Risk: Don’t let this four-letter word be a curse in your business
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NRF 2019: Retail's Big Show KC Fox, SVP, Technology Services, Radial
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Risk: Don’t let this four-letter word be a curse in your business
- 1. Risk: Don’t let this four-letter word be a curse in your business KC Fox, SVP Technology Services
- 2. Retail Has Morphed Creating New Challenges & Risk 2
- 3. © 2018 Radial, Inc. 60% of online shoppers prefer to return items to a store3 expect to see store inventory online71% do so to avoid shipping charges73% heightened consumer expectations73% online shoppers make extra purchases when returning to store 73% online shoppers use in-store pickup61%
- 4. Attempts to Meet Expectations Create Additional Risk 7-15% the amount of safety stock consumes of inventory on the balance sheet $24.2B the amount of capital NA retailers tie up to compensate for OOS $144.9B total loss due to OOS annually 54% will shop a competitor if their preferred delivery method isn’t available 59% of shoppers won’t return after a bad experience
- 5. © 2018 Radial, Inc. Because Executing is Complex
- 6. © 2018 Radial, Inc. Product Availability Order Authorization Fulfillment Order Orchestration Customer Service Real-time visibility of inventory Available to promise (pre- orders, back orders) In-Store Pickup and Ship- to-Store availability rules Delivery estimates Single view of all enterprise inventory Order splitting rules Tax calculation Fraud screening Payment authorization Order status workflow Order routing optimization (stores, drop shippers, DCs) Exception management Order splitting optimization Inventory allocation Store pick/pack/ship Dropship integration Store pick up Carrier integration (for store-fulfilled orders) Single view of order across the enterprise Order modifications Distribution centers Same day delivery BusinessIntelligence Explore Buy Use There Is A Lot To Do 6
- 7. Complexity is Hampering Maturity 7
- 8. Order Management is Critical to Managing Risk 8
- 9. Integrating Store Resources Drives Profit, Minimizes Risk Ship-from-Store In-Store Pickup Ship-to-Store Buy Online Return In-Store Associate Delivery Tablestakes Competitive Advantage On the Fly Order Brokering Rules Integration with Promotions Ship Method Optimization Predictive Analytics
- 10. © 2018 Radial, Inc. Drop Shipping Extends Your Brand with Almost No Risk • Automation/Integration • Supplier Compliance • Management and Oversight Reduce risk to your brand with advanced drop shipping technology Eliminates inventory overhead and risk Expands your product assortment with $0 inventory investment Facilitates testing of new products Increases fulfillment locations 10
- 11. © 2018 Radial, Inc. Multi-Node Fulfillment
- 12. Multi-Node Drives Speed & Efficiency Single Node vs. Multi-Node • Better utilize distribution network • Outbound transportation cost • Speed of delivery Optimization Allocation • Inventory placement and distribution strategy • Get closer to the customer 12
- 13. Multi-Node Has Pros & Cons Pros Cons ↓ Outbound transportation cost ↓ Transit time ↑ Service level ↑ Total inventory level ↑ Fixed cost ↑ Inbound transportation cost 13
- 14. © 2018 Radial, Inc. Fraud Management May Be the Biggest Risk Today & In the Future 14
- 15. Source: Javelin Strategy Research 15 Identity Theft Account Takeover Synthetic Identity 16.7M Victims in the U.S. in 2017 31% Amount ATO increased in 2017 275% Increase in 2017 $16.8B Stolen $5.1B In losses 1.5M People who had a new account opened before realizing there’d been a breach eCommerce Fraud Grew More Than 30% in 2017
- 16. © 2018 Radial, Inc. Fraud Management Requires Man + Machine 16
- 17. Machine Learning Only Assets Best at identifying patterns Fastest decision maker Scales well in volume and cost Minimizes human interaction Liabilities Decreases order approvals Increases false positives Only as good as the data it has Boundaries understood by fraudsters 17
- 18. Man Only Assets Able to weigh “gray area” decisions Decreases false positives Seeks new data sources Best at exception handling Liabilities Adds friction to the buying process Increases processing time Increases cost Limits # of variables used at same time 18
- 19. • Human intuition that relies on machine input • AI/Machine learning + sophisticated fraud screening tools • Big data – the more, the better A Balanced Approach eCommerce companies that invest in a multi-layered approach experience 65% fewer successful fraud attempts.
