caused our polled consumers to have a negative shopping experience…

RetailWeek

3. Avoid pre-allocation if you can

Double selling becomes a greater risk when you trade on more than one sales channel. How do you keep from selling a product on another channel while a sale is being processed?

There are two ways:

• Pre-allocation: With this approach, which is required by some systems, you reserve, or pre-allocate, a percentage of your inventory from each channel as a pad against double selling. The downside is that you remove unsold products from inventory so you can’t sell them.

• Quick synchronization: A better way is to choose a system that updates your inventory instantly after a sale to minimize the risk of double selling.

4. Optimize the channels that work for your business

Marketplaces are intensely competitive. Being there is not enough, your products need to be visible and attractive to buyers – and that takes work.

Online marketplaces like Amazon and eBay have invested massively in search technologies to promote the best rated products and suppliers.

You need to understand how these mechanisms work and optimize what you do.

• Avoid stock-outs – canceled orders kill your ranking.

• Offer the right delivery options, keep your promises and keep customers informed. Shipping is about managing expectations more than it’s about raw speed.

• Build seller ratings with speedy communications and great customer service.

• Ask for reviews from your customers to bolster future demand.

5. Don’t forget brick and mortar stores

Your customers don’t distinguish between your online operation and your physical stores and nor should you. Modern multichannel retailers are breaking down the barriers between online and offline journeys.

• Give store staff visibility of inventory across the enterprise and allow them to take orders for delivery.

• Allow your in store staff to see the purchase history for all customers – even those who purchased online.

• Offer Buy Online Pick Up In Store (BOPIS).

• Allow customers to return products purchased online, in store.

• Check what sort of goods the customer has returned in the past to better inform your staff in store. Has the customer already returned this product?

The most efficient way to reach more customers is with Brightpearl as it:

• Gives you a single view of all orders from multiple channels

• Enables you to view and manage all your data in real time

• Promotes a smooth-running, automated shipping process

When a business is spread across multiple channels, all its elements; orders, inventory, shipments, and more, still have to be managed centrally, either through huge manual efforts or integrated multichannel retail systems like Brightpearl.

Choosing a system saves you time and prevents errors, ultimately providing the control and confidence you need to thrive, no matter how many channels you sell on.

Using retail analytics to drive great service

• Maintain a trusted view of each customer’s activity

• Segment your existing customer base

• Target profitable prospects

1. Build a single view of the customer and log activity against each record

Customers engage through different channels at different times. The more you understand past behavior, the better your chance of delivering great service and building a profitable future.

• Log every interaction you have with a customer, be it a marketing campaign, a telephone conversation, an order placed or a product returned.

• Help your team deliver great service by ensuring anyone dealing with the customer can see the full history of your relationship with them.

• If you incentivize your team to upsell, they will look for opportunities to do so.

• Build a process to alert you when you need to make contact. If you call an interested customer the moment a new product arrives, they are much more likely to make a purchase.

2. Segment and analyze your customer base

Customer relationships very often develop along predictable lines, even if the actual stories are very specific to the business you’re in.

A jeweler, for instance, who sells an engagement ring can reasonably expect that there will be a wedding ring or two to follow and, with a following wind, a protracted and highly predictable pattern of anniversaries to follow.

Understanding where customers are in their relationship with you will ensure you’re making the right overtures at the right time.

• Use the data you log to segment your customer base. Analyze order history and build segments around lifecycle categories.

• Analyze marketing responses. See which campaigns have appealed to which segments in the past and try to replicate best practice.

• Target offers appropriately to maximize returns. Offer discounts to the price sensitive and new products to those who have been attracted by similar things in the past.

• Don’t be afraid to exclude customers from marketing campaigns who have sky high return rates or who otherwise drain your resources.

3. Maximize the lifetime value of the customers you acquire

Understand the cost of acquiring a new customer and balance this against their lifetime value. Focus on building lifetime value and you will make your life incrementally easier.

After all, making repeat sales to existing customers drives profitability by building revenue without the associated cost of acquisition.

• Build a picture of the lifetime value of customers.

• Analyze what your most valuable customers have in common. Where were they acquired? What was their first purchase? How often do they shop with you?

• Target prospects with characteristics in common with your best existing customers.

• Nurture existing customers to build their lifetime value.

