‘Electronic commerce and the Internet are fundamentally changing the nature of supply chains, and redefining how consumers learn about, select, purchase, and use products and services’ (Sreenivas, 2007)
According to Barnes and Lea-Greenwood (2006) and Berger (n.d), mass-communication has allowed consumers greater access to information and consequently the performance gap between companies can no longer be hidden. With the introduction of e-commerce, how consumers behave and what they demand has changed. Mintel (2011) reported that over 55% of all Internet users research products via the Web before making a purchase either in-store or online. With so much information at hand, consumers have become more demanding. Their willingness to wait to be satisfied has been reduced and instant product availability is expected (Fernie & Sparks, 2009). These new demands have rippled across supply-chains and impacted how fashion businesses deliver and maximise customer experience.
According to Verdict (2010), the rising use of high-speed broadband worldwide is further facilitating the growth in online retail spend and its influence on the movement, storage and sale of merchandise from production through to consumption and service support. E-commerce is proving to be an increasingly significant distribution channel, poses both challenges and rewards for fashion retailers. The challenge for fashion companies has been to shift away from traditional methods of supply-chain management (SCM) towards an integrated approach that attempts to develop end-to-end supply-chains that are consumer-centric rather than product-centric, providing customized products and services (Sreenivas, 2007; Fernie, McKinnon & Sparks, 2010).
Over the last few years, many businesses in the fashion retail sector have forged success by entering into the e-commerce market and shaping their supply-chains in order to be responsive to these changes in consumer expectations and demands. Founded in 2000, pureplay e-commerce retailer ASOS, has maintained a competitive advantage by analysing and acting upon the detailed metrics that apply to its customer base. The company depends upon its supply-chain being “fast and flexible, with short lead-times and quick repeats and deletions” (Webb, 2010: 5). It is clear that ASOS place an emphasis upon agility and market responsiveness, defined by Christopher et al. (2004: 367) as being “characterised by short time-to market, the ability to scale up (or down) quickly and the rapid incorporation of consumer preferences into the design process”.
Supply-chains have had to become flexible enough to offer fashion businesses the ability to make changes in their operations or products in order to satisfy increasing consumer expectations (Bartlett, Julien and Baines, 2007). Fernie & Sparks (2009) stress the importance of agility in relation to SCM when flexibility and responsiveness are demanded. Harrison et al. (1999 cited in Christopher & Towill, 2000) identified to be truly agile, a supply-chain must posses a number of distinguishing characteristics as Table 1 suggests. Table 1: Characteristics of agile supply-chain
Market Sensitive| * Utilizing information technolgy directly from point-of-sale to capture real consumer demand.| Virtual | * Sharing data between buyers and suppliers. * Information-based rather than inventory-based. * Enables partners in supply-chain to act upon real demand | Process Integration| * Leveraging the use of shared information. * Buyers and suppliers collaborate in joint product development, co-manage inventory and use common systems. Network Based * Increased emphasis placed on co-ordination, collaboration & relationship buliding among supply-chain memebers.
Source: Christopher and Towill, 2000
In reaction to new players entering the market with online offers, many traditional retailers responded to this change and started trading on the e-commerce market, with a multi-channel approach to retailing becoming the norm in the mid-2000s (Fernie & McKinnon, 2009). Multi-channel retailing involves the use of more than a single-channel to sell goods to consumers, such as retail stores, online stores and mobile stores with retaliers like Next PLC and John Lewis pioneering the idea in 1999 (Fernie & Sparks, 2009). FreshMinds (2010) recognised that the shift from traditional retailing towards multi-channelling is an ongoing process fuelled by the Internet and becoming an essential business strategy, posing challenges as well as opportunities, for fashion retailers.
Christopher et al. (2004) identified a number of significant changes that have challenged supply-chain operations including short product life cycles, high levels of impulse buying and volatility, coupled with low predictability of demand. While the traditional apparel industry model worked on long lead times, in recent years there has been an increase in ‘time-based competition’ and the need for fashion businesses to focus on lead-time reduction and develop more responsive replenishment systems (Christopher et al, 2004). Many retailers have looked to global sourcing in reducing lead times with Jin (2004, cited in Doyle, Moore & Morgan, 2006: 3) identifying that “a balance between global and local sourcing may be the best route […] with emphasis being placed upon domestic suppliers where demand is highly volatile and unpredictable”. Deputy Chairman at Zara, a multi-channel retailer that was waiting for online consumer demand to build before launching into cyberspace in 2010, stated “In the next few years, we will source more basic items from China and Vietnam, but the high value added fashion items will continue to be made closer to home (Anon, 2010; Linguri, 2005).
