Distribution Systems in Omni-Channel Retailing
This scholarly article addresses the question that several marketers now face in our new e-commerce, internet-based marketing. Omni channel marketing has become common among marketers in recent years because more consumers can be reached by offering different channels of distribution. Omni channel marketing, however, presents challenges to the firm, as the article describes.
Conceptual background and basic terminology
This section
structures the research field by defining OC distribution, which is
required before the related literature can be identified and analyzed. We compile current concepts of distribution in OC
retailing and define basic terms.
We
focus on the distribution concepts of retailers who operate both
bricks-and-mortar stores and a distance channel, and refer to these
retailers as "omni-channel" retailers. In practice, several different
terms and definitions have been developed for retailing in multiple
channels. Among others, "multi-channel", "cross-channel", and
"omni-channel" are often used interchangeably and without clear
distinction. However,
Verhoef et al. claim that recent concepts from literature and
practice tend towards seamless OC retailing, where the boundaries
between physical and online retailing disappear This
definition of "omni-channel" is based on the customer's point of view.
It underlines the difference between it and "multi-channel", where
distance and bricks-and-mortar retailing do not overlap from a
customer's perspective, even though a retailer operates in both fields.
By this definition, the channels are not physically linked in
multi-channel retailing.
Because we want to get the broadest
possible view of the logistics systems relevant in practice, we refer to
distribution in multiple channels as "omni-channel" distribution, since
this is the overarching term and most advanced concept. Consequently, we
investigate the structures and processes needed for OC distribution,
where retailers aim to integrate operations and physical product flows
to provide a seamless shopping experience. The overarching idea is to analyze the distribution
systems that enable customers to complete a purchase and receive orders
from any channel they choose. For example, a customer can buy a product
in a webshop and choose either home delivery or in-store pickup, and
may have similar options for product returns. Since we concentrate on operational distribution systems, we do
not make a distinction between the customer interfaces for shopping,
e.g., in-store, webshop, mobile commerce, catalog, or phone. We
investigate how operations and logistics function for physical stores,
the direct-to-customer channels, and the links between channels.
An
OC retailer's distribution system encompasses not only the delivery of
goods to stores and customers, but also backward distribution concepts,
since products purchased online require options for customers to return
products, if they do not want to keep them. As seen from the perspective
of an OC retailer, the forward (1) and backward (2) distribution
systems must therefore be taken into account.
(1) The forward distribution system is usually characterized by its sources (=dispatching locations), destinations (=points of reception) and associated links. To understand distribution systems within OC retailing, we need to consider the different types of sources (e.g., DCs and stores) and destinations (e.g., stores and customers) in the physical distribution structure, as well as possible delivery processes and modes, i.e., shipments to customers and stores.
(2) The backward
distribution system encompasses the physical flow of product returns
from the customer to the retailer, and the locations where returns are
processed (e.g., return centers). Backward
distribution therefore covers shipments from customers and stores. An
alternative name for this dimension would also be "returns" or "reverse
logistics".