The initial results for Black Friday and Cyber Monday show impressive gains in both online and brick-and-mortar holiday sales. But these increases are having different effects on each channel, even when the sales are by two different divisions of the same retailer.
The traditional supply chain has become a well-known quantity for most retailers that purchase their goods from suppliers and deliver them through physical stores. These retailers certainly need to deal with complexities to have the right goods on their shelves when shoppers want to purchase them. For that reason, planning and forecasting has become a science, and both retailers and suppliers pay a lot of attention to it.
The planning for holiday sales season and Black Friday in particular is a source of activity months in advance. Accurate predictions can lead to highly successful sales. Of course, predictions that miss the mark can lead just as easily to disastrous results if shoppers can't find the items they want.
Online sales would seem to bypass those issues. Customers place their orders while viewing images and descriptions of products, and they expect their purchases to be delivered to their door. Never needing to touch the actual merchandise is a huge burden removed from retailers. At the same time, the responsibility of predicting sales and managing deliveries shifts back to the suppliers that pack and ship directly to the consumer.
Though this may seem simple, retailers and their suppliers may find this direct sales approach significantly more complex than brick-and-mortar sales. Of course, online retailers like Amazon.com Inc. (Nasdaq: AMZN) already have the direct-to-shopper model figured out. But the supply chain is so different that some retailers put their online and physical store sales in completely different organizations.
Here's a quick list of the issues that need to be dealt with differently when retailers sell their suppliers' products using a direct shipping method:
- Determine whether the product is in stock, and provide feedback to the customer.
- Route the order to the supplier or suppliers (if multiple suppliers are involved in a single order).
- Get feedback on order receipt.
- Allow for order modification or cancellation by the customer.
- Advise the supplier about an order modification or cancellation.
- Package the order in retailer-identity packaging.
- Include retailer promotional materials.
- Produce retailer-branded shipping labels.
- Ship the order by the retailer's shipping method.
- Provide return order processing.
All these tasks are handled by people in the retail store environment but must be automated for online orders. The activity generated this last Cyber Monday in particular shows these functions are being integrated into a comprehensive system. At the heart of much of the back-end processing is some form of EDI (electronic data interchange) that provides standardization to the formatting and processing of orders and the documents they spawn.
The same EDI that enables the complex direct-to-customer order processing is an extension of the EDI systems that process orders between retailers and suppliers for brick-and-mortar environments, but with the necessary changes to accommodate the additional functions.