With consumers gaining more power in the marketing channel there has been a shift from push to pull in the supply-chain (Porter, 1985; Fernie, McKinnon & Sparks, 2010). This has resulted in a shift away from traditional methods of SCM, which were considered to be lean and forecast-driven, towards more agile and demand-driven supply-chains. As previously mentioned, there has been increased non-price competition in the fashion retail sector.
Retailers such as Zara, H&M and New Look, have shifted their focus of competitive advantage towards fast response to changing fashion trends and consumer demand (Barnes & Lea-Greenwood, 2006). As identified by Christopher and Towill (2000), a lean approach to SCM is most powerful when cost is the winning criterion, although when service and customer value are most important, an agile approach to SCM is crucial. Fernie & Sparks (2009) argue, however, that there is no reason why supply-chain systems may not contain both lean and agile elements, creating a ‘leagile’ approach to SCM, with the aim for retailers being to create value for the customer at an acceptable cost as illustrated in Table 2.
Table 2: Comparison of lean, agile and leagile supply-chains Distinguishing attributes| Lean supply-chain| Agile supply-chain| Leagile supply-chain| Market demand| Predictable| Volatile| Volatile and unpredictable| Product variety| Low| High| Medium|
Product lifestyles| Long| Long| Short|
Customer drives| Cost| Lead time and availability| Service level| Profit margin| Low| High| Moderate|
Stock-out penalties| Long-term contractual| Immediate and volatile| No place for stock-out| Information enrichment| Highly desirable| Obligatory| Essential| Typical products| Commodities| Fashion goods| Product as per customer demand| Source: Agarwal et al. (2006, cited in Fernie & Sparks, 2009).
One of the biggest challenges now facing e-commerce retailers is managing inventory. When a customer orders an item from a retailers online inventory, they expect that product to be stocked in the retailers warehouse. With consumers now expecting reliable product-availablity across channels, stock-availablity issues are accentuated by a move into a multi-channel strategy (FreshMind, 2010). Handling inventory is especially important due to the whole issue of returns management. On average approximately 30 per cent of products ordered online are returned, compared to 6-10 per cent for ‘bricks and mortar’ fashion businesses (Fernie & Sparks, 2009). Retailers need to find efficient and effective ways to manage the intricate logistics involved in meeting these new demands (Fernie & Sparks, 2009). A research report carried out by Jones Lang LaSalle (2012: 14) noted:
“Traditional retailers must now support the delivery of merchandise to customers from multiple channels- managing in-store and online inventories and shipments- all at a more frenetic pace, and all in the midst of intensifying competition from pure e-commerce rivals”
FreshMinds (2010: 29) recognised “the principal challenge is to ensure that front-end stock information is updated in real-time as orders are made across several different channels.” With supply-chains demands becoming more complex, Bartlett, Julien and Baines (2007) noted that the visibilty of key information and inventory is becoming an essential criteria for a long-term competitive advantage. One solution is to implement a Warehouse Management System (WMS) that enables a real-time, endless link with the web front-end (FreshMinds, 2010). Marks & Spencers (M&S), a multi-channel retailer, recently overhauled its supply-chain to improve in-store availability, reduce end-of-season mark-downs and increase the agility and transparency of supply-chain operations. Andrew Skinner, merchandising director at M&S, noted the new systems would give the company “the inventory visibility we need to make more profitable decisions, help match our strategic and tactical plans with local customer preferences, and drive overall profitability” (King, 2011).
As well as product availablility, order fulfillment has become an essential element in enhancing customer satifaction. Fernie, McKinnon & Sparks (2010) identified that e-fulfillment, especially the ‘last mile’ problem of delivering goods to the end customer, holds the key to success in obtaining a competitive advantage. Boo.com is often cited as an online fashion retailer that failed due to its inability to successfully fulfil orders it received (Jackson & Shaw, 2009). A study conducted by FreshMinds (2010) found that 40% of consumers have been discouraged from shopping on line due to dissatisfaction with a prior delivery experience and that 45% look for delivery information before they start to browse. With the introduction of e-commerce, consumers have come to demand reliable delivery and return options at times of their choosing (Fernie & Sparks, 2009).
Many retailers have responded to this with innovative delivery and collection services. High-street retailers, such as John Lewis and New Look, have begun to offer an in-store pick-up service to online customers known as ‘click and collect’. In retaliation to this, many pureplay e-commerce retailers, have looked to using third party service logistics providers to offer a similar service to store-based retailers. For example, ASOS and misguided.co.uk, have partnered with Collect+ which gives customers the option to collect or return their order via a nominated independent store providing they offer the Collect+ service (Verdict, 2010). However, in spite of this, FreshMinds (2010) identified that a number of fashion businesses trading online are still struggling to keep up with their delivery and returns expectations.
