December 11, 2017

The state of omnichannel fulfillment in the Nordics

Tuukka Karjalainen

Solution manager, Tieto

Combining in-store and online to serve customers better has been a hot topic for retailers in recent years. Three recent studies examined how retailers have walked the talk in the Nordics. I've wrapped up the results to an overview of the Nordic omnichannel fulfillment.

This autumn we published our study on the maturity of customer experience management (CEM) among Nordic companies. We examined the maturity of CEM in three different functions: sales and fulfillment, marketing and customer service. It was discovered that within this focus group sales and fulfillment was most developed in digital customer experience when compared to other functions.

However we also noted that most of the comments were related to sales, while the fulfillment part was much less explored. There have recently been two other studies on fulfillment, so I thought it would be good to wrap these up for additional details.

Nordics - advanced, but in a particular way

About a year ago we commissioned a report 'Omnichannel Development within the Swedish Fashion Retail Industry'. The fashion industry is in middle of a transformation from manufacturing and B2B sales to retailing and consumer sales. It is a favorable industry for advanced fulfillment, since the color and size variants make the inventory levels typically low and goods are easy to move around compared, for example, to electronics that are more prone to breakages and theft.

The study used omnichannel parameter index as a measure and found fashion retailers are still in quite early stages on their path towards omnichannel retailing. For example, one parameter was click and collect, which was used by 48 percent of fashion retailers.

Interestingly OrderDynamics used many of the same metrics in its Global Omni 1000 study, which was published last month and included 80 Nordic retailers. Click and collect was found in 58 percent of retailers (not just fashion retailers), which suggests this is either more common outside fashion or becoming more common in fashion. Either way, omnichannel fulfillment seems to be developing, as the Nordics was seen a being rather advanced in this area, together with the UK.

The Global Omni 1000 study also revealed a few specialties in the Nordic omnichannel fulfillment. For example:

  • Free shipping was less common in Nordics than elsewhere
  • 65% percent of Nordic retailers charge restocking fees,  whereas only eight percent of retailers do it elsewhere
  • Nordic retailers are very slow in pickup delay, with 18.2 hours as an average. The best retailers can do this within one hour.

The findings suggest that although Nordic retailers have basic processes in place, they are not optimized in terms of customer experience or cost. Also, both the Global Omni 1000 study and our Swedish fashion study stated that there are no clear omnichannel policies or instructions to customers to leverage these services. Taking these together, using these services can be quite difficult for the Nordic customers.

The way forward – will we be the leaders?

The anticipated large changes in the operations are the biggest obstacle to omnichannel development in the fashion retail (according to our report). This is something I have also personally noticed when discussing with the people in the industry. Developing order management tools has somewhat of a bad reputation, requiring a large implementation project and redesign and reimplementation of all major e-commerce processes in order to be successful.

It should be noted that developing order management can take place in different solutions in the architecture, can be rolled out in phases and be generally implemented in an agile and pragmatic way without too much disruption for the business. While companies with the highest ambitions go for dedicated solutions, modern SaaS offerings have significantly reduced implementation times.

With well-developed order management processes in place, retailers can optimize their fulfillment activities, either from the warehouse where it's most efficient, from the store where it's fastest or from another location where the product is subject to markdown soon. They can also offer more options to customers, some of which may give more choices to consumers who are willing to pay extra.

At the best, the retailers can enjoy engaged customers who are served well and efficiently and who concentrate their purchases to the retailer. The studies show we have all the ingredients to become the world leaders – will that be the case next time?

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