Outsourcing Omnichannel Operations: How to Gear Up for the Next Peak Season
Omnichannel retailers are already implementing plans to execute both in-store and online operations in advance of 2021’s peak holiday shopping season. But many are discovering that gearing up for fully integrated operations — from ERP to fulfillment — requires major investments in technology and an operational overhaul.
Many other retailers are following through on plans they reported in PFS’ post-Peak 2020 Survey, with 52% planning to outsource some or all of their digital-first operations. In some cases, this is seen as a stop-gap measure while retailers develop a long-term strategy. For others, outsourcing is the strategy that will allow them to focus on their core competencies long term. In either case, there are certain questions omnichannel retailers need to ask to assure a smooth peak season and a continuing rebound of their business.
So much to do, so little time
While overall retail was down during peak season 2020, online retail was up dramatically, as expected. This year promises to be better on both fronts, forcing omnichannel retailers to allocate budgets and attention accordingly.
Preparing for peak 2021 was already a big lift. There was enormous uncertainty coming out of 2020 regarding how long the pandemic would last and what effect it would have on shopping behaviors moving forward. As a result, many omnichannel retailers have been hesitant to go all in on major e-commerce investments. Now, though the future is becoming clearer, it’s too far into the year, and too close to peak time, to implement anything more than a minimum viable plan.
The challenge isn’t just the scale of the resources required but the ability of the resources to scale. Unlike the physical store model in which staffing is the primary consideration in preparation for the peak rush, omnichannel operations require staffing as well as systems that are capable of scaling to meet demand. There is no practical way to implement such systems incrementally; either you have an end-to-end operation, or you do not. Under-provisioning any part of the chain becomes a choke point that constrains the entire operation.
Investment in the required e-commerce systems may make economic sense now, but there are additional hurdles in the way. For example, warehouse space is at a premium, and it is increasingly difficult to find space for dedicated DTC e-commerce operations. Even if you can find space, it would be a stretch to build out the automated systems necessary for sophisticated e-commerce operations before the Q4 rush.
This is inspiring even those retailers who had not planned on outsourcing some or all of their operations to consider outsourcing now.
Identifying a suitable business process outsourcing provider
The biggest barrier to outsourcing e-commerce operations is identifying a provider who can be trusted to handle a company’s brand and their customer experience. The chosen provider needs to be able to answer the following questions to a retailer’s satisfaction.
Can they scale up?
Since this is the real problem that outsourcing is meant to solve, it should require the most evidence in the form of past performance and demonstrated current capabilities. As stated above, e-commerce infrastructure must always be capable of handling peak volumes regardless of how often peak is reached, not just during the holiday rush.
And, since outsourcers have multiple clients, the outsourcer must be able to prove to the retailers that their capacity is not spread too thin.
Can the outsourcer integrate with your stores’ operations?
Even if the digital piece is outsourced, it cannot be siloed. One of the strengths of a digital-first omnichannel model (versus digital-only) is the ability to fulfill orders according to a customer’s preference. This includes drawing on different pools of inventory as well as different points of fulfillment.
The need for such integration is often what inspires outsourcing in the first place when a retailer can’t give the digital component the necessary resources. The outsourcer must be able to fulfill e-commerce orders at scale while giving the stores complete real-time transparency into stock levels and locations. The outsourcer also has to enable store fulfillment (curbside pick-up, buy online pick up in store (BOPIS), ship-from-store) solutions that have become a key component of most omnichannel retail scenarios.
Will they protect the brand and customer experience?
Brand is perhaps the single greatest asset an omnichannel retailer possesses. And anxiety about outsourcing any part of a retailer’s operations usually revolves around the risk of jeopardizing the brand’s image and the customer experience. Many outsourcers can conduct e-commerce operations the way they know best. There are very few that can properly honor the brand and meet a loyal customer’s expectations.
An outsourcer should demonstrate the ability to disappear inside the brand. Their fulfillment operations should be flexible enough to process a brand’s orders in ways that distinguish it from other brands. If customer service is a part of the outsourcer’s mandate — like shoppers’ assistance or managing disputes and returns — the outsourcer should be able to demonstrate a history of delivering appropriate customer experiences for retailers of the same caliber.
Are they where you are?
While it’s not critical that digital operations share a zip code with the stores, the best customers think of these retail brands as close by. Even if an outsourcer’s major distribution centers are geographically dispersed, they should be able to execute alternative fulfillment solutions (like pop-up distribution or micro fulfillment centers) if required. And, as mentioned above, the outsourcer should be properly integrated to enable in-store fulfillment if that is part of the model.
If you are looking ahead to peak season with a technology to-do list instead of omnichannel infrastructure already in place, there may be an outsourcer in your near future. This isn’t a failure. In fact, as noted above, many retailers are realizing the benefits of this route, especially after their experience last year.
By asking the right questions and getting adequate assurances of their ability to execute, the right outsourcer will help make your omnichannel operations ready for the fast-approaching peak season.
Kamran Iqbal is Commerce Strategist at PFS.