OMNICHANNEL LOGISTICS IS HELPING RETAILERS MEET CONSTANT DEMAND FROM ALL DIRECTIONS

Nail Rock’s failure to meet deadlines for shipping nail polish to Walmart, its biggest U.S. account, led to a lot of hand-wringing. Neil Jerzak, operations manager for Rock Beauty, London—U.K. retailer for the popular beauty product—reveals that Nail Rock hit only 30 percent to 35 percent of Walmart’s order deadlines. That dismal figure resulted in fines and worse: a less-than-stellar reputation among the mega-retailer’s personnel. Something had to change, and fast. That’s when the company decided to partner with SEKO Logistics.

A small distributor in New Jersey had previously handled all of Nail Rock’s U.S. operations. It met expectations in terms of product deliveries, Jerzak says, but failed to focus on customer targets or meeting customers’ needs. “So we looked at our other options—specifically SEKO Logistics, since I was working with them in the U.K. already,” Jerzak says. SEKO Director Dean Townsend suggested that his company could lend a hand, so Jerzak and Townsend trekked to America in mid-September to talk business. Less than a month later, SEKO had completely taken over Nail Rock’s distribution activities in the U.S. Jerzak admits that moving from the previous distribution center to SEKO’s Cranbury, N.J., location was no small task, but he says it’s been highly rewarding.

In the three months since Nail Rock has been working with SEKO, the cosmetic company has met more than 90 percent of Walmart’s deadlines. “Anything over 90 percent is considered good,” Jerzak says, “and Walmart doesn’t fine you.” He reveals that Nail Rock’s rating improved even more in the last three weeks of 2013—surging to 97 percent—which puts the company into the “exceptional” category. “Considering where we’ve been, this is incredible,” Jerzak says. “Walmart has certainly noticed the difference—and commented on it.”

What’s elevated Nail Rock’s performance to the “next level,” he says, is SEKO’s omnichannel logistics model. The retailing strategy, which marries brick-and-mortar and e-commerce, enables Nail Rock to distribute to both wholesalers and online customers. “People can log onto our website and buy products with the omnichannel model,” Jerzak explains, “and SEKO also does wholesale, which means they do the deliveries to Walmart.”

In addition to providing companies with a comprehensive shipping, logistics and distribution solution, SEKO integrates with their customers’ sales-order management systems. “SEKO’s omnichannel model just provides us with that end-to-end service,” Jerzak says. The global logistics provider handles Nail Rock’s shipments from production to distribution—typically from the Far East to U.K. or U.S. distribution centers and major retailers like Walmart. Jerzak explains that handing over the reigns to SEKO provides him and his colleagues with more time to devote to the nitty-gritty details of running Nail Rock. “We’re such a small team that every minute is vital to us,” he says. “[SEKO’s Omnichannel Logistics] division really takes a lot of the strain away from us.”

Jerzak envisions more companies jumping on the omnichannel bandwagon in the years to come. Calling omnichannel retailing the “wave of the future,” he explains that consumers like the option to buy products in stores and online. The latter option is particularly attractive from a manufacturer prospective, he maintains. After all, Jerzak says, companies enjoy higher profits when the public buys their products, rather than when retailers purchase them. “Don’t get me wrong,” Jerzak says, “we want to get as many retailers on board as possible. But, at the same time, there’s a huge margin when online customers purchase products.”

Fortunately for Nail Rock, online shopping appears here to stay. Mike Maris, senior director of Transportation, Distribution and Logistics at Motorola Solutions, believes the trend toward e-commerce points to a major cultural shift: smarter consumers. And omnichannel retailing, he says, takes full advantage of the shrewd consumer. “As the volume of e-commerce sales moves away from traditional shopping, an omnichannel retailing model provides a better ability to keep customers and facilitate greater customer service as they purchase via non-traditional methods,” Maris says.

“Being able to show what inventory is available to the purchaser, as well as choices for when and how to take delivery, all feeds into smarter shoppers’ needs,” he adds. Omnichannel retailing also encourages brand loyalty, Maris says, and enables vendors to upsell.

That’s not to say that employing an omnichannel retailing model is without challenges, he cautions. Key difficulties include maintaining accurate inventory when products can come from a brick-and-mortar store, warehouse or cross-dock; shrinking delivery times when same-day and two-hour deliveries are expected to become much more common; and determining how to handle returns. “Some retailers negotiate a fraction of the original sales price and allow the customer to keep [the merchandise], give it to charity or dispose of it, rather than absorb the cost of managing a return,” Maris explains. Retailers must also build distribution centers closer to their customer base, as well as smaller warehouses containing their most-requested items.

Another challenge, according to Curt Bimschleger, GENCO senior vice president of Retail Logistics, is changing customer service representatives’ mindsets about the consumer experience. Thanks to the advent of e-commerce, customers may come into the store to pick up a product, return an online purchase to a store, or even buy online from a store if the product isn’t immediately available. “In some ways, stores are becoming mini-distribution centers,” Bimschleger says. “If consumers aren’t satisfied, their experience will be impacted.”

Technology can also present problems for omnichannel retailers. Bimschleger cities customer order visibility, as well as being able to view all inventory across all retail stores and distribution centers, as essential elements of a successful omnichannel strategy. Unfortunately, he admits that this can prove a herculean task for retailers with multiple inventory systems driving their business.

Maris agrees that setting up an omnichannel may be a cumbersome process, but he says it reaps tremendous benefits. “It’s very appealing to customers to have the choice to buy online, at a brick-and-mortar store or online within a store using their system or smartphone,” Maris says. Adapting to customer demand, however, requires retailers to develop a new attitude toward commerce. He says vendors must be prepared to manage the changing demands on the product delivery process, as well as learn what can and can’t be purchased through omnichannel distribution models—for instance, pharmaceuticals and alcohol. Retailers need to pay attention to these issues, Maris says, since statistics point to a surge of omnichannel purchases in the future.

Bimschleger concurs, explaining that e-commerce currently represents 8 percent of total retail sales—a figure that is expected to double by 2017. Mobile-commerce, or m-commerce, accounts for roughly 15 percent of these sales, he adds. “It’s not unusual for a pure commerce company today to have 70-plus percent of their sales through their own app,” Bimschleger says. After all, consumers carry their smartphones with them 85 percent of the time, which means that their e-commerce and m-commerce interactions with retailers will only increase in the years to come.

He cautions that vendors failing to provide a “seamless experience” for customers via an omnichannel strategy will likely fall behind the curve. “Retailers need to understand the necessary technology architecture and make sure it provides a consistent, seamless customer experience across any channel,” Bimschleger says. He explains that a consistent omnichannel experience includes distribution, fulfillment, returns processing, disposition and customer service. “The [key elements] usually revolve around one view of all inventory visibility across all distribution centers and stores, fulfillment and customer order visibility,” he adds.

Fortunately, Bimschleger says, many retailers are well-versed in omnichannel strategies and are already providing seamless customer experiences. It’s a good thing, indeed, he says, since it’s a sink-or-swim economy. “Look, omnichannel isn’t just the wave of the future—it’s going on right now.”

Nowhere is this more evident than in the case of Nail Rock. The brand’s Neil Jerzak says Nail Rock’s foray into the world of omnichannel retailing has been nothing but positive—and lucrative. Thanks to the brand’s partnership with SEKO’s Omnichannel Logistics division, Nail Rock has enjoyed higher profit margins due to e-commerce, as well as greater product visibility. “More and more people shop online, so that’s a real focus for us as a business,” Jerzak says. “Omnichannel retailing is just the way people want to go.”