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Three ways to improve CX without eroding profitability

Image of woman at checkout in clothing store with staff on the phone enquiry.
Image of woman at checkout in clothing store with staff on the phone enquiry.

Omnichannel fulfilment has increased rapidly in Australia as retailers respond to the massive shifts in both consumer demand and impacts on supply chains caused by the Covid-19 crisis. Aussie retailers just suffered their toughest month on record with retail sales falling 17.9 per cent in April. With brands such as Bardot and Jeanswest closing their doors this year, the ability for retailers to adapt quickly and continue to delight their customers is essential.

Every customer counts and retailers need to take every step they can to improve the margin on each order. This may include shipping from the closest location to the customer, the most efficient location, or the one that will provide the best experience for high-value customers. Some strategies will yield big results. Others will be smaller. But to stay competitive, retailers need to embrace them all and fine tune over time. Every incremental improvement counts.

Below are some of my top tips to protect and improve in-store experiences, reduce reliance on markdowns, which can erode profitability, and maximise revenue from your highest value customers.

1. Protecting the in-store experience

Some Aussie retailers are using their stores as mini distribution centres and have dedicated staff for pick and pack activities. But for those who don’t have dedicated staff for this, protecting the in-store experience for customers is crucial. Ensuring your flagship stores are well stocked means that some retailers will need to set higher buffer levels to protect supply to these stores or source from non-flagship stores and move stock quickly into them from lesser performing areas.

Another way to protect the in-store experience is store capacity management. This type of order management rule lets retailers limit the number of click and collect and/or ship from store orders sent to a store based on total orders per day. For example, once the store has a certain number of open orders, only send click and collect orders to that store, not ship from store orders. That way stores receive a manageable flow of orders, and staff still have time to service their in-store customers.

Disabling and enabling store fulfilment can be done at the store level, blacklist the store or across a network of stores. That way store staff are not overwhelmed by online orders and can focus on maximising sales to in-store customers. This same flexibility applies to products too. Adding or removing product or product categories quickly on a store level helps prevent poor customer experiences and returns. Think about a case where one of your stores has had severe flooding overnight and some of the stock has been damaged. Being able to quickly fulfil orders from another nearby store is crucial to being able to still serve customers.

2. Reduce markdowns

To reduce the erosion of profitability through markdowns, retailers need to consider several factors that require prioritisation. Retailers who have distributed order management software in place can do this easily, calculating many variables such as if it’s better to source from locations with the highest markdowns in a given store, or from stores with the most inventory, or from the lowest sell through rate or from the oldest inventory. And the priority of each will vary based on your business. 

Seasonal inventory may also need to be factored in, such as when the sale of that inventory is weather dependent and needs replenishing. Stores with low stock in a more favourable climate can be replenished from stores with high stock in a less favourable climate. For retailers operating with stores spread across different climates such as Perth and Queensland vs Melbourne and Hobart this can provide an advantage.

3. Maximise revenue from high-value customers

Retailers operating both physical stores and an online store, need to protect the advantage of being able to offer an in-store experience, so staff have more time to service your best customers. But there is another way as well. You may want to restrict availability of inventory to customers based on their loyalty status and give VIPs exclusive early access to buy first, before the larger inventory pool is made available to all customers.

Another option to maximise revenue from high-value customers, is to only offer high-value or high-demand items for click and collect, which can be especially effective for limited edition items. That way your store staff can have an opportunity to upsell and cross sell to increase the value of the sale. You might also want to fast track the fulfilment of orders from your most loyal customers to ensure you keep their loyalty and repeat business. Options for this may include pick and pack orders for VIP customers before other orders so they’re ready for pickup or delivery faster, fulfil VIP orders from designated ‘VIP service’ stores and/or fulfil VIP orders from locations where expedited shipping is readily available.

Every retailer is unique and the strategies that make sense for your business will depend on the products you sell, their price points, and the customers you serve. There is no one size fits all approach. This means successful omnichannel distribution requires a flexible system. One that allows you to tweak your sourcing rules easily. That way you can react quickly as consumer demand and market factors change and continue to provide a premium customer experience.  

Graham Jackson is CEO of Fluent Commerce.

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