4. Pay attention to post-sale customer communication

Something that’s different on each channel is how shipment details are communicated to your customers. To keep your customer service quality up, make sure you know what to do on each one.

• eBay and Amazon: Since seller ratings and buyer service are monitored closely, you need to update their systems when an order is shipped so customers can be notified.

• Retail stores: Your stores, on the other hand, require little post-sale communication since the customer has already left with their products. (Hint: you can still send an offer later to encourage further sales).

• BigCommerce, Shopify and Magento: Some sales channels, like these three, email customers when a shipment is created. But, for those that don’t, you need to manage this communication yourself.

Discover how to automate your customer service (including your post-sale communications) now.

With over 2,000 customers it’s hard to keep track of them all, but Brightpearl stores all the customer data you need to know. I can see what my customers are buying and when, which makes it a lot easier to follow up with them

www.peachybelts.co.uk

Running an efficient operation

Whether in stores, at the distribution center, with the manufacturer or in returns, locating all the inventory means you are better able to source the order from the most convenient, cost-effective location for the customer.

Andrew Starkey, Head of e-logistics at IMRG

Get your products offered through the right channels, and get your messaging right, and the orders will start to roll in. This is a great moment but immediately it puts pressure on your back office processes.

The challenge is to cope with the increased volume whilst maintaining levels of customer service and profit margins.

In this section, you’ll learn how to:

• Maintain a centralized view of all your inventory

• Streamline your pick, pack, ship process

• Minimize mistakes through managing by exception

1. Make use of SKUs

Doing business across multiple sales channels can make product management difficult. For one thing, you’re likely to offer a different subset of your products on each channel. Plus, each channel runs its own software.

The only way to bridge these differences is with Stock Keeping Units (SKUs). They act as unique identifiers for the products you sell and give you a common way to refer to them, regardless of channel.

2. Maintain a centralized view of your inventory, what you have and where it is

When the orders start to roll in, you need to get the goods into the hands of your customers with the minimum fuss and effort.

You cannot possibly build an efficient process if you do not know what you are holding or where it is.

• Specify which orders are fulfilled from which warehouse to simplify your workflows and ensure you give great service to customers.

• Don’t forget your brick and mortar stores. Maximize your opportunity to sell by ensuring store staff have visibility of inventory in the warehouse and vice versa. Keep track of products on the shelf as well as in the warehouse.

• When you send inventory out for pop-up shop locations, make sure you move this inventory into a new virtual warehouse, so that you can track it in the same way as you would for all other locations.

“Having the multi-warehouse functionality has helped me immensely. Most of my inventory is managed externally but some will also sit with me, my freelancers or with the manufacturer. Being able to mark us as separate warehouse facilities means I can keep track of all of my inventory all of the time.”

www.evolvebeauty.co.uk

3. Look into the future

Most retail businesses over stock. Reducing the amount of product in your warehouse puts more cash in your bank account, but it increases the risk of stock-outs. The way to mitigate this risk is to know what is on its way and when.

• Use purchase orders. A purchase order process means more work upfront, but it’s the key to taking control of your supply chain.

• Establish a single trusted source of truth and keep it up-to-date. Spreadsheets are brilliant tools, but it’s all too easy to find yourself basing important decisions on out of date information.

• Maintain an up-to-date picture of inventory, sales and products on order, and use it to make intelligent decisions about what to order and when.

• Make sure new products are available for sale the moment they arrive (if not before). If it’s in your warehouse and not for sale, it’s costing you money.

4. Streamline your pick, pack, ship process

As your business grows, so does your payroll. Minimizing unnecessary labor costs can have a huge impact on the bottom line of a business.

A great place to look for these efficiencies is in the warehouse, where well thought out processes can maximize efficiency and minimize human error and shrinkage.

• Create warehouse locations and organize your warehouse for optimum picking efficiency.

• Use pick lists to pick multiple orders in batches, then pack them at a centralized packing station.

• Integrate your order management system with your chosen shippers and you will never have to re-key an address again. But remember, shipping is a highly competitive market; rates change and customer service levels vary between suppliers, so be careful not to get locked in.

• Don’t be afraid to outsource. Many merchants find it’s more cost effective to outsource some or all of their warehousing and e-commerce fulfillment to specialist third party logistics suppliers.