New challenges have also emerged in the way fashion business deliver and maximise customer experience. It is important for retailers to remember that online consumers spend less time browsing through a brand’s site than they would when entering a physical store. With retailers’ competitors just a click away, websites should aim to provide creative ways to display product ranges and engage with consumers (Verdict, 2011). As “product” is the core element in the marketing mix, it is vital that e-commerce retailers replicate the consumers need to ‘touch and feel’ garments before purchasing. Many have attempted to do so by employing zoom features, 360° views and catwalk videos (Jackson & Shaw, 2009; Verdict 2010). In relation to marketing communications and engaging with consumers, there has been a shift from the use of traditional advertising towards new channels of communication that provide information on products and services (Jackson & Shaw, 2009). Several retailers have begun to use social networking sites such as Facebook, Twitter and internet blogs to interact with their consumers. In January 2011, ASOS launched Europe’s first transactional Facebook site that allows customers to purchase, leave comments, ‘like’ products, and link their opinions on ASOS items to their Facebook profiles (Verdict, 2011).
Along with e-commerce and f-commerce, many retailers have begun to explore other new channels of distribution beyond the traditional ‘brick and mortar’ stores such as m-commerce and in-store kiosks. Mintel (2012) noted that while relatively new to the market, m-commerce is expanding at a rapid pace and looks set to be the future of the fashion retail sector. A number of retailers have begun to embrace the m-commerce market with Oasis launching an iPhone app in 2009 followed by Next and Warehouse in 2010 (FreshMinds, 2010).
According to Verdict (2010), these new channels are as cost effective as online stores and can serve to extend a brands presence and help to maximise profitability by complementing physical store sales. It was identified, through a number of studies, that the multi-channel customer is the most valued customer and tends to spend more (Berman & Thelen, 2004; Fernie & Mc Kinnon, 2009). However, to achieve this, it is important for retailers to develop a well-integrated multi-channel strategy by providing a consistent, end-to-end customer experience regardless of the channel by which the customer chooses to shop. In accomplishing this, a retailer must posess certain characteristics as shown in Table 3 (Berman &Thelen, 2004).
Table 3: Characteristics of a well-integrated multi-channel strategy Integrated promtions across channels| * A uniform message is created * Promotions planned on horizontal basis across channels, not vertically by creating separate promtions for each channel.| Product consistency across channels| * Too little product overlap across channels crates inconsistent image. * Too much overlap may result in loss of sales opportunty. * Solution is to use Web as means of offering highly specialized merchandise.| Shared customer, pricing and inteventory data across channels| * Effectively manage an information system that shares data across channels. * Constant communication among channels is vital.| A process enabling store pick-up for items purchased on the Web| * Consumers favour this approach as means of avoiding shipping charges. * Requires database to be integrated.| Search for multi-channel opportunities with appropriate partners| * Multi-channel strategy may require additional resources. * Strategic partnerships with firms that offer complementary services e.g. third-party logistic providers.| Source: Berman and Thelen, 2004
Debenhams recently won the Retail Week best multi-channel retailer of the year award in 2012. The retailer aims to make the customer shopping experience as convenient as possible and has been committed to adding new channels to complement their existing stores and online presence such as a mobile optimised website, in-store kiosks and catalogues (Paige, 2012). According to the Debenhams Annual Report (2011), the integration of stores and other sales channels is what makes them a true multi-channel retailer. While some retailers are proving to be successful in implementing a well-integrated multi-channel strategy, according to Metapack (2010), several retailers have ground to make up by improving real time visibility of their stock as well as upgrading their order fulfillment solutions.
In conclusion, the e-commerce market is proving to be an increasingly significant distribution channel for fashion businesses. However, as well as rewards, challenges have emerged that retailers are now faced with. There has been a shift in market power towards consumers based on reduced information asymmetry. Consumer buying patterns are now changing which have challenged supply-chain systems. There has been the development of integrated SCM to enable quick responses to consumer demands with an increasing emphasis on visibility, flexibility and relationship building between members of the supply-chain. Effective management of the supply-chain to provide a customer orientated shopping experience has become a primary requirement for a fashion business to succeed in e-commerce market. While many retailers have proved to be successful with a move into the e-commerce market, others have room for improvement by increasing the integration of their supply-chains functions.
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