The Actual Cost of Ecommerce Fulfillment Errors: Lost Customers, Lost Profitability

With consumer expectations continually on the rise, and the willingness for leading e-commerce retailers to fulfill them, many brick and mortar retailers find themselves struggling to adapt to the speed and complexity of omnichannel order fulfillment. By Michael Womeldorph

October 10, 2017

For years, brick-and-mortar retailers have carved out their niche by providing excellent in-store customer service.

But for those now entering the e-commerce fulfillment arena – and providing customers with the option to buy online and pick up in stores (BOPIS) – the challenge of preserving their hard-earned reputation just got bigger.

To say that online customers are demanding is an understatement.

One order error is often all it takes for online shoppers to permanently take their business elsewhere.

Retailers risk not only losing their online customers but also eroding the loyalty of their existing clientele.

There’s no question that e-tail giants have raised the bar for e-commerce fulfillment.

Today’s consumers expect nothing less than 100 percent order and inventory accuracy.

Multichannel Shoppers

According to a 2015 study by IDC, multichannel shoppers are 30 percent more profitable over the lifetime of the customer than traditional shoppers, making the potential impact of getting orders wrong even greater.

Here are a few online customer characteristics to keep in mind when considering their importance to your business:

• They are less loyal than traditional customers
• They expect fast delivery time and will jump to a competitor if the predicted delivery time is too long
• They are very price-conscious and can perform price comparisons quickly at no cost
• They expect a flawless customer experience at every touch point, or they will choose another retailer

Atoning for order mistakes can also cut into retailer profitability. Let’s examine an order pickup scenario that is more common than it should be.

An online customer shopping for a toolset confirms that the item he’s looking for is available at a local home improvement store and will be ready in 2 hours.

The internet e-tailer has changed the game

For more than a decade, traditional brick and mortar (B&M) retailers have faced a new omnichannel reality: internet e-tailers have changed the game. Driven by the consumer preference to order online from any of their connected devices, e-tailers have adapted their business model and distribution networks to fulfill service level agreements (SLAs).

Unlike B&M retailers, e-tailers aren’t concerned about building storefronts; they’re focused on delivering products to customers from their distribution centers (DCs) — providing two-, next- and same-day shipping to meet SLAs.

Consumers have also realized that there’s no substitute for actually seeing, inspecting and buying a product at a store. There’s no waiting or asking questions about quality. When presented with the option to buy online and pick up in store (BOPIS) or pay more to expedite the shipping of an online order, many consumers are making the drive to the nearest store. Thus, store order fulfillment processes have become increasingly complex as they take on their new role of e-commerce warehouse.

An opportunity to differentiate

While traditional B&M retailers have struggled to compete, they have a unique opportunity to give consumers the best of both worlds: online and in-store shopping options. To differentiate, B&M retailers must create an exceptional customer experience at every touch, whether that’s in-store service or the ability to ship directly to regional customers.

But inaccurate inventory levels, process unpredictability and a lack of visibility to labor effectiveness are traditional retailer roadblocks to achieving omnichannel fulfillment success. Increasingly complex store processes can take their toll on the customer experience and squander the opportunity at hand. For example, the inability to efficiently fulfill BOPIS orders — without sacrificing existing customer service levels — can damage the brand and cut into profit margins.

To succeed, B&M retailers need to get serious about omnichannel fulfillment processes by turning their stores into warehouses and enabling DC-like efficiencies.

Once at the store, the shopper discovers that the order was ‘shorted’ the toolset, as there is a disconnect between what the online system thinks is on the shelf and what is actually on the shelf. To make up for the inventory mix-up, the store manager grants the shopper a discount on a larger toolset – making it even cheaper than the original item and reducing or eliminating the profit on the item.

Let’s add up the full costs of this botched transaction: the time the store associate searched for the item; the discounted price of the more premium tool set; and the loss of confidence by a customer who has many other retailer options.

So how can retailers fix this problem?

By combining a voice-based task engine with labor management software, retailers can gain visibility to inventories on hand and add efficiency to all in-store fulfillment processes. By checking the SKUs for each item picked or put away as an item movement occurs, there is greater synchronization between the online inventory and the physical inventory, in real time.

Honeywell Intelligrated’s Store Solutions is designed to do just that. With Store Solutions, retailers can validate the activity of each SKU with every transaction – whether that’s stocking, picking or returns – resulting in a view of actual items in inventory that can drive order accuracy levels to as high as 99 percent.

The benefits of meeting online customer expectations are gaining their all-important loyalty and securing their repeat business. And with the efficient management of labor, retailers can add predictability to all in-store order fulfillment processes.