White Paper

July 2013
Omni-channel Optimization for
Retailers:
Fulfllment best practice to deliver on customer
promises and drive down returns
Contents
1. The omni-channel revolution 3
2. Omni-channel by numbers 4
3. Speed is of the essence 4
4. Protecting the brand
5. The rules of diminishing returns
6. Fulfllment best practice: recommendations for omni-channel success
A successful omni-channel retail
strategy requires multiple customer
order touch-points
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Omni-channel Optimization for Retailers 3
The omni-channel revolution
For many years, frst multi-channel and later omni-channel was touted as
the business model of the future and evolved as the successor to the ofen
disjointed post-internet boom retail strategies. Following a slow build
in popularity with customers, online retail has now well and truly taken
hold, and much wider omni-channel strategies increasingly at the heart of
retailers strategies.
From major high street brands to household mail-order names and niche
internet start-ups, omni-channel is bridging the gap between traditional
retail and pure e-retailers, and, driven in part by the popularity of smart
phones and tablets, forcing the issue of customer choice. More and
more retailers are allowing customers to choose how, when and where
they interact and purchase, by ofering a combination of websites (fully
functional and mobile-enabled), catalogues, call centres and stores, with
increasing convergence of channels, for example through click-and-collect
and in-store internet ordering points.
Not only is omni-channel here, but its proving very successful. Recent
years have seen well-known retailers, including Ofce Depot and Macys,
reporting omni-channel sales growth far outpacing that of individual and
in particular traditional channels, such as bricks and mortar department
stores.
In order to rise to the opportunity omni-channel undoubtedly presents,
more than ever before, retailers need to be truly joined-up in their
customer-centric, demand-driven supply chain response. With customers
increasingly likely to check out a retailers website before visiting stores
to examine goods frst-hand, then price-checking the competition before
ordering over the phone - and of course skipping or adding several stages
depending on the price, complexity and familiarity of the purchase,
consistency of experience is paramount.
Yet disjointed channels and unresponsive supply chains risk an
inconsistent customer experience rather than reliably delivering goods.
The key to ensuring consistency of customer experience across multiple
channels is a well-though out, cohesive fulfllment strategy that focuses
around the customers demand and desires.
Websites
Store Purchase
Direct Mail
In-store kiosk
Smart Phone / Tablet
Customer Order
Touch-Points
1

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Omni-channel by numbers:
e-Retail sales are forecast to increase by 62% to $327 billion in
2016 from $202 billion in 2011 (Source: Forrester Research January
2012)
Retail sales made on smartphones are forecast to hit $27 billion, or
8% of e-retail sales, by 2016 (Source: Forrester Research January
2012)
Cyber Monday November 26 2012 the culmination of the peak
period around Thanksgiving saw a record 8.52 million page views
of e-retailing site per minute (Source: Akamai)
53% of searchers purchase as a result of a smartphone search in
the U.S (Google/OTX, The Mobile Movement, U.S, Apr 2011).
70% of smartphone users use their device while shopping in-store
(Google/OTX, The Mobile Movement, U.S, Apr 2011).
Over half of all online toy shoppers research on online retailer or
mass merchant sites (Google/Compete, The Role of Digital in the
Toy Shoppers Journey, US Dec 2011).
Speed is of the essence
While customers would once have been satisfed with a lead time of a few
days, now it must be next day, or even same day, or they will take their
business elsewhere. Free shipping is frequently not even appreciated
its expected as standard, and diferent shipping options (e.g. express)
are increasingly becoming a point of diferentiation and a marketing
campaign feature.
Yet with the huge increase in online sales, customers are increasingly
located nationwide, in Canada or even internationally, instead of within
neat state boundaries. This makes shipping charges and timescales
tricky to calculate, with retailers, or their fulfllment partners where this
is outsourced, needing to be able to stay on top of multiple carriers
service options and pricing structures. Ultimately, this new complexity
and pressure for shorter delivery lead-times makes customer delivery
promises increasingly difcult to ofer and to keep.
Further complicating the situation, retailers are increasingly fnding they
have to ofer more product lines, ofen from more suppliers, but without
increasing already rising logistics costs and tying up cash in inventory
with the associated risk of obsolete inventory.
The answer for many is adopting a drop ship model, where customer
orders are sent directly to the retailers supplier to despatch the order,
efectively removing traditional links in the supply chain.
While this cuts logistics costs as goods do not have to be shipped to
the retailers DC and stored, managed and processed, it also cuts the
retailers control over the execution of the fulfllment process. This is
a beneft in terms of reducing their costs and allowing them to focus
on their core competencies merchanidising, selling and customer
interactions but also introduces risk to the customer experience and
brand perceptions.