The most successful businesses use software like Brightpearl to manage their operations to:

• Drive cost efficient replenishment and administration

• Provide exceptional customer service with the right processes in place

• Easily scale operations and meet fluctuating operational requirements across multiple channels

Is your ability to analyze your business operations confounded by endless listings and reports?

Are you letting customers down or missing out on new markets because your operations are at full capacity?

Smart and savvy retailers are using tools and software to get their operations under control.

5. Stay on top of partial shipments

Different channels also treat partial shipments differently. Most e-commerce systems support the concept of shipments and multiple shipments for an order.

And most software pushes shipment information back into the sales channel.

eBay is the big exception. This channel marks orders as “shipped” only when all shipments are completed.

Make sure you know which channel does what.

6. Add a multichannel system

When you venture into new sales channels, your e-commerce and accounting software won’t be enough to handle the new workload.

Instead, you need to supplement that software with a multichannel retail management, or hub, system designed to handle the unique complexities of this business model.

• Support your e-commerce platform: When you pull sales from your e-commerce platform (and any others) into a hub system where back office processes like order processing, inventory management and customer service can be handled efficiently, you leave your e-commerce system to do what it does best – sales.

• Augment your accounting software: Hub systems provide more purchasing, order processing and inventory management power to handle the increased load. They also send consistent, branded invoices and communications, even if you use different trade names on each channel. And they support multiple levels of permissions so your whole team can work in the system.

Merchandising for multichannel retail

Good merchandising means emptying your shelves of slow moving inventory and re-investing the money that you release on products that sell fast and that are profitable. To do that, you’ll need to:

• Build a product hierarchy and use it to analyze your sales

• Set your pricing in the light of full landed costs

• Invest in inventory that moves

1. Understand your product hierarchy

You may know your individual products inside out, but to put together a great range, you need to know what categories, brands and styles sell well, so you can stock the products that your customers want.

Say you’re running a bike shop. Are you selling men’s bikes or women’s? Road bikes or mountain bikes? The right insight will allow you to spend your valuable cash on the right products.

• Build a product hierarchy and assign each and every product a place within it.

• Identify best sellers and worst sellers at each level – and don’t forget to factor returns into these calculations.

• Analyze your sales against this hierarchy and use these insights to drive merchandising decisions.

2. Customize your product content

Different sales channels may need different product information, so it’s best to manage products at the channel level.

eBay listings, for example, may contain much more information – even a storefront full – than Amazon listings.

And e-commerce stores need extra content that the other channels don’t need to help shoppers search for and compare products.

Although this channel-specific content can lead to inconsistent data, it’s generally worth it to have the information tailored to each channel’s format.

3. Focus your investment in products which sell through

If you ask an accountant to assess two merchant businesses, one key measure is the rate at which they turn their inventory.

Sure, there are huge variations depending on the goods you sell, but the fact remains that if you buy the right goods, you can sell them faster, and release the cash more quickly to buy more.

• Identify slow moving products and clear them out. Mark down the price if you have to, just do what you can to release the cash that’s tied up in these products and re-invest it in fast moving lines, categories and brands.

• Where customer expectations permit, fulfill orders on demand by placing back-to-back orders with your vendors.

• Take this a step further by having your vendors dropship orders directly to your customers.

4. Get your pricing right

Pricing is hard. Drop your prices and you sell more, but make less margin. Raise your prices and the opposite happens.

Furthermore, one of the benefits – and challenges – of selling on multiple channels is that you’re selling to different audiences. To do this well, your prices may need to be different from channel to channel.

eBay and Amazon shoppers are especially price sensitive, so pennies can make a difference. Others, such as your in store or wholesale customers, may be willing to pay more.

Striking the right balance is art as well as science. But one thing is for sure – without data, you’re in the dark. To optimize your prices you must know your margins.

• Track the total cost of getting products into the warehouse (the landed cost) to understand their true margins. You need to allocate all the costs of the inventory including: cost to ship, taxes, insurance, storage costs, etc.

• Attribute costs by channel to ensure each channel is running profitably.

• Know your marketplace. What do your competitors charge? Does it differ online, on marketplaces and in store?

• Understand the value proposition, what your customers are buying and what they are willing to pay.

• Track and analyze your markdown rate – are you giving too much money away?

• Consider tailoring your pricing to your audience in one of two ways:

  • Built-in price management: Some systems include automated price management, which is especially handy on channels with price-sensitive shoppers where adjustments are made more often.

