This article was originally published on RIS News.
Since its inception, the world of e-commerce has traditionally been oriented toward sales and marketing.
Get people to notice your brand through various engagement channels and advertising, then get them to visit your online store while providing a differentiated online shopping experience via product assortment, pricing, promos, personalization, etc. — all with the end goal of getting customers to place items in a cart and check out, hopefully with no or minimal returns.
This sales and marketing lens is likely why when the topic of KPIs comes up, the metrics usually revolve around site traffic, conversion, cart abandonment, average order value or any of the other marketing KPIs that surround customer acquisition and online sales. The same can be said for brick-and-mortar retail KPIs, which are essentially the same as e-commerce, but in the physical world. Measures like footfall or foot traffic, sales per square foot, conversion rate and average transaction value dominate retail boardroom conversations.
While customer retention rates are also tracked in both physical and virtual stores, one of the key drivers for customer retention in an omnichannel world — service — is left out. The reason for this is threefold.
For starters, service and customer satisfaction can be notoriously difficult to measure as it is usually only the disgruntled customers who make their voices heard. But in an omnichannel world, customer satisfaction can be easily tied to fulfillment: Did I actually get my order? If so, did I get it when it was promised? Was it accurate? Was it a pleasant experience?
Secondly, omnichannel fulfillment sits at the intersection of stores, distribution, and e-commerce, so ownership gets murky.
Finally, fulfillment is usually seen as a supply chain function, but supply chain might not be measuring those KPIs, since their objectives revolve around reducing the cost of fulfillment.
Consider the following scenarios:
- A shopper browses online and sees that an item they want is at their neighborhood store. They decide to go to the store to buy it, but find it is out of stock when they get there. Service failure: The store’s inventory is not kept up to date, or the order management system is not capturing real-time sales.
- A shopper browses an online store and sees that an item they want is at their neighborhood store. They place an order to have it click-and-collect. They find out later that the order was cancelled by the store. Service failure: The store associate felt that the order could not be fulfilled, either due to lack of resources or lack of inventory.
- A shopper browses an online store and sees that an item they want is in stock, so they order it. Four days later they receive an email saying the order is cancelled by the DC due to stockouts. Service failure: The online store did not accurately represent available-to-promise inventory in the warehouse. The warehouse is also slow to fulfill orders.
- A shopper places an order for four different items. Each of the four items arrives at different times and in separate boxes. Service failure: The orders are not consolidated for customer convenience.
- A shopper places an order for four different items. Only two of the items arrive. Service failure: The fulfillment center was unable to fulfill the order either due to lack of resources or lack of inventory.
- A shopper requests two-day shipping and the order only arrives after four days. Service failure: The fulfillment center was unable to fulfill the order either due to lack of resources or lack of inventory.
In all of these cases, the sales channel remains the same: the online store. But the fulfillment methods employed call on a store, a warehouse, a 3PL, or any combination of these. If somewhere along the line someone drops the ball, it’s the e-commerce store that will pay the price.
The reason for this is that when customers have bad shopping/shipping experiences, they are apt to associate it to the sales channel, and this negative online shopping experience will impact customer retention (or repeat purchase). That means that e-commerce has no visibility or control over the customer experience once the order is processed, but they will bear all the negative repercussions of a bad experience (lost future sales).
The good news is that in an omnichannel world, customer retention can be traced back to the shopping experience (or service levels), which is rooted in fulfillment performance, and which can be measured.
With so much crossover and ambiguity, it is easy to see how service in an omnichannel world can fall through the cracks. So, what’s the solution? Everyone needs to be working together to track and optimize fulfillment KPIs, which should fall under the omnichannel umbrella. While not an exhaustive list, the following KPIs should be provided by an order management system:
- Channel performance: From which channels are your orders being fulfilled? This includes stores and DCs and may even go as far as the country of fulfillment for cross-border retailers.
- Time to completion: How long does it take to get an order shipped?
- Shipment exceptions: What are your partial shipments, rejected shipments, rerouted shipments, and orphaned shipments, by fulfillment center?
At first glance, these might look like supply chain KPIs, but it’s time to adjust that lens. These should be viewed as omnichannel service KPIs, which need to be monitored by e-commerce, store operations and supply chain. The lines between online, stores, and distribution (and even IT) have been blurred by omnichannel, and retailers can no longer be siloed along traditional lines.
It’s a paradigm shift, certainly, but the first step toward a holistic view of the customer in an omnichannel setting is recognizing that fulfillment is now cross-functional, and everyone needs to work together to ensure service levels are met and processes are optimized.