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Omni-channel retail ofen falls apart at the fulfllment stage, with the
following common pain points:
Slow order processing: The quicker orders are shipped, the faster
customers receive them and the fewer calls to customer services
the better customer satisfaction is. It also means customers have
less time to change their minds and cancel their orders, which is
particularly important where free shipping and returns are ofered
to entice customers through flexibility and choice.
Processing orders in real time mean they are completed and
ready to go immediately, while batch processing slows things
down because there are intervals between batches. This requires
a rethinking of core operational processes.
Integration between order management and shipping
management systems is essential to avoid a time lag between
orders being placed and the fufllment process starting, adding to
the overall delivery timescale.
Where fulfllment is outsourced, or orders are fulflled on a
drop-ship basis, further delays are automatically introduced if
retailers order management systems are not integrated with
those of their suppliers or fulfllment partners, or suitable access
provided.
If the retailer is managing fulflment, purchasing must be closely
tied to demand and forecasting must be accurate to avoid stock
outs.
Lack of Visibility: It is impossible to handle customer enquiries if
staf do not have accurate visibility of where a customers goods are
in the fulfllment cycle.
Customers will not accept outsourced fulfllment or drop-ship
as an excuse for lack of information. They purchase from the
retailer and the fufllment model is not their concern, but they do
expect delivery promises made to be met and that the retailer can
provide up to date information on the status of their delivery.
Queries cost time and money - badly handled queries cost
customers. It is therefore imperative to minimize the number of
queries received and the time taken to resolve them. Its usually
much cheaper to keep a customer than to have to win new
customers or persuade a lost customer to return..

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Poor carrier intelligence: Is it better to use a method thats faster
and more expensive or slower and cheaper? Thats an individual
decision for each retailer, and one that may change in line with
seasons and demand. However lower-cost shipping methods can
results in fewer orders due to longer delivery times and higher
numbers of calls to customer services from customers chasing up
delivery, higher numbers of cancelled orders and even negative
comments posted on social media. [Is there a stat? E.g. one bad
comment can impact 20 people considering buying?]
Carriers change their rates and services frequently, in response to
market demand and frequently as a competitive move.
Retailers who opt for a drop-ship model need to consider how
they will implement and monitor shipping policies with regard to
carriers and services used, to ensure customers receive the same
value regardless of fulfllment model.
Retailer places bulk
order with supplier
Drop Ship Order Process Flow
Traditional Order Process Flow
Retailer passes
order to supplier
Supplier delivers
bulk order to
Retailers warehouse
Customer places order
(by phone, online,
at in-store kiosk,
by post)
Carrier delivers order
direct to customer/ to
store (click and collect)
Retailer picks order
1
Customer places order
(by phone, online,
at in-store kiosk,
by post)
1
Carrier delivers order
direct to customer/ to
store (click and collect)

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Protecting the brand
One of the most convincing arguments against outsourcing fulfllment is
protecting the retailers brand. Yet fulfllment is easy to get wrong and can
create brand damage, regardless of how and by whom it is executed.
Retailers are sensitive to any negative or damaging stories in the press
regarding customer deliveries and service levels. And the popularity
of social media ensures that customers who are unhappy, be that with
delivery times, service or the goods themselves, will tell their network of
friends, relatives, neighbours and colleagues, who will in turn tell their
network Before retailers know it, news of one delayed delivery or out
of stock item causing a minor inconvenience can spread like wildfre and
erode a prized brand reputation and negatively influencing consumer
buying decisions.
With more and more consumers shopping online, its critical for retailers
to execute shipping flawlessly to get the right product, to the right
customer, at the right time the frst time, every time. In fact, just one
shipping error or delay will cause many consumers to stop shopping with
a particular retailer online as well as in physical stores according to
research by Voxware published in an article in Internet Retailer.
Results from this survey on fulfllment and delivery errors indicate that
29% of respondents will stop shopping with a retailer entirely if they
receive even one incorrect order, while only 45% would continue to make
purchases from that company if their orders were consistently delivered
late, according to the survey conducted by Voxware Inc. in November
2012.
Results of the survey indicate that:
62% of respondents are much less or less likely to shop with a
retailer online or by phone in the future if items they buy via those
methods are not delivered within two days of the date promised.
68% of respondents note that their expectations for correct and
on-time delivery of items that they purchase online or by phone are
higher during the holiday shopping season.
30% of respondents intend to have more or signifcantly more
purchases delivered directly to them during the holiday season.

