Enabling Direct-to-Consumer Growth for Brands

Transcription

1 Enabling Direct-to-Consumer Growth for Brands

2 Digital redefining How, What and When consumers buy Chat-bots and shopping assistant Endless aisle marketplace Real time promotions Digital stores and pop-ups 24/7 customer care FOLLOWUP 1 STIMULUS Smart device replenishment 2 BROWSE Online dressing room Time Definite Delivery 5 Frictionless Consumer Journey 3 TRANSACT 4 EVALUATE Crowd sourced same day delivery Click & Collect Locker Pickup Mobile, alternative payment One click buy on social media Amazon dash button Curated, free home trials Automated stores Digital augmented dressing rooms Source: A.T. Kearney 2

3 Expectations are rising 50% all consumers and >60% of Gen Z already shop cross channel Gen Z is 3X as likely to select delivery speed as the most important fulfillment metric vs. older generations same / next day delivery is 5X more important for Gen Z Consumers facing a negative fulfillment experience are 3X more likely to switch to a competitor for the next purchase under omnichannel Source: A.T. Kearney 3

4 In many categories, online is the only growth story in town Online vs. Offline Growth by Category (Retail Value, CAGR) Online Growth 35% 30% 25% Men s Grooming 20% Designer Apparel and Footwear (Ready-to-Wear) Color Cosmetics Hair Care Diapers 15% Super Premium Beauty and Personal Care 10% 5% 0% Luxury Leather Goods Baby & Child Personal Care Apparel Sportswear Fine Wines/Champagne and Spirits Luxury Goods Luxury Eyewear Oral Care Dishwashing OTC Footwear Skin Care Bath & Shower Vitamins Laundry Care Luxury Jewellery Fragrances Surface Care -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% Offline Growth Size of bubble indicates online penetration, ranging from 0% to 15% for categories shown Beauty and Personal Care Consumer Health Home Care Baby Care Apparel & Footwear Luxury Goods 1. Diapers online growth based on estimate for online baby products growth Source: Euromonitor; Morgan Stanley, IBISWorld, Nielsen, Internet Retailer, A.T. Kearney analysis 4

5 Brands are increasingly pursuing direct to consumer Omni-Channel Value Chain Integration Curve Level 1 Level 2 Level 3 Depth of Level Offering 4 Level 5 Service / Omni No hassle returns One click live customer service Omni-channel integration Buy / Fulfill Buy online for direct delivery 1-click and/or mobilepayment Store pick-up Global shipping Store fulfill with last mile delivery Shop Online customization Retail location recommend Customized order management Subscriptions Segmented assortment by channel Product sampling for VIP customers Research Online/mobile product search Side by side feature comparisons Online memberships High resolution specs/photos (3D) Product narration User feedbacks and reviews Smart recommend User communities Source: A.T. Kearney 5

6 DTC rapidly becoming a top C-suite agenda 6

7 Supply Chain Digital / Front-End Companies pursuing Direct-to-Consumer often neglect supply chain and fulfillment capabilities Website Digital Stores Smart Phone / Social Media Shop anywhere CRM Customer Service Digital Wall Retailer / eretail Ecom fulfillment centers Order and fulfill from anywhere B&M stores Right Right Location Home Delivery DSD / Drop Ship Ship from store / store pick-up 7

8 Effectively fulfilling consumer promise is much more critical in Direct-to-Consumer vs. traditional brick & mortar DTC Has Direct Impact on Top Line DTC Efficiency Has Higher Impact on Profit Consumers More Willing to Switch under DTC Brick & Mortar Long lead time = increased likelihood of Out of Stock, which may impact consumer conversion DTC Delayed fulfillment for an online order leads directly to an unhappy customer experience Source: A.T. Kearney; GfK FutureBuy 8

9 We see several priorities of focus Creating a Winning Direct-to-Consumer Supply Chain Define a clear, segmented fulfillment promise Redefine the role of the store (owned or retail partners) Evolve the right supply chain partnerships Set up the right enabling systems 9

