Autumn 2006

There's been plenty of talk about multi-channel retail, but now that it's really happening, it's driving new demand for sophisticated, all-embracing fulfilment software. The suppliers are ready, says Peter Rowlands

If you'd read nothing but Fulfilment & e.logistics for the past five or six years, you might be forgiven for thinking that multi-channel retail was a done deal - something accepted and absorbed into the business-to-consumer retail mainstream.

Likewise you might assume that the software to support it was already mature, widespread and readily available. That's because it's our business to focus on these things.

The reality, of course, is that despite all the noise about online retail growth in the wider business world, it's only in the past year or 18 months that internet shopping has truly reached critical mass, and started influencing the way retail fulfilment is handled at a more general level.

That's why almost without exception, the fulfilment systems suppliers are refocusing with renewed energy on the online market, and on multi-channel solutions in particular. Take Maginus, for instance, whose fulfilment suite already sits squarely in the multi-channel space. For some years it has offered everything from web storefront development to customer interaction, payment handling, order management, pick and pack and delivery.

However, sales director Harry Manley admits that in the past the company has not put the e-commerce elements at the top of its agenda. If it needed specialised front-end development resources, historically it would sometimes simply buy them in.

"Now we're building up the web side," he says. "We've appointed new developers, and recruited a new staff member who was previously with Shop Direct to head our e-commerce practice."

Maginus plans to re-launch and re-brand its web development capability, enhancing its ability to handle affiliate schemes, email campaigns and search engine optimisation.

Sanderson, one of Maginus's long-time rivals, also says online selling is its biggest growth area. "Two or three years ago, it might have accounted for 10 to 20 per cent of our activity," says Paul Davis, managing director for mail order systems, "whereas now the figure is more like 50 to 60 per cent."

In Sanderson's case, the company has gone to the extent of acquiring a third-party transactional e-commerce software solution, which was in previously use at a specific customer site. "Now we'll develop it and make it into a packaged solution, which we can include with our existing Unity suite," Davis says.

Other suppliers also seem to have been taken new interest in the interface end of the multi-channel retail process. Wayne Holgate, managing director of Axida, points out that the range of third-party tools retailers can draw on is massive, but adds: "We've always had the ability to handle web development in-house, and now we've resurrected and enhanced this."

Part of the appeal of buying into a multi-channel solution is that most of them aim to take in the full range of features you're likely to need in the business - including for instance marketing, customer relationship management and contact centre operation as well as more traditional fulfilment functions.

Some suppliers have lately been throwing new emphasis in these areas. Exact Abacus, for instance, has launched a system called iSOS (Intelligent Stock Optimisation System), which provides for campaign management and tracking, whilst at the same time integrating these functions with demand management and stock control and fulfilment.

Priam Software, meanwhile, has been developing its sales handling systems, both in the form of CR Magic, a contact centre scripting tool, and in Sales Manager, an integrated contact management system. Director Glyn Carvill says part of the appeal is that these functions are incorporated in a modern, graphical interface. "It's a much more user-friendly environment than operators could have expected in the past."

As existing retailers have grasped the nettle of multi-channel sales, suppliers with strengths in traditional retail markets have also started to pay more attention to the multi-channel approach. A prime example is Sterling Commerce, which acquired multi-channel specialist Yantra last year. Incidentally, although the Yantra name has been phased out, Sterling seems to have realised that it was too valuable to lose, and is believed to be considering reviving it.

Sterling's David Hogg says there is currently "enormous appetite and interest" among customers in cross-channel selling opportunities, but points out that the offer has to be matched to the user's circumstances. "The ability of clients to execute their requirements varies with the legacy system they're integrating."

He adds: "You'll find the retail world made up of a smorgasbord of applications. We don't try to be like an ERP supplier and sell clients everything; we acknowledge there are areas where they need to manage with legacy systems."

He says vendors such as Sterling are getting progressively better at doing this. "The infrastructure is there now. They're becoming more responsive and adaptive." He says basics such as order processing "are almost old hat now," adding: "Where things get complicated is understanding categories of merchandise, and the expectations that go with each type." In his view, the new wisdom is that "ordering, fulfilment and replenishment need to be tied together."

Steven Hampson, business development director for K3 (the developer behind the Elucid range), agrees that there's now enormous interest in the multi-channel space among traditional high street retailers. He feels his group has a flying start in this market, since one of its divisions has a long-standing and well-established presence in mainstream retail, delivering EPOS, store management and head office systems.

"This gives us credibility when we talk to the larger retailers about multi-channel fulfilment," he says. "Whilst smaller suppliers may have good products, established retailers are often more comfortable dealing with larger companies like ours."

He says such retailers really are now starting to take online sales seriously. "And we're well-placed to provide the kind of integrated service they need." Indeed, he says he can foresee a day when K3's retail and multi-channel divisions might eventually converge.

While vendors with origins in mail order and traditional retail are becoming steadily stronger in the multi-channel space, those that have emerged from the e-commerce side are simultaneously adding greater depth to their offerings. For instance Actinic, the budget storefront specialist, has consistently emphasised its back-end integration capabilities, and recently took a decisive step into the bricks and mortar retail market by acquiring Checkout, an established supplier of EPOS software and hardware to retailers.

Some e-commerce specialists such as Shopcreator and Venda have concentrated on the hosted approach, in which they run the software on their own servers, and user-companies access them over the internet. An obvious attraction is that this enables them to switch in new resources as they are developed, and in some cases amortise development costs over the whole user base.