The results of the survey indicate that as consumers online spending
increases, they expect more from retailers. Although online shopping
has exploded, retailers havent thought enough about optimizing their
demand-driven supply chain networks for omni-channel distribution, as
a number of companies are still managing many aspects of their shipping
processes manually. This increases the possibility for errors and delays,
according to the results of Kewills 2012 parcel shipping survey, Best
Practices Survey: Parcel Shipping/LTL Freight.
Results from this survey on
fulfllment and delivery errors
indicate that 29% of respondents
will stop shopping with a retailer
entirely if they receive even one
incorrect order
29
%

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Omni-channel Optimization for Retailers 8
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For example:
44% of the 730 companies surveyed are still manually entering
data for all of their shipments
30% manually review their paper invoices to prepare for carrier rate
negotiations
33% are managing trade compliance manually
More than one third of respondents are using a manual process to
screen for restricted/denied parties and embargoed countries

Entering data manually can cause a number of problems: it increases the
likelihood for errors, requires more staf, and slows down processes while
lowering productivity. According to our survey, distribution center workers
are spending much too much time locating and entering this data. In
fact, more than a quarter of respondents (28%) say their distribution
center workers spend more than a minute per shipment. Another 37%
of respondents say their distribution center employees spend 10 to 60
seconds per shipment. Even if you ship fewer than 100 shipments a day,
thats still a lot of time.
Another key factor to consider is the look and feel of packages; outer
and inner packaging, labelling and documentation. Where goods are
purchased online or over the phone, this tangible reflection of the brand
takes on a greater signifcance, as customers have had more limited
interaction via a website or telephone call than when purchasing from a
store. Where goods are fulflled directly by the supplier (drop-ship), you
need to ensure consistency in the customer experience.
The rules of diminishing returns
A growing headache for omni-channel retailers is returns, which represent
the weakest link in the supply chain for many, eating away at profts
and customer satisfaction. An obvious downside of increasing sales
via non-direct channels is the practicalities of returning unsuitable or
unwanted goods, coupled with customer expectations and of course legal
requirements under distance-selling regulations, covered by federal and
state law. Customers who havent physically seen or touched the goods
they purchase, or experienced the all-round experience of selecting them
in a store, handing them over at the till, having them wrapped and bagged
and then taking them home are naturally more likely to return goods.
Apart from the practicalities of not getting what they envisaged or wanted,
there just isnt the same level of personal engagement.
Apparel retailers and their suppliers have historically borne the brunt
of customers ordering multiple items and sizes. However, retailers of
other types of goods are increasingly fnding that other categories are
more frequently bulk ordered with more than one model, color-way
or specifcation, by customers who are now used to the generous free
delivery and returns policies of pure play internet retailers. Apart from
the higher shipping costs that are usually absorbed by the retailer and
Customers ordering online
generally expect to receive their
goods quickly and frequently free
of delivery charges ofen next
or even same day depending on
location

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Omni-channel Optimization for Retailers 9
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greater value of inventory in the supply chain, the more time goods spend
in transit the more likely they are to be lost or stolen. Thef in this area are
becoming a more and more signifcant problem and the cost again directly
impacts on retailers (and also carriers) profts.
The crucial role shipping policies play in successful omni-channel
retailing is well-documented. Customers ordering online generally expect
to receive their goods quickly and frequently free of delivery charges
ofen next or even same day depending on location, and certainly within
the period specifed at point of order. Even previously satisfed customers
will ofen order elsewhere for a saving of only a couple of dollars, or to get
their goods quicker, with free delivery and increasingly, the comfort factor
of free returns should they need it.
Returns processes are becoming a key diferentiator. Returns are an
important part of the omni-channel experience and came out second to
free shipping options in a 2012 customer poll on the aspects shoppers
wanted to see improved by Retailers. What customers wanted was an
easier returns/exchange process (Source: May, 2012, comScore, Inc.).
Ultimately, its about ensuring customer promises are met as well
as goods are delivered. Customers who have received the goods they
expected, within the timescale promised at point of order, and in the
condition they had anticipated (including packaging) are signifcantly less
likely to experience dissonance and return the goods, saving retailers and
their suppliers on return costs and refunded revenue. And those who do
need to return goods, perhaps due to sizing anomalies, where the returns
process is made straightforward due to clear returns labelling, are more
likely to order again

