Shipping wars: Fighting pricing surge with omnichannel retail tactics
By Jennifer Sherman
The term omnichannel retail has grown in popularity over the past year and is now a commonly used term among retailers when describing their overall strategy for delivering a positive customer experience. At the heart of this heightened customer experience lies the ability to compete against ecommerce giants such as Amazon, which continue to win over the customer market with their ability to deliver products with free two-day or even same-day shipping— a feature that is rapidly becoming a standard expectation among customers.
Pair that with the fact 2016 brought with it an increase in shipping prices from popular shipping providers including FedEx, UPS and USPS, and it is clear to see why all retailers are looking for a solid strategy to overcome the current shipping wars.
While free shipping may benefit the customer, the practice often leaves retailers with a low margin or none at all. With this shipping struggle already a pain point for retailers, the latest news that popular shipping providers are raising rates hits home for retailers and can cause them to rethink their plans. What can they do to compete against shipping price inflation?
A proper omnichannel strategy provides two winning solutions for retailers – ship-from-store and in-store pickup. Omnichannel retailing requires the ability to serve customers across all channels, with the physical store serving as a key player. By properly arming brick-and-mortar locations with the right technology, retailers can turn their stores into active ecommerce fulfillment channels, delivering benefits for both customers and themselves.
Implementing a ship-from-store model can serve as a retailer’s secret weapon to overcoming elevated shipping costs by shortening distances between the product and the customer. For example, by shipping an item to a customer directly from a nearby store –-instead of a far away distribution center— retailers can effectively shorten distances, as we find that on average, dealers are 47 percent closer to customers than warehouses or distribution centers.
However, this omnichannel strategy requires unified order management to deliver overall benefits. For example, in a scenario where an in-store customer is looking for an item that is out of stock, through the store’s mobile point of sale technology, an integrated order management system (OMS) can help to locate the item at a nearby store and have it shipped to the customer’s location of choice. An OMS allows for accurate order routing that truly saves on shipping costs and pleases the customer during their engagement with the retailer.
In-store pickup is a feature many retailers are already offering as it is a clear customer favorite. In fact, in a recent consumer trends survey report, “The Digitally Demanding Consumer,” Kibo found that 43 percent of U.S. shoppers prefer in-store pickup as their main fulfillment method. In-store pickup is a hidden treasure found in omnichannel retailing, as customers are naturally engaging in this behavior. This method not only eliminates retailer’s shipping costs but also increases customer traffic to the physical store.
Having the proper tools in place for this approach is essential for ensuring success. Retailers need a detailed website that is tightly correlated with the order management system to provide customers accurate information at every stage of their path to purchase. An order management system will inform and identify when the desired inventory is available for pick up at a specific store, and once the order is placed, the store associate will be notified to prepare the order for pick-up. Once that is accomplished, the customer comes into the store to pick up their order, with literally no shipping expense whatsoever to any party involved.
Omnichannel is more than just a buzzword in the retail industry. When retailers properly implement omnichannel tactics, they not only elevate the customer experience, but also gain from the various benefits that having a connected retail environment provides. While the costs of shipping may continue to rise, retailers can wage against the pricing storm by leveraging two features within their omnichannel strategy – ship-from-store and in-store pickup.
Jennifer Sherman is senior VP, product and strategy at Kibo.