10 Small Basket Size Large Basket Size 1 Consumer Promise Brands must define a clear consumer promise based on their brand and basket dynamics Customer Promise: Beauty Industry Example Premium Illustrative Beauty Brands Commitment to provide reliable access to quality products Catered to loyalist customers, access to right products is key differentiator Commitment to high quality products and customer service Increasing need now expectations driving need for creative supply chain solutions Commitment to providing a large range of SKUs at an affordable price Typically operate through an integrator/retailer Commitment to providing quick, easy access to multi-brand products Choice drives large basket size Mass 10

11 1 Consumer Promise We see a clear differentiation in consumer promise across omnichannel leaders Illustrative Consumer Promise for Omnichannel Leaders Fulfillment Focus Service Order Tracking One package Interaction Quality IVR CRM / CCC Personalized service OMS Cross Selling Supply Chain Promise variables Customer Care Promise variables Reliability On Time in Full (OTIF) First Contact Resolution Source: A.T. Kearney benchmarking Convenience Delivery / Pickup Delivery Cost Returns Subscription Model Capability Hours of Operation Choice Assortment Order Personalization Order Modification Speed Order to Delivery Speed to Answer Broad assortment and exclusive SKUs Customer centric service experience Free shipping and returns Customer care & convenient tracking Delivery speed Replenishment model Endless aisle assortment Leverages large store footprint for customer convenience Marketplace allows larger assortment Free shipping and returns (700+ stores) Efficient customer service 11

12 1 Consumer Promise A clear consumer promise informs future supply chain design Illustrative Segments Product categories Key Dimensions of Consumer Promise (eaches supply chain) Assortment / Product Range Key Dimensions of Customer Promise (case supply chain) OTIF Informs Supply Chain(s) Design Warehouse Product Cube Profile Peak Profile SKU Count Sales Channel Store Online Mail Direct to Consumer Order to Delivery Time Home Delivery Time Window Fill Rate Lead Time Inventory Days Prepaid % Network / Flow Item volume Service / SLA Inventory SKU Velocity SKU Cycle Assortment Geography Urban Metro Suburb Small City Rural Partner Store Pick-up Order Frequency Store Size/format INV level / breadth Fulfillment roles (Ship, pick-up) volume 12

13 2 Role of Stores Getting the right balance of future store capabilities will be key Consumer Experience Hub Local Fulfillment Hub Treasure Hunt Incubate exclusive or little known brands exclusively Dark Store Pick and Ship Merchantainment Provide an exciting environment to engage consumers in-store Click and Collect Product Trial Allow shoppers to touch and feel products On-Shelf Pick and Ship Personalized Service Enhanced level of personalized service Returns Getting the right balance will be key for retailers 13

14 2 Role of Stores Brands are aggressively testing different store solutions Emerging Omnichannel Store Concepts High Experience Hub Enhanced Hybrid + Customer Experience Focus Sales $ per square foot Customer experience Digital capabilities Location Traditional Store Some beauty and vertical specialty retailers are pushing towards enhanced hybrid concept Hybrid of Experience and Fulfillment Hub Fulfillment Hub Store as Fulfillment Hub Low Low Supply Chain and Fulfillment Focus Square footage Cost Proximity to demand Pick and pack capabilities in-store High 14

15 2 Role of Stores Brands also need to consider leveraging their retailer partner store networks Example of Joint Value Creation Opportunities Illustrative 1 Customer orders on Levi s.com or at Levi s experience hub Manufacturer / Brand 2 Next day delivery Levi s studies customer location and partner inventories to offer delivery or in-store pickup from nearby Macy s fulfillment hubs 3 Customer opts to pickup at a Macy s store 4 Levi s and Macy s joint systems track inventory levels 5 Customer picks up order and pays at Macy s, Macy s system updates Levi s and completes transaction Retailer A true omni-channel supply chain will require the creation of seamless integration of brand and retailer supply chains Source: A.T. Kearney 15

