#ecommerce #omnichannel #digitaltransformation #it
Welcome to the second part of this trilogy about omnichannel solutions. In the previous part, I presented the main IT challenges companies have all over the world:
- Lack of delivery time and cost calculation: most of the ecommerce platforms don’t have the ability to calculate precisely how long it takes to ship goods to customers in different ranges of postcodes. They rely on tags, such as “Shipping-from-store: 4 business days”, which reflects the worst-case scenario, hence decreasing conversion rate.
- Limitations when managing multiple fulfilment locations: we explored the example of a company with 40 physical stores across the UK and the importance of storing, calculating and displaying the stock availability of each of these locations according to the selected delivery (or pick-up) method.
- Manual procedures: without having automated processes and integration between systems, I presented two real cases of companies having their staff acting manually, order-by-order, to allocate them accordingly. Besides increasing operational costs, manual work limits growth.
- Integration with external OMS, the leap to a new problem: I showed why integrating an external Order Management System might affect the latency and SLA and drastically increase operational costs. Although it’s a common practice, the implementation process is certainly a challenge.
If you haven’t read the first part yet, feel free to do so by clicking on the link below.
Unleash omnichannel capabilities: Main technology challenges
Companies that don’t prioritize off and online integration won’t thrive in the digital era. It’s not just about…
Throughout this second part, I’ll explore more about VTEX’s omnichannel solutions, such as OMS, marketplace tools and how companies are unleashing all capabilities by using our native features. First and foremost, however, I want to share a couple of highlights Gartner wrote about VTEX in their last Digital Commerce Magic Quadrant Report:
Marketplace and fulfilment providers: two different abstractions
When was the last time you placed an order on amazon.com? Do you remember how many sellers did you buy from? Do you remember receiving different emails saying that your parcel was shipped, even though you placed one single order?
VTEX works the same way. In our architecture, each fulfilment entity is treated separately from the store, the marketplace entity, thus making it possible to onboard physical stores, 3PL, warehouses, dropshipping providers or even external sellers. That means it’s possible to implement any omnichannel strategy such as ship-from-store, click-and-collect, drive-thru collect and others only through configuring the platform. No wonder Gartner points out our marketplace capabilities as one of our main advantages.
The screen below shows VTEX back-office and an example where a company has multiple stores, a 3PL provider and one main warehouse fully integrated.
Each of these locations has an environment where it is possible to set its strategies individually. Everything from the catalogue, price, inventory management and promotions can be managed separately by each location.
As you can see in London’s and Manchester’s store panels, prices vary. Therefore, when a customer is accessing the store from Manchester, VTEX not only applies the prices accordingly but also displays the products available in that region.
Note: as an API-first solution, prices, inventory management, promotions and a lot more can be fully integrated using our Rest APIs.
Omnichannel cart and checkout: simplifying the UX
Besides being a headless solution, VTEX offers two important modules which help our customers to be more agile: VTEX CMS and Store Framework. Instead of building the checkout UI from scratch, which might take months depending on the complexity of the operation, VTEX offers a set of native out-of-the-box front-end components that solves omnichannel scenarios.
Below you can see an example of the native components that allow customers to select between home delivery or click-and-collect.
Now, let’s imagine the scenario where a customer has added two items to the basket and selected click-and-collect. As I said previously, due to the fact that VTEX controls the stock availability and the shipping policies of each location, the system knows that one item is available for collection at the selected store, King’s Cross, while the other is not.
Therefore, VTEX splits the order into two: Package 1 will be shipped by the London Store and Package 2 will be collected at King’s Cross Store. Another important feature available is the ability to calculate the delivery time for each location.
VTEX’s Distributed Order Management
You may wonder “What if my company has dozens, hundreds of stores, how does VTEX know which one to select?” “How does VTEX know if the London Store is the best to fulfil the order?”. That’s exactly the role of an Order Management System (OMS), which is an important ally in the moment of implementing omnichannel strategies.
But before digging into the topic, I want first to explain why we call our OMS “Distributed Order Management”: because each individual location has its own Order Management, thus we “distribute” the order management capabilities among all locations.
How VTEX’s Order Management System works
Below, we illustrate in three different scenarios how our Distributed Order Management works. Consider the following example for all scenarios:
- Jade is based in London, Zone 1;
- She wants to buy: a tablet, a new hat, a pair of shoes and a sneaker;
- She found an online store that sells everything she wants;
- The store has two brick-and-mortar locations and one warehouse.
Below you can see the availability of each product in each location as well as available shipping options for each of them.
At the checkout, Jade selected click-and-collect. At this moment, similar to our last example, VTEX displays that Store Zone 1 has the sneakers and the shoes so Jade can collect them in one hour. The hat is only available at Store Zone 2 so VTEX knows that this location is the only one that can ship this product. But how does VTEX decide which location will fulfil the tablet?
The answer is Store Zone 2. Why? Well, in this case, it is the one that ships the product faster, in one day, while the warehouse takes 2 days. The delivery time is one option to “untie” when two locations have the same item.
Now let’s imagine another scenario:
In our previous example, the difference between shipping costs was only £ 0.50. When the difference is bigger (£ 5.00 in this case) maybe the store prefers to allocate the warehouse instead.
That’s why VTEX’s Distributed Order Management takes into consideration not just the delivery time but also costs. Each store is capable of balancing the decision considering these two criteria so that customers also see the best option. Nevertheless, it’s important to say that VTEX’s solution considers more criteria to decide which location to allocate, like operational capacity, for example.
Now, in our last example, let’s suppose that Jade wants to buy two tablets, not just one. Let’s also incorporate one more data point as you can see below.
Now, even though Store Zone 2 is the best option, it has only one unit available while the warehouse has another unit. Thus, in this case, VTEX would split the order into three parts:
- Jade can pick up the sneakers and the shoes in one hour at Store Zone 1;
- Store Zone 2 will ship one tablet and the hat, with both arriving in one day with a shipping cost of £ 5.00;
- The warehouse will ship the other tablet and it will take two days to arrive and Jade will pay £ 4.50 for that.
By adopting a marketplace architecture, VTEX separates natively the entities responsible to place orders from the ones responsible to fulfill them. With this, companies are able to onboard any type of fulfilment providers such as warehouses, stores, 3PL, dropshipping agents and others. VTEX creates two separate layers so it’s possible to “buy from anywhere” and “fulfil from anywhere”.
The Distributed Order Management System allows each location to have its own price and promotion strategy while providing inventory management and shipping policies. Thus, VTEX’s omnichannel checkout is able to select the best location according to the customer’s choice between home delivery or click-and-collect.
In the next and final chapter of this trilogy, I will bring real examples of our clients that have successfully implemented VTEX’s omnichannel solutions and now are unleashing the full potential of their business.