The days of retailers handling all critical business functions and processes from delivery, warehousing and logistics to returns and customer contact centres are coming to an end.
The traditional notion of retailers handling all these processes is slowly but surely being phased out, as the sector enters a new ‘post-modern’ era in how it conducts its operations. In 2015 outsourcing in the retail sector increased by 45 per cent year-on-year, with 60 per cent of retailers citing delivering an improved customer service as the main driver for handing control of critical processes over to third parties.
And the benefits of outsourcing processes don’t stop there – as Natalie Sehnal, Business Development Manager at Spark Response, a provider of customer contact and distribution service to the retail sector, recently explained.
The case for outsourcing
“When talking to customers it’s clear that outsourcing offers them increased flexibility and scalability at a price point far below the investment required to handle processes themselves,” commented Natalie, “What’s more, they can instantly gain access to expert staff and specialist skills that would take a significant amount of time, resource and investment to accrue internally.”
As a result of these benefits, retailers have realised that they are in a far stronger position to respond to changes in the market place and more able to upscale to cope with peak trading times such as Black Friday and Christmas. Importantly they can do so cost effectively, while realising a quick return on investment.
Assessing your outsourcing options
So, which business processes do retailers stand the most to gain from outsourcing and what are the potential drawbacks of doing so? Let’s take a look at some of the pros and cons of outsourcing key processes.
eCommerce - The obvious pro of outsourcing an eCommerce offering is the easy to use templates that third party marketplaces can offer, ensuring a retailers’ products become almost instantly available to the mass market. However the flipside tends to be that, by outsourcing to companies such as Amazon and eBay, retailers will lose any USP over competitors and have limited choice and control over how products are presented.
Customer contact centre - Customer contact centres require not only a large amount of office space but also significant investments in both staff training and infrastructure. By outsourcing, retailers gain instant access to a well-trained expert team of staff, while also gaining the flexibility to upscale for peak trading periods. However, the drawback is that it removes a direct touch point with the customer, creating the potential for a disconnect opening up between the brand and the customer.
Warehousing - A warehouse capable of handling a retailer’s entire product range is not cheap, so outsourcing removes the need for upfront investment in facilities while also providing the scalability to increase or reduce space as and when it is needed. The downside however is that the retailer is placing a high level of trust to fulfil orders in a third part provider.
Delivery - The main appeal of outsourcing delivery to an external supplier is that it removes the complex problem of meeting same day and next day delivery promises, leaving it to the experts to fulfil. However, retailers are literally putting their brand and reputation in the hands of the service agent knocking on the door.
Connecting the outsourced dots
Despite the obvious benefits of outsourcing these processes, the retail sector has two core reservations about handing over the critical functions to other providers.
First, it becomes a major challenge to pull together all the information they require from the disparate providers and secondly there is the fear that they will lose all control over the critical data that handling these processes generates. The obvious answer is to utilise cloud solutions to pull together all outsourced functions onto a unified platform and ensure they retain control. This model enables retailers to realise the benefits of business applications, while also enabling suppliers to access only the applications that are relevant to the functions that they deliver.
Much like the move from keeping money in a tin under the bed to keeping it in the bank, whereby control was sacrificed for enhanced security and access from a variety of touch points, the cloud/SaaS model delivers the same for retailers that outsource processes.
As retailers outsource more processes to expert, niche providers they will be better positioned to focus on core competencies of branding, buying and selling, and merchandising. The cloud will sit at the centre of this new world, pulling together all the disparate data from third party suppliers, enabling retailers to ensure that they achieve customer service excellence.
This ‘post-modern’ approach will not only enable retailers to deliver better customer service but also to respond more quickly to changes in the market and ultimately improve their bottom line.
Mark Thornton, marketing director at Maginus
Image source: Shutterstock/Maxx-Studio