Omnichannel Journeys The information / fulfillment matrix Module 7 Video 1 Omnichannel Journeys The information / fulfillment matrix

Intro In this module we cover what we call omnichannel journeys. These are examples of decisions made by retailers to expand their footprint and offer customers an omnichannel experience. We introduce the framework that we are going to use in the rest of the module to analyze the key aspects of the retailers' omnichannel journeys. This is what we call the information fulfillment matrix

Information / fulfillment matrix Customers increasingly expect to interact with retailers in a seamless way that may combine aspects of multiple channels at different stages of the customer journey. The possible combinations are endless. In order to structure this complexity, we focus on two of the most important aspects of the customer journey: how the customer gets information about a product how the customer gets the product. These are the information and fulfillment dimensions. Information and fulfillment are actually the two main functions provided by channels. Traditionally, those two functions were usually provided in the same channel. A customer shopping at a brick- and-mortar store would get product information at the brick-and-mortar store, and a customer shopping at an online store would get product information at the online store. With omnichannel retail, these two dimensions are becoming increasingly decoupled. A customer may get product information at a brick-and-mortar store and then place the order online, or get product information online and then purchase the product at a store. We can think about the information and fulfillment combinations as a two by two matrix.

Information / fulfillment matrix (cont.) The information may be obtained offline or online. What we mean by obtaining the information offline is having the possibility of physically inspecting the products prior to the purchase. What we mean by obtaining the information online is having access to a digital representation. The fulfillment of orders can be done offline or online as well. The difference is whether the product goes to the customer or the customer goes to the product. What we mean by fulfilling an order offline is that the customer physically goes to pick up the product. What we mean by fulfilling an order online is that the product is delivered to the customer. So we have four different combinations of information and fulfillment depending on whether or not the customer can inspect the products and whether the product is picked up or home-delivered.

Information Let's look at each dimension and discuss the pros and cons of each of the options. Let's begin with the information. Offering online information can be cheaper for the company than offering offline information. For example, the company does not need to hold inventory in order to offer online product information. However, from a customer point of view, having physical access to the product can reduce uncertainty when the products have nondigital attributes. Remember that products with nondigital attributes are those for which there is some information loss when providing a digital representation. If the customer wants to buy a suit, or perfume, there is only so much that can be communicated online, and many customers will value the possibility of having physical inspection, and therefore choose one of the combinations in the top row. If the customer wants to buy a book, perhaps the digital representation may be enough. It may be even better because the customer can explore the information from the convenience of their home.

Fulfillment Let's now move to the fulfillment dimension. The online fulfillment option corresponds to home delivery. Home delivery can be implemented using dropshipping or from a distribution center. The offline fulfillment option corresponds to customer pickup, which implies holding inventory in the store. What are the pros and the cons of both models? The offline fulfillment will give better response time and lower transportation costs because the customer is picking up the product. However, inventory costs will be higher because it requires to have inventory at each brick and mortar locations, losing the aggregation benefits of the online fulfillment. For categories where transportation costs are high, or where customers want to take possession of the products immediately, offline fulfillment may be more appealing. For example, if you want to buy this eighty pound concrete mix from Home Depot, it is probably a good idea to get it from the store, because the delivery costs are going to be much higher than the price of the product. For categories where shipping costs are low and in which there is a lot of variety, online fulfillment will be appealing, because it allows us to aggregate the inventory and reduce the costs.

Traditional vs hybrid approaches These considerations will drive the omnichannel journeys that retailers will find more appealing. We can think about these omnichannel journeys as expanding to new boxes in the matrix. These journeys typically start from one of the boxes in the diagonal that goes from the upper left to the lower right. That is where most of retailers were traditionally anchored. These are what we can call traditional approaches. The upper left corner corresponds to traditional brick and mortar retailers. For example, the Gap started as a retailer in the upper left corner. Customers would pick up the products from the stores and customers would be able to obtain product information at the stores, for example by trying on the clothes. The lower right corner corresponds to traditional pure-play retailers. This is where Amazon started. Amazon would do online fulfillment, shipping orders from their distribution centers to customer homes. Amazon would also provide product information online. Male apparel company Bonobos also started operating in this box. With the expansion of omnichannel capabilities, retailers following a traditional brick and mortar or online approach have been extending their footprint and have started offering new combinations of information and fulfillment. These are what we call hybrid approaches. For example, many traditional brick and mortar retailers now offer the possibility of obtaining product information online and picking up the products at a physical location. Similarly, many retailers that operated as pure-play online retailers at their inception now offer the possibility of obtaining product information at a physical location, while the product continues to be fulfilled from their distribution centers. Retailers are also expanding their capabilities along the fulfillment dimension, with traditionally brick and mortar retailers offering home-delivery and with traditionally pure-play retailers opening pick up points. In the next videos, we are going to follow some of these omnichannel journeys through the information fulfillment matrix.

Traditional vs hybrid approaches (cont.) With the expansion of omnichannel capabilities, retailers following a traditional brick and mortar or online approach have been extending their footprint and have started offering new combinations of information and fulfillment. These are what we call hybrid approaches. For example, many traditional brick and mortar retailers now offer the possibility of obtaining product information online and picking up the products at a physical location. Similarly, many retailers that operated as pure-play online retailers at their inception now offer the possibility of obtaining product information at a physical location, while the product continues to be fulfilled from their distribution centers. Retailers are also expanding their capabilities along the fulfillment dimension, with traditionally brick and mortar retailers offering home-delivery and with traditionally pure-play retailers opening pick up points.