Is the omni-channel model an urgent
making the final purchase decision, consumers receive product information for
13 times on average, including 7 times online. 50% of the consumers who
purchase offline try the products in a regular store. The traditional sales
channels are torn out. Retailers are no longer facing the simple models of
offline-to-online or online-to-offline, but will have to provide products and
services at the right time, right place and with the right price in the
channels’ cross-over. It would be the key of O2O to address core demands of
different consumer groups utilizing different channels.
are optimistic, O2O can be spring to the garment industry. In the O2O era,
brands are created and developed much faster. Core competitiveness of
traditional retailers are built on terminals and channels, and e-commerce makes
the construction of channels faster and cheaper. There are more than 5,000
garments brands with an annual turnover of over 100 million RMB. Inman, a Taobao-based and well-positioned brand
developed itself in a few years, which is impossible in the past.”
inevitable that supermarkets have to transfer from online or offline models to
the omni-channel model. For example, 5% of
the middle-class families in Shanghai jog in the evening or walk their dogs.
When they need water then, consumers would place an order on their cell phone,
and pick up the goods in a nearby store. There is typical sales scenario in
which online and offline sales are integrated. The key of competition in the
future would be acquiring new consumers and realizing and increasing sales
through various O2O scenarios. O2O is not just a trend, it’s the reality. O2O
is not only a sales channel, but the sales itself.”
talking about O2O, but not many are brave enough to practice it. The
technologies needed are not difficult, but we have to rebuild the business
model by replacing the old one with a new healthy model built around the O2O
strategies. The bigger a company and its headcount are, the more difficult such
a transformation would be.”
What does O2O mean
the Supply Chain?
part of the
the business model we are looking into is: transform the stores into exhibition
and experience centers, and manage inventory at the DC level. Inventory is always a heavy burden
in this industry. In the past, the stores are warehouses at the same time. On
average, we store around RMB 200,000 of inventory at each store, and it is one
billion in total for our over 5,000 stores. If the monthly sales rate is 60%,
then there is an inventory cost of RMB 400 million each month. By the end of a
quarter, every store keeps a huge amount of inventory, and goods are frequently
transferred from store to store. If we keep the majority of inventory at the DC
level and less in the stores, and send out goods only when orders are placed,
the logistics costs will increase by tens of million per month, but it would be
much more affordable than the inventory costs of hundreds of million. The Taobao-based brand Inman has only one
warehouse in China, and its stores are only for experience. All orders placed
both online and offline are sent from the warehouse. On one hand, it minimizes
the inventory costs, and on the other hand, decision making is made much easier
with real-time sales information available.
supermarket industry is on the contrary. We would like to keep inventory and
delivery at the stores so as to control the logistics costs. In the past few years, many
e-commerce companies dealing with fresh food are trapped. The per-customer
transaction value and gross profit of sundry goods and fresh food are low, the
super high logistics costs cannot be translated into value, and continuous
investment is needed for traffic attraction. According to our statistics, the
gross profit rate of sundry goods (normal temperature) is around 25%, and it is
18% for fresh food. Transportation is a huge proportion of the costs.
The traditional delivery system
is the “City Warehouse - Customer”
and in such a model, logistics of normal temperature goods takes 12-15% of the
total costs while that of fresh food takes 20-24%. The logistics costs are
super high. In the omni-channel model, we would like to
allocate the inventory to stores, and distribute in the two-phase model, e.g.
“Warehouse - FT Store - Customer”. Delivery will be carried out by the stores.
Through such arrangement, we can reduce the logistics costs by 10%, shorten the
time period of delivery, and improve customer experience. What’s more, we need
to select a better portfolio, and provide better experiences both in store and
in delivery. Our supply chain, IT system, processes, devices, and etc. have to
be rebuilt to suit with the new business model.
challenge in front of us is how to adjust ourselves in the existing system to
adapt with the omni-channel
model, or how to move and improve.
We wish to resolve this issue with supply chain design. However, the fact is
that we cannot make a complete transformation within one or two years. As many
other companies, we are facing this challenge: How to adjust ourselves in the
existing system to adapt with the omni-channel model. We call it “Move
and Improve” in Beaumanoir. As for inventory, offline
inventory and online inventory support different channels in the past. We
cannot even share inventory for different online channels, and this induces
huge cost. The current strategy of our company is to manage inventory in the
Omni-stock manner, and we have adopted technical measures to coordinate demand
from different channels, define rules and manage prioritization. As for
logistics, we will need to balance in-house and outsource, and determine where
to build in-house capabilities.
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