  • Outside price management: If your system doesn’t include automated re-pricing, you can deactivate price management for that channel and delegate the responsibility to a separate price management system.

Building a wholesale business

The traditional separation between retail and wholesale is breaking down, with ambitious independent merchants increasingly combining the two. Success depends upon tracking and optimizing each according to its own criteria. Remember to:

• Look at wholesale on its own terms

• Manage your customer relationships

• Land and expand

1. Separate your data

Margins may be smaller on wholesale orders, but the lifetime value of a customer is typically much higher.

This is just one of many respects in which the metrics you use to manage a wholesale business differ from those that are appropriate to a retail business.

The fact is, to effectively track and optimize your wholesale business, you need to be able to look at it separately.

• Flag your wholesale customers and orders so that you can report against them.

• Assign costs to the relevant business stream, and don’t forget to include your internal costs: salaries, rent and the like.

• Build separate income statements for each business stream.

• Establish relevant performance indicators and analyze your wholesale business against them.

2. Know your customers

Great customer service is, if anything, even more important when you’re dealing with trade clients.

If your account managers are to maximize the lifetime value of each and every account, they need to know your customers, their needs, their history and their business cycles.

• Log every interaction with every customer and make it available across your team.

• Keep track of your customers’ business cycles, their goals and their buying windows.

• Understand your customer’s processes and make their lives easy wherever you can.

• Manage your customers’ expectations. They are themselves making commitments so will value clarity and predictability from their suppliers.

3. Cross-sell and upsell

Trade customers, like retail customers, will likely come to you initially for a particular product. The challenge as you develop the relationship is to encourage them to purchase across your range.

• Learn about their business. See what sells well and identify appropriate products to offer them.

• Don’t assume your retailers know your business. Show them what you’ve got.

• Learn from your customers and replicate best practice. Help your retailers to succeed by keeping them aware of which products are your best sellers.

• Measure your success. If you know what a profitable customer looks like then you’re in a much better place to replicate them.

Managing cash and profitability

No matter what else is going on, if you run out of cash, the music stops. To maximize your chances to make the most of any situation, you need to know, at any moment, how much money you have, what is due in and what you have committed to pay out. Always:

• Use purchase orders to understand future outgoings

• Assign costs by channel to protect margins

• Target your team on profitability

1. Use purchase orders

It may seem at first like a bureaucratic overhead, but the use of POs is one of the most important disciplines that you can introduce to a retail or wholesale business.

Purchase orders give you a view of what is on its way and when, which is invaluable data when evaluating how to spend your money. They are also a vital piece of the puzzle when evaluating supplier performance.

• Build purchase orders in your inventory system.

• Ensure inventory that is on PO is visible to operations.

• Book in inventory against each purchase order.

2. Use retail analytics to maximize channel profitability

It takes effort to optimize a sales channel, which is effort that could equally be expended elsewhere.

By associating the cost of doing business through a particular channel with the orders it generates, you can decide whether that commitment is justified.

• Account for goods movement on a first-in, first-out (FIFO) basis. That means your margin reporting remains true even as your vendors change their prices.

• Get a true picture of your cost of sales by assigning all costs associated with a transaction, including, for instance, marketplace fees, forex charges and the cost of processing orders.

• Assign expenses at the channel level, including the costs of preparing your listing data, translating descriptions and optimizing for search efficiency.

• Use all this data to understand your profitability by channel. Focus your valuable time where the margins are.

3. Build incentives around profitability

To give yourself the best possible chance of achieving your goals, you need to specify exactly what you’re trying to achieve, communicate this to your team and build incentives around them.

How?

• Build a set of management accounts and identify key performance indicators. These are the numbers that tell you how well you’re shaping up to your objectives. Regularly measure your business performance against them.

• Keep your books up-to-date. The sooner you can see something changing, the sooner you can react.

• Manage by exception. If there’s a number that doesn’t look right, investigate – quickly.

The most profitable way to manage your business is with Brightpearl, which shows you:

• How much money you’re really making, thanks to landed cost and multicurrency features

• Your income statements on a daily basis and in real time

• Key data to help you make informed decisions to grow more efficiently and profitably

Accurate data and software tools that can help you to interpret your data, is important for savvy retailers to glean real insight into business operations and to stay competitive. A business that turns their data into useful actionable knowledge is expected to make decisions five times faster than its competition.