According to Dan Wagner, the e-commerce entrepreneur who started Venda in 1998: "Businesses recognise and buy into the concept of being part of a user community." He says they're not deterred by the idea of sharing benefits with potential rivals. He feels that e-commerce systems are already becoming commoditised, and that retailers tend to maintain edge in other areas such as marketing, product range and demand, not core technology.

A question bound to spring to any would-be user of these systems is how far they are genuinely stand-alone, and how far it would be assumed that they would integrate with existing software. This is where the rounding-out process now under way in the market is much in evidence. Venda's strengths, for instance, are undeniably in the front-end department; yet Dan Wagner says that some users rely on its e-commerce suite entirely for everything from customer interaction to picking, packing and despatch. One of its highest-profile customers, the BBC, does precisely that.

Then again, Wagner says integration "would be expected" by many customers, especially larger businesses. He says this and other bespoking adds about £2,000 a month to the standard £5,000 flat fee: which still leaves the intriguing prospect of a comprehensive, ready-made yet configurable e-commerce package for about £80,000 a year. If you're starting from scratch, but want to get under way quickly and have the potential volumes to afford it, this kind of offer is difficult to ignore.

Glyn Carvill of Priam Software says integration is very much part of his company's offering. "On the whole, clients take a complete package from us, but with larger companies, there tends to be more likelihood of an element of integration with existing systems."

In the multi-channel world, of course, integration means a great deal more than just making old and new software work together. It also means dealing with product lines in a coordinated way, not separately according to sales medium.

Priam scores here by using a customised version of the well-proven and highly scalable M Technology ("MUMPS") database, which lies at the core of its ERP and fulfilment suite. All settings are stored here, rather than being specific to different retail channels. "So you could set up, say, a discount or other special offer in the central database, and then apply it through in any sales medium. There's no duplication."

Integration also means visibility. As Axida's Wayne Holgate puts it: "Larger retailers in particular want visibility in their multi-channel operations. Currently a lot of them just don't have it."

Visibility comes to the fore if you want your consumer web site to offer a live picture of stock availability. In that case, the expression you need to look out for from the vendors is "real-time". Priam's data-centric system, for instance, offers a real-time view into stock availability. So does the Axida suite. "Some systems use batch updating to refresh their published stock lists," Wayne Holgate says, "but ours are based on live interaction with what the guy actually picks in the warehouse."

Maginus's Harry Manley sounds a cautionary note on this kind of capability. "If you're integrating various new and existing systems, then your live stock view depends on how well the integration actually works."

Nevertheless, Maginus already does offer this kind of live status information. "People want to know when goods are going to arrive, so you have to provide this capability."

Where things can get a little more murky is where the goods never touch the retailer's premises, but are called off directly from the manufacturer or importer in response to consumer orders, and delivered directly from source. Often this process is called "drop shipping" (delivering single orders instead of batches). Are the multi-channel vendors geared up to it?

They say yes - though adding again that integration lies at the heart of it. "We've been doing it for years," says Sanderson's Paul Davis, but he notes that customers are only just beginning to ask for tracking information to be fed right back through the system to the consumer in real time.

However, things are changing, as Wayne Holgate of Axida observes. "Capturing data on drop-ship consignments is becoming increasingly an issue," he says. "We can supply information to a number of levels, depending on what is available." He says the company has in fact just implemented the first of its systems in which full tracking information on drop-ship deliveries will be made available to consumers. It's for an as-yet unnamed DIY client.

The message seems to be that if the supplier is ready and willing to provide information about product availability and despatch timing, it can usually be captured by the multi-channel suites and incorporated in their systems: increasingly via XML messages and web services, which are for instance used by Axida. But availability is as yet patchy at best.

Something else the multi-channel specialists now tend to include as a matter of course is carrier integration. This usually means the ability to produce shipping requests, labels and manifests and automatically in the form required by specific carriers, and to submit the requests electronically. Sanderson, for instance, says it works with "most carriers"; Maginus works with nine. Axida integrates with selected carriers, including Parcelforce.

None of the software houses we contacted for this feature specifically offers "carrier selection" (allocating consignments to the carrier best suited to each item and delivery address), although most recognise that there is growing interest in the idea. The preferred approach is to work with an established specialist (MetaPack was mentioned by several).

The software developers also acknowledged a growing desire among retailers to offer consumers the ability to pick a day and even time of delivery. Not all could provide such a fine degree of granularity, but Axida's Wayne Holgate has an interesting take on the idea.

"What's more helpful to consumers is the ability to be able to specify the times when a delivery is not convenient," he suggests. "They need the opportunity to say 'Don't deliver on Wednesdays, or on any day between 11am and 1pm'."

What if you're a fulfilment house, and are looking for a multi-channel solution geared to your requirements? Most developers mentioned in this article can and do supply fulfilment houses, but some make a particular point of serving their needs. One is Priam, whose Glyn Carvill points out: "Our software particularly well geared up the needs of multi-customers operations."

K3, too, is particularly keen to gain build up its presence in the third-party fulfilment market. "I don't mind being quoted as aiming for the leadership in that sector," says Steve Hampson, adding that the company already has "three or four clients" in this part of the market.

Features offered by K3 that are said to suit its software to this type of application include an extensive range of functionality, plus the ability to manage separate client accounts discretely, while still allowing them to share the same storage space and handling processes.

It's clear that although the fulfilment systems for the growing fulfilment market have a lot in common, there is still enough variety to make it well worthwhile deciding exactly which systems will serve your specific needs best, and how well they will work with your existing IT infrastructure. You certainly won't be left wanting for choice.