We all know the rapid growth of ecommerce in retail, but the numbers are still rather staggering, rising 15% or so year-over-year, quarter after quarter.
According to the Commerce Dept., ecommerce sales were about 8.1% of total retail sales last year, up from 7.3% in 2015 - but those total retail numbers include sales of cars, gas stations, restaurants and a few other categories that are not really relevant for comparison.
Supply Chain Digest Says... |
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Let's face it, most of the retail industry is under financial pressure due to the changes that are roiling the sector.
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So, SCDigest computes the numbers based on a formula in which we take total retail and subtract out those non-relevant categories.
Using that formula, ecommerce sales were a much higher 11.9% of total US retail sales in 2016, up strongly from 10.9% in 2015, as shown in the figure below. Of course, that share is much higher in some product categories, such as electronics and apparel.
Little discussed is the impact of this sea change on retail vendor compliance.
I see a number of ways that compliance must evolve to best manage an omnichannel world:
Be Prepared to Monitor Vendor Drop Shipments: An increasing number of retailers are using vendor drop shipment programs to reduce inventory levels and meet customer service needs. Have your compliance rules and monitoring programs been extended to embrace vendor drop shipments?
No doubt there is some trickiness here, as some aspects of compliance may be invisible to the retailer, as the order is sent from the vendor directly to the end consumer. But there are a whole array of performance factors (packing/packaging, packing slip format and contents, electronic communications of shipping data to major parcel carriers for tracking, returns handling and more) that needs to be tracked.
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And just as retailers monitor vendor performance in areas such as on-time delivery to retail DCs and order fill rates, retailers now need to track vendor drop ship performance in terms of on-time delivery to consumers and meeting delivery commitments, fill rates and more.
A simple web search, for example, find Nordstrom's has a complete compliance document specifically for vendor drop shipments.
How Will Third Party DCs be Handled? Compared to regular retail DCs focused on traditional store replenishment, a far higher percent of ecommerce DCs are outsourced to third-party logistics providers.
How will vendor compliance be extended to handle vendor shipments to these outsourced facilities? Vendor performance is just as important if not more important at these facilities as at in-house operations. Why perhaps even more important? Because while the costs of vendor failure (e.g., incorrect price ticketing) can be at times a bit of a soft cost at a traditional DC, you can be sure a fulfillment center run by a third party will charge for every nickel of work that needs done to address vendor issues.
Third party operators need the same processes and tools an in-house DC has to address compliance.
The Importance of Recouping the Costs of Vendor Performance Failures: Let's face it, most of the retail industry is under financial pressure due to the changes that are roiling the sector. That means that it is imperative for retailers to fully recover all costs which are caused by vendor performance failures.
That means automated systems that are built for such scale and accuracy – and detailed vendor communications about the failures to encourage prompt payment.
Robust vendor compliance can play a small but important role in a retailer's financial results.
Is your vendor compliance program and technology omnichannel ready?
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