4. Set up taxes correctly

You’ll find that each channel handles taxation a little bit differently. Your best bet is to make sure everything is set up properly at the sales channel level.

Just enter tax exclusive (net) prices and then add tax based on country-specific rules.

• U.K. merchants: Under your VAT-based scheme, tax depends on the type of product as long as it’s being purchased from within the EU. Buyers in Australia don’t pay tax.

• U.S. merchants: Under your sales-tax scheme, tax is chargeable based on where you and your customer are located as long as the product is taxable.

Read our retailer’s guide to international trade VAT implications.

Getting your team building your business for you

When your business is small, you know what products you have in stock and what is on order, you see what is selling and what isn’t and you know how much money you have to spend.

But in a larger business, this simply isn’t possible. An organized and focused team can be the difference between success and failure. You’ll need to:

• Clarify roles and responsibilities

• Create a trusted source of truth

• Establish efficient processes and keep improving them

1. Plan for success

Think about the business you want to become and map out in detail what it might look like.

What are the roles and responsibilities of the people involved? What are their key skills and characteristics?

Clear ideas will help you hire the right people and clear responsibilities will help them succeed.

How?

• Talk to others in your sector even if they are your competitors. People love to talk and you will be amazed at what you can learn.

• Map out an org chart and plan the roles that you will add as your business grows.

• Define a role before you fill it and what qualities an ideal candidate might have. Not only will it help you hire wisely, but also the clarity will help them succeed.

• Set some simple KPIs for each role so that you and the individual know what success looks like.

2. Stay in tune

“Singing from the same hymn sheet”…“on the same page”… The driving force behind these cliches (and plenty more besides) is the importance of teamwork.

As the leader of a team, your success depends upon the combined energies of the people around you. Get them working together and you can move mountains.

How?

• Be explicit about what you’re setting out to achieve. Sell it to your team and they will sell it to the world.

• Ensure everyone is working with the same facts by establishing single trusted sources for all your key data:

  • A single view of all customer activity will mean that no matter who your customer interacts with in your team, that person is in possession of the relevant facts.

  • A single view of orders will help your fulfillment team make fewer errors.

  • A single view of inventory, sales and commitments will help you order wisely.

  • A single system across all these entities is gold.

• Use technology to give people access to tools and information. Clearly there is some data that is sensitive, but the more people can see and understand what their colleagues are doing, the easier it is for them to collaborate.

3. Define your workflows

When your business is small, workflows are simply what you do and you very quickly work out the most efficient ways of getting the business of the day squared away. They just become second nature.

Add a few more people into the mix and inefficiencies and mistakes easily creep in, which can erode margins and change the dynamics of your business.

Get it right, on the other hand, and you can create a culture of ongoing improvement.

How?

• Make your workflows explicit and train your team to follow them.

• Identify objective measures to assess how well they are working. If you have a pick, pack, ship process, how many orders are you processing in a day? What are your error rates? How much inventory is lost or broken?

• Review your workflows regularly, listen to feedback and iterate. If you’re measuring the right things, you will quickly see if your business is improving.

4. Manage by exception

Whether that’s giving special treatment to your most valued customer, or identifying potentially fraudulent orders on your website, the fact is that a few exceptional cases can have a disproportionate impact on the profitability of the business as a whole.

If you can identify the exceptions, you can deploy your most intelligent and effective people to deal with them – and that is interesting and motivating work.

How?

• Specify opportunities. Is the person walking into your flower shop looking for a single rose for their sweetheart or organizing a wedding for 200?

• Specify threats. Does that delivery address look complete or is there a chance that the package will be returned?

• Work out the features that identify the exceptions that matter and flag them straight away. Use technology to automate this if you can.

• Identify appropriate responses and empower the right people to act on them.

• Streamline your workflows around the unexceptional. Use technology and automate as much as you can.

The ability to collaborate over the internet means I don’t have to waste money hiring out office space, or on travel, and I save time by no longer having to share my system. Overall this equates to my company being more green and cost-effective.

www.evolvebeauty.co.uk

Conclusion

Getting multichannel retail right can fuel big revenue and profit growth. And these tips can help you to do just that.

Each one is based on our many years of retail experience and are designed to flag the differences between channels – so you can not only get it right, but get it right the first time.