Crucial to operating an efective and cost-efcient omni-channel
retail business is minimizing the pain and cost of returns:
Clear, Accessible Returns Policy: Analyze your returns so that you
understand which items are typically returned, by which types of
customers and why. Draw up a policy that frstly complies with all
applicable laws, but that is practical (e.g. doesnt expect customers
to take large items to a post ofce) and then make it accessible
post it on your website and include clear links to it in order
confrmations.
Be realistic about charges and neither charge customers far
more than the return costs nor ignore the impact of returns on
the bottom line. Also keep a watchful eye on the competition if
you are the only retailer in a category charging for returns, or
charging a re-stocking fee, it may harm your business in the long
term. If you want to gain competitive advantage by ofering much
more favourable returns then thats your decision, but dont enter
into it blind calculate and monitor the cost and proft impact.
Make sure returns policies across diferent channels are

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consistent having much stricter returns policies either in store
or online diminishes the omni-channel experience and leads
customers to feel they are being treated unfairly or inconsistently.
Consider the practicalities of returning items via diferent
channels; how will a store process online returns, how will the
distribution center handle store-bought items returned via mail?
Inventory Visibility: Depending on the item, out of stock statuses
notifed at point of order will probably result in a customer
purchasing elsewhere, but without the processing and delivery
costs incurred by retailers/suppliers when goods are received
late or not at all, and without creating an unsatisfactory customer
experience.
Retailers need to ensure they can provide up-to-date information
on merchandise availability at point of order, including for orders
which are fulflled on a drop-ship basis via data sharing and/or
system integration.
The benefts are not only increased customer satisfaction and
lower returns, but reduced processing costs into the bargain, and
being better prepared to meet demand next time.
Sometimes its better to sell out on a seasonal collection and
inform your customers than to re-order and be lef with obsolete
inventory with the cost eroding away the proft margin
Documentation: Consider the documentation set you produce and
issue with each shipment ensure this includes returns labels and
any relevant forms, with clear instructions. Think carefully about
how your packaging and documentation reflects your brand a
consistent brand experience is key to customer satisfaction as well
as brand integrity.
If the process is unclear, customers will need to make calls
to customer services, increasing handling costs and further
reducing satisfaction and the likelihood of a repeat order.
At worst, packages risk getting lost, with customers becoming
further enraged as refunds are delayed.

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Omni-channel Optimization for Retailers 11
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Fulfllment best practice:
recommendations for omni-channel success
Automation makes sense
Supply chain management isnt going to any easier. Retailers need to
move to a customer-centric demand-driven approach and those that
continue to use manual processes will fall further and further behind their
competitors that are using global shipping sofware to automate their
supply chains. To remain competitive, retailers and carriers should take
steps to automate basic shipment processing.
Ensure the cost savings as well as the customer service benefts of
automating your parcel shipping handling will more than justify your
investment. Parcel shipping sofware can help ensure each customer
receives the right order at the right time, every time.
Visibility, visibility, visibility
Accurate, real-time inventory visibilty at point of order is key in managing
customer expectations and avoiding unnecessary queries to customer
services, and returns. Customer services staf need to have full visibility of
order statuses, even if fulfllment is outsourced/drop-ship.
Alerting the customer immediately regarding the status of his order as
it is dispatched and during its journey via status updates (e.g. by email/
text message) is becoming standard practice and is a very efective way of
reducing calls to customer services
Build in branding
Uniformly branded, well-labelled packaging not only protects goods and
ensures rapid processing through the delivery cycle, but also helps to
create a good impression of the brand on opening the parcel.
Consider the documentation set you produce and issue with each
shipment ensure this is consistent with your brand, in terms of logos
and fonts used, but also that it includes returns labels and any relevant
forms the customer needs to complete, with clear instructions that are
consistent with your website.
Ensure consistency of the customer experience where drop-shop or
outsourced fulfllment is used.
Keep up with the carriers
Carriers change their rates and services frequently, in response to market
demand and ofen as a competitive move.
Its essential that you stay up-to-date with what services are available
and look at automating this within your shipping management system to
ensure you dont become uncompetitive.
If outsourced fulfllment or drop-ship features in your fulfllment strategy,
consider how you will ensure a consistent shipping policy is applied
across your operations, and that you maintain good customer value.
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About Kewill
Kewill is a global leader in multimodal transportation management systems,
providing organizations with a comprehensive end-to-end platform for
managing the complexities of transportation, logistics and trade compliance.
The Kewill MOVE platform helps companies reduce costs, manage
volatility and gain greater visibility across the logistics value chain. Trade,
transport, store, comply, manage and integrate the Kewill transportation
management platform gives you the insight, agility and tools you need to
deliver better customer service and streamline global supply chain execution
for strategic advantage.
The Kewill platform supports supply chain execution activities for
more than 7,000 companies in over 40 countries across 5 continents.
Learn more about how Kewill can help you achieve greater innovation in your
transportation management and logistics functions at www.kewill.com.
For further information please contact us at:
www.kewill.com
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