- 20. Some Retailers Are Getting It Right 20
- 21. © 2018 Radial, Inc. Headquartered in Carlsbad, California, TaylorMade Golf is a leading manufacturer of high performance golf equipment with industry-leading innovative products. Solution: Fraud Management Results: • 99.5% order approval rate • 13% increase in order conversions • Nearly 40% decrease in chargebacks • 1.5 headcount resources freed up to focus on service and finance • Zero fraud liability “With more orders getting approved and no fraud liability, we are increasing our revenue while freeing up headcount to focus on other initiatives. Choosing Radial to protect us from fraud only had an upside for us, and Radial delivered on everything it said it would.” Matt Kneller, Director, eCommerce, TaylorMade Golf Company 21
- 22. Solutions: Optimized OMS, Ship-from Store, In-Store Pickup Results: • 250 stores live in 6 weeks • 5,614% increase online inventory (70K units to 4M units) • 99.7% of orders ship in 2 days • 90% of online orders fulfilled by stores • 99.5% fill rate • 567% increase in boot sales in first 5 days of peak vs. entire prior year peak season “We went from about 70,000 units on average to about 4 million units available to our customers. We did more business in our first holiday season than we did in the entire year.” Kent Zimmerman, VP, Digital, Shoe Carnival 22
- 23. A premier cosmetics company wanted the ability to reach their customer within 2 days Solution: Multi-Node Fulfillment Model with 4 Facilities across NA Results: • Lower time in transit • Increased peak capacity • Improved business continuity option 23
- 24. © 2018 Radial, Inc. It’s Time to Change Your Thinking Modern Order Management: If your OMS isn’t smarter than shoppers, replace it Store Fulfillment: It’s tablestakes; start thinking beyond the fundamentals Drop Shipping: If you’re not doing it, start Multi-Node Fulfillment: Your customers expect faster delivery; you need to deliver Fraud Management: Hands-off is an open invitation to fraudsters; it’s time to take care of your good customers instead 24
Notes de l'éditeur
- Each of these
- Source: “Customer Desires vs. Retailer Capabilities: Minding The Omni-Channel Commerce Gap”, by Forrester Research, Date, geography and relevant to survey data Stats: CFI Consumer Study 2017: 61, 73, 73
- Notes about this section: This slide shows the “considered needs” of our audience. In other words, these are the things that they already know, at least to some degree, that they need to manage, buy, do, etc. The sales strategy during this section is to acknowledge that we know about all this stuff too. We get their world. The strategy is NOT to sell them on our products and services at this point. This would risk setting Radial up as a commodity purchase. Key points to make: The truth is there’s a lot to do, as you know. This is our version of an excerpt from Forrester that you may be familiar with. You see, all of your products have to available, all of the time, everywhere. And that means real-time inventory visibility across every sales channel, tax calculations payment processing, fraud screening. You need to be able to orchestrate your orders, route them to the best source location that meets your delivery SLAs and keeps your profits as high as possible. Your stores need to be able to fulfill online orders, if you use dropshippers, all communication needs to be automated, your customer service agents need a single view of the full order life cycle and the list goes on. Bottom line: it’s insanely complex. We get it. We get it because this is actually all the stuff that we do. One thing you’ll learn today is how your team could actually manage all this stuff.
