At the heart of everything omni-channel is inventory. The customer needs to be able to get the merchandise they want, when they want it, and through their channel of choice. There has to be inventory visibility across channels, so stores, warehouses, and distribution centers can see real-time inventory levels as part of the order fulfillment process. And finally, in order to actually fulfill orders in a timely and efficient manner, inventory needs to be shared across channels.
At the end of last year, Clint Reiser and I worked on an extensive survey examining the omni-channel commerce landscape. From that research, which I am currently updating now, it became apparent that organizations were not doing a very good job of sharing inventory. While many companies had either the business processes or enabling technology in place, they did not have the combination of the two required to actually share inventory. In fact, our research showed that just over 50% of respondents are sharing inventory across channels. To put this in perspective, imagine if half the stores you went to could not fulfill your order both online and in-store because they only had the inventory allocated to one channel. That would leave you frustrated, and most likely, would send you to another store / brand to get the product you want. That is what is happening in today’s fragmented omni-channel environment. A lack of inventory sharing is creating customer dissatisfaction and reduced customer loyalty. Sharing inventory alleviates some of the concerns about lost sales. However, it does require accurate inventory counts at all locations, and the ability to centrally manage the flow of inventory. And these are major issues facing organizations as they attempt to move to a truly omni-channel environment.
Now looking at those respondents that are sharing inventory across channels indicates that a combination of online and in-store are where companies are focusing their attention. According to our research, 62% share across all channels (brick and mortar, online, mobile, call center) and an additional 34% share between brick and mortar locations and online. That means 98% of respondents are sharing inventory between stores and online. There is not a big push to share call center and catalog inventory with brick and mortar or the online channel. These channels are really a byproduct of their customer service departments. As a result, they generally do not carry direct inventory. However, call center employees need access to inventory to fulfill orders that do come in.
The big reason for brick and mortar and online channels to share inventory is the changing nature of retail. Click and collect, and ship from store are two areas that are gaining more traction, and seeing a lot more investment from retailers. According to our data, 42% of respondents fulfill online orders from the store. The majority of orders fulfilled from the store are picked and shipped from the store (86%), followed by click and collect (68%), and shipped to the store from a DC for customer pick-up (45%). These processes require inventory visibility and availability between channels. The end result is the opportunity to increase sales, decrease mark-downs, better utilize labor, and potentially decrease transportation costs and delivery times.
There is still a lot of work to do in order for companies to fully share inventory across all channels of operation. There are business processes and enabling technologies that must be updated and integrated in order to be fully omni-channel. However, until organizations are able to gain full visibility of on-hand inventory (and ensure that it is accurate), allocate inventory appropriately, and pull inventory from all available channels, the customer experience will still feel disjointed. This lack of a cohesive customer experience is a main cause of customer defection. Our survey shows that those organization that share inventory across channels have increased customer retention 12% year-over-year, compared to a 1% reduction for those companies that do not share inventory. These defections are rooted in the inventory issues that are plaguing today’s retailers, and is a main reason for the continued slow evolution of omni-channel operations.
The results of this year’s survey will be released in the coming months. For your chance to participate, the survey link is below.