strategy+business Winter 2013 : Page 8

Coordinate across channels. Senior leaders must commit to tearing down the last remnants of silos between offline and online domains. Full cooperation across Also contributing to this article were Booz & Company partner Scott Corwin and principal Umut Aytekin. strategy+business issue 73 leading ideas 8 The Rapid Delivery Win-Win By leveraging local stores as distribution centers, retailers can significantly decrease the gap between their cost to deliver and the consumer’s willingness to pay. $20 Estimated transportation cost to deliver, in US$ traditional and digital offerings is required to make a nationwide plan for low-cost overnight delivery fea-sible and capable of reaching its full potential. Enhance management. real-time inventory Send a strong marketing mes-sage. A large-scale marketing cam-paign is important in helping retail-ers spread the word about a next-day delivery offering, and in articulating the benefits of ordering from the company’s website instead of from an e-commerce competitor. Managing bricks-and-mortar stores has so consistently been framed as a disadvantage that it’s easy to underrate the value of physi-cal proximity to customers. In reali-ty, these stores may be just the ad-vantage retailers need to gain an edge over their online competitors. A handful of retailers are already ex-perimenting with the “store-to-home” concept, mostly to move out-of-season stock and leverage idle sales capacity—but not to fulfill or-ders in the evenings and get them to the customer’s door the next day. As Amazon, eBay, and Google push ag-gressively into rapid delivery, tradi-tional retailers must not hesitate to respond. The storefront advantage is real, but it’s not permanent. + Reprint No. 00213 $15 Potential new cost to deliver $10 Consumer’s willingness to pay Inventory systems must provide transparency into where every SKU is located. This detail must go beyond knowing in which store an item can be found, to knowing in which department, down which aisle, and on which particular shelf. Optimize fulfillment systems. $5 1 hour Same Standard 2 days day overnight 3 days 4–5 days Source: Booz & Company analysis A Rapid Delivery Strategy Admittedly, this distribution strate-gy will not be easy for any retailer, and each needs to consider a range of questions: Which product catego-ries are most sensitive to delivery speed? How do our customers’ needs change during the peak holiday sea-son? Are time-definite delivery win-dows more valuable to our custom-ers than overall speed? Execution of this strategy, which would likely take several months to implement, will require retailers to take a cross-functional approach that involves thoughtful planning, IT investments, and close ties with transportation partners. Most important, it must treat stores and their inventory differently—not as a burden but as a source of com-petitive advantage. The following steps can help retailers get started. Fulfillment systems are needed that can immediately determine which particular retail store can satisfy an order. This decision requires balanc-ing factors such as proximity to the customer, current (and predicted) inventory levels, and staff capacity for selecting the ordered items and packing them for pickup. Create a flexible workforce. Sales staff may be asked to fulfill on-line orders during what would oth-erwise be idle time. They need training to use the retailer’s order-taking technology and must learn how to locate, pack, and label items for shipment. New approaches to sales personnel compensation (espe-cially at commission-heavy retailers) may also be required. Develop robust logistics part-nerships. It’s critical to select a Curt Mueller is a partner with Booz & Company and leads the firm’s supply chain practice. He is based in Chicago. Andrew Schmahl is a principal with Booz & Company’s engineered products and services practice, and is based in Chicago. Andrew Tipping is a partner with Booz & Company and leads the firm’s U.S. transportation practice. He is based in Chicago. transportation partner (or partners) capable of picking up parcels later in the evening than is currently typi-cal, closer to store closing times of 9 to 10 p.m. Transportation part-ners might not enthusiastically offer late-night service, but the retail in-dustry accounts for a substantial amount of their delivery business— which gives them a vested interest in helping traditional retailers compete with e-tailers.

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