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Gamification is Badly Overhyped, but it Really Can Work in Retail

By October 16, 2023Uncategorized

Distributed order management solutions can support a ship-from-store strategy.

The book You’ve Been Played was written by a software developer who created one of the most popular gamified apps in the world. He writes, “over the years, I’ve found little evidence that most gamification actually works.” I’ve encountered gamification in enterprise applications. After an initial burst of enthusiasm, I’ve also become skeptical.

But a company called OneStock Retail looks like they have cracked the code. OneStock Retail, based in Paris, has developed distributed order management software that puts gamification at the heart of the solution. DOM is a solution that supports retail chains who want to pursue an omnichannel strategy.

As ecommerce grew at double digit rates, while in store sales grew at less than the rate of inflation, retailers were looking for a way to turn their stores into a competitive weapon. Rather than just offering consumers the choice of buying online or buying in the store, a retail omnichannel strategy involves a lot more paths to fulfill an order or to process a return. Flow paths can include buying online/ship from store; buy online/pick up at store, shop at store/have item shipped from a different store, and many other options as well. In short, these different options offer consumers more choice and more convenience.

Chris Cunnane, an expert on omnichannel commerce at the industry analyst firm ARC Advisory Group, says that “a consumer does not expect a similar experience across channels. Instead, they are seeking out a brand experience that allows them to interact through multiple channels during the shopping journey.” In the end, it all comes down to whether they can receive the product they want, when they want it. And in the ecommerce age, customers often want the product as soon as possible. This puts product availability and speed at the heart of omni-channel operations.

But retailers have struggled to turn the store into the competitive omnichannel weapon. One key problem is that the inventory accuracy in a store is often terrible. For many retailers it hovers around 90%. A customer may order a product, the DOM system believes the store closest to the customer has it, a store employee goes to pick it, but it is not there.

The second problem with turning a store into a competitive omnichannel weapon is that the culture of a store is to serve the customers in the store first, and then, if time allows, to work on ecommerce orders. The way a store is compensated can contribute to this. Does the credit for an online/ship from store order go to the ecommerce operation? Or the store?

The Gamification Approach

The approach many retailers take to fulfilling online orders from a store is what Romulus Grigoras, the CEO of OneStock Retail, calls the “waterfall” approach. There are usually a series of steps fashion retailers take to fulfill an ecommerce order. First, the DOM looks to see if the inventory is available in the warehouse. In fashion, products often have short lifecycles and these products are not reordered near the end of their sales cycle. The result is the product is no longer stocked at the warehouse, but some stores have not sold out – they still have the item in stock.

When the DOM does not find the item in stock at the warehouse, it looks for the closest store to the consumer to fulfill from. The DOM confirms the order, and then the DOM waits three of four hours for the store to fulfill that order. If the store has not fulfilled the order by then, the order is cancelled at that store and routed to the second-best store location to fulfill the order.

“We don’t do that at all,” Mr. Grigoras said. “What we do is that as soon as the online order is placed, we select a subset of the stores which are eligible to fulfill that order. We then put those stores in competition.” This is where gamification comes into play.

“They know they’re in competition.” The store that is the quickest to grab the order and commit to quickly fulfilling the order, gets the sale and the reward for that order. In short, Mr. Grigoras explained, the stores are “incentivized to fulfill quickly, but to do so reliably.” If the store can’t do what they say they can, they will lose priority in the DOM’s orchestration queue. In other words, that store will not have the same opportunities to fulfill future ship-from-store orders as better performing stores do.

Because gamification drives a much quicker fulfillment process, it greatly reduces the ecommerce cancellation rate. “This is the major problem in ship-from-store.” Mr. Grigoras named one of their retail customers that was using a DOM system from a different supplier. That retailer was doing ship-from-store and they had roughly a 30% cancellation rate for their online orders that were fulfilled from stores.  When they changed to OneStock it was because they “understood that gamification would be a game changer. They now operate with the cancellation rates which are very close to warehouse cancellation rates, which run at about 3 to 5%.”

Why would competition between stores improve stock accuracy? When a store tries to claim the order, but can’t because the item is not there, the store must declare this. The DOM then automatically corrects the stock level at that store. The store also must provide a reason code for why their inventory was inaccurate. It might be that the item has just been sold, or the master data associated with the item was incorrect, or there may be other reasons.

Because retailers know that their store inventory may be inaccurate, they operate with buffers. It may be that a store will only be selected to fulfill an ecommerce order for an item if there are at least five of those items listed as in stock at that store. But with competition, and a continuous improvement process to improve inventory accuracy, stores can reduce their buffers. They may decide if the store lists two items in stock, that store should be eligible to fulfill an ecommerce order. This increases sales.

The post Gamification is Badly Overhyped, but it Really Can Work in Retail appeared first on Logistics Viewpoints.

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