16 New Capabilities Exiting Capabilities 3 Partnerships The right fulfillment partnerships is critical for enabling flexibility and capabilities Capabilities Needed to Build Omnichannel Supply Chain Design & Manufacturing Warehousing Delivery Customer Care Sales Facility management Distribution Center Mgmt. Case picking Traditional CRM Website Management Raw Material Inventory Finished Goods Inventory Retailer Delivery Phone Call Center Store operations Manufacturing lines Facility Management Value added services Store-as-awarehouse Last Mile Delivery Integrated CRM Mobile App Analytics Cross-docking Direct to Consumer Chat/Video Chat Call Center Returns management Eaches picking Brands need to leverage external partnerships to quickly build these capabilities 16

17 3 Partnerships There is a rapidly developing, segmented supply market for fulfillment Segmentation of End-to-End vs. Best of Breed Fulfillment Vendors (US) Non-exhaustive Warehousing Delivery Customer Care End to End Marketplace Sales End to End Omnichannel Vendors Best of Breed DC Vendors Best of Breed Last Mile Delivery Best of Breed CCC Vendors Best of Breed Marketplaces 17

18 3 Partnerships Brands need to systematically design and evolve fulfillment partnerships as they grow Omnichannel Fulfillment Partnerships Evolution Higher End to End Outsourced Best of Breed Outsourced Mostly In-House Strategic Focus on Fulfillment Fulfillment / Customer Care is key source of differentiation? Need to optimize a multi-dc network? Limited uncertainty? Strong legacy in fulfillment / CCC / IT? Lower $50-300MM $300M - $700M >700M Source: A.T. Kearney Volume Online Sales 18

19 3 Partnerships Amazon and other marketplace also needs to be part of the solution Amazon Case Study 51% of US e-commerce growth in 2015 (and 24% of total retail growth) Top US E-Commerce Companies (2015 US internet retail sales, USD million) Amazon ebay 26,486 84,300 Maximize profitability Develop platform-unique assortment Increase volume to drive profitable sales while accounting for dynamic pricing Tailor product assortment to different business models (e.g. large sizes for Amazon s Subscribe & Save) Apple Wal-Mart Valve Macy s Liberty Interactive Best Buy Home Depot Sears 13,456 8,244 5,565 4,516 4,407 3,849 3,719 3,437 Collaborate on new product innovations Advertise and launch new products through platform First movers enjoy high market share on Amazon s Dash button sales Launching new products on Amazon provides a quick path to market with valuable consumer insight (e.g. Pepsi s launch of True) Brands need to manage Amazon as a platform, channel and customer 19

20 Please reach out to continue the dialog Michael Hu Andrea Szasz 20

21 Check out the companion article Creating an Omnichannel Supply Chain for Branded Manufacturers The Untapped Potential for Growth In today s omnichannel world, the distinction between brands and retailers is of little interest to consumers. They will buy from whoever is best able to deliver the goods. Branded manufacturers can take advantage of this unprecedented opportunity to get closer to the consumer, if they manage to acquire the requisite fulfillment and supply chain capabilities Read full article here 21

22 A.T. Kearney is a leading global management consulting firm with offices in more than 40 countries. Since 1926, we have been trusted advisors to the world's foremost organizations. A.T. Kearney is a partner-owned firm, committed to helping clients achieve immediate impact and growing advantage on their most missioncritical issues. For more information, visit Americas Atlanta Bogotá Calgary Chicago Dallas Detroit Houston Mexico City New York Palo Alto San Francisco São Paulo Toronto Washington, D.C. Asia Pacific Bangkok Beijing Hong Kong Jakarta Kuala Lumpur Melbourne Mumbai New Delhi Seoul Shanghai Singapore Sydney Taipei Tokyo Europe Amsterdam Berlin Brussels Bucharest Budapest Copenhagen Düsseldorf Frankfurt Helsinki Istanbul Kiev Lisbon Ljubljana London Madrid Milan Moscow Munich Oslo Paris Prague Rome Stockholm Stuttgart Vienna Warsaw Zurich Middle East and Africa Abu Dhabi Doha Dubai Johannesburg Manama Riyadh 22