- While close to have (44%) of retailers have optimized their end to end order management visibility, only 1/3 have the maturity to optimize split order fulfillment and only ¼ have optimized intelligent order routing. By not optimizing these retailers are losing Margin; Slowing Down fulfillment process and ultimately risking sales. Definitions: EndtoEnd Visibility: ability to see orders and inventory across entire store network and DCs Distributed Order management: ability to distribute orders to DCs, stores or both Flexible Fulfillment: orders placed online can be shipped from DCs, stores or directly from supplier Split Order FF: abililty to split orders between DC and store; between different stores; between DCs, Stores, dropshipper Intelligent Order Routing: ability to route orders to various locations based on rules – safety stock levels in stores; available inventory numbers; SKUs; Best fulfillment locations.
- Retailers continue to face major challenges around inventory control, visibility and returns. They need an intelligent OMS to address these challenges.
- Store Fulfillment is now tablestakes, but the issue is doing it right. If you’re not doing Store fulfillment at all you’re a laggard. If you’re doing it but not profitably – you’re behind. Need to think outside the box – stores become return centers for online purchases; and with consumers wanting real-time gratification, leverage store resources to also become delivery agents to enable same day delivery and extend your brand reach. SFS: Drives incremental eCommerce revenue Cost savings by leveraging fixed store overhead Optimizes store inventory Minimize out of stock scenarios ShipToStore Provides customer convenience & control for pick up location Reduced or free shipping Freight savings for retailer Increase foot traffic & upsell opportunity Minimal disruption to store operations & inventory
- Flexible integration options for any level of supplier sophistication Automated shipping notifications Two-way invoice matching Real-time inventory feeds Retailer-branded pack slips and shipping labels Formal compliance guidelines and enforcement Regular test orders to ensure compliance Defined chargeback process for non-compliance Compliance reporting Supplier recognition program Consistent two-way communication Supplier feedback loop
- The numbers for 2018 have not been released yet Ecommerce fraud grew 2X the amount that ecomm sales did (sales 16%; fraud more than 30%)
- THE SITUATION TaylorMade Golf Company has a growing direct-to-consumer business where average order values (AOVs) are high due to the nature of its top-of-the-line golf products. With customers making a highly considered purchase, creating a frictionless purchase experience is vital. Equally important, is preventing fraudulent purchases. Finding a balance proved challenging. TaylorMade worked with a third-party vendor to set up its fraud rules and relied on the vendor’s risk analyst to manage the rules. For orders held for manual review, TaylorMade leveraged one or two of its own customer service representatives to manage the fraud review queue, releasing orders when warranted, or canceling orders that failed the manual fraud checks. The combination of a one-size-fits-all rules engine and dual purposed customer service representatives, resulted in an order approval rate that hovered between 88 and 89 percent. On the backend, TaylorMade’s finance department was tasked with managing chargebacks, which caused resource constraints for the team. Matt Kneller, Director of eCommerce at TaylorMade Golf Company explains. “Based on the nature of the products we sell, which are highly personalized, TaylorMade didn’t have all of the necessary resources to support a direct-to-consumer business as it relates to fraud management. Our customer service representatives were double teaming as manual review analysts and our coverage was limited to a standard Monday through Friday work week, which created bottlenecks in the fraud queue and friction for our customers. Plus, we had limited resources to respond to chargebacks. We were also relying on our fraud management vendor to manage our rule set, but what we found is that their standard rule set may be fine for more consumable items, it wasn’t adequate for our business. Our order approval rate was too low and we were losing revenue not just in order conversions, but also in chargebacks. We knew it was time for a change.”
- Shoe Carnival, Inc. is one of the nation’s largest family footwear retailers, offering a broad assortment of moderately priced dress, casual and athletic footwear for men, women and children with emphasis on national and regional name brands.
- Why did they go from 1 node to 4 TNT driven decision to reach customer base within 2 days TNT ELC has 3 US facilities (Reno, NV; Louisville, KY; Burlington, NJ) and 1 in Canada (GTA). What are the benefits they realized from going multi-node – Faster TNT to customers, potential capacity increases during peak and of recent, the ability to divert volume to other nodes in a disaster recovery effort (i.e. Reno fires last year).
- Bus