Key Elements of Success in Building a Retail Channel Strategy

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Landing your first retailer is exciting, but figuring out what comes next can be a challenge. Creating a retail channel strategy with the right processes will be vital to your success as you work through the ins and outs of being part of the supply chain. 

The challenge of vastly different retailer requirements

Success in the retail supply chain doesn’t come easily. It takes a lot of hard work to navigate this complex system. After signing your first retailer, you may begin to see why. 

Each retailer you do business with has their own set of requirements for their merchant community. These requirements, often referred to as “rulebooks,” include specific business processes for suppliers to exchange data and documentation requirements such as invoices, purchase orders, and advance shipping notices. 

Rulebooks can be hundreds of pages long and are not standardized between retailers, but vary based on a retailer’s size, industry and technological capabilities. Suppliers working with multiple retailers need to accommodate different rulebooks for each retailer. The differences in rulebook requirements between retailers can range from minuscule formatting details on an invoice to labelling and shipment size parameters. 

Let’s say, for example, that you have two retailers with two different rulebooks. Both require purchase order acknowledgements, but the details and timing are different for each. One retailer might allow you to make price or quantity changes to a line item on the acknowledgement, while the other doesn’t allow for any line item changes. One may require an acknowledgement to be sent within minutes of receiving an order while another allows responses within a week.

The cost of noncompliance with retailer requirements can be refusal of delivered goods, fines, and potential damage to your relationship. Maintaining good retailer relationships should be one of your top priorities, and following their rulebooks is an important way to nurture and build those relationships.

As you add more retailers and channels, complying with multiplied requirements becomes exponentially more challenging. One way to deal with the growing complexity would be to keep these processes in-house and hire additional staff. 

Employees would have to become experts in the individual retailer rulebooks and stay up to date with changing requirements, taking them away from other important business priorities. As you continue to add to your business, more and more staff would be necessary to keep up. But as your manual processes multiply, so does the potential for errors and inconsistencies.

Managing each of these rulebooks and retailer relationships can take an enormous amount of time and labour and is probably not a core competency of your business. Luckily, there’s a better option. Rather than becoming an expert in retailer rulebooks, you should take advantage of solutions that already exist. The right business partners can help you navigate these complexities with ease and confidence, supporting a good retail channel strategy.

ShipBob’s ability to service both D2C and B2B has enabled us to build more consistent procedures and practices across our different sales channels.

Along with Chewy, we’re also fulfilling orders through Amazon, as they are the two biggest online pet sales channels in the US.”

– Stephanie Lee, COO at PetLab Co.

Adopting full-service EDI for your retail channel strategy

As you continue to grow, you will likely be asked to provide data to your retailers via EDI (Electronic Document Interchange). EDI is a common industry term that describes the electronic exchange of important business documents like purchase orders, order acknowledgements, invoices, advance shipping notices and more in a standard format. 

Getting started with EDI is a daunting prospect, but it can readily be outsourced to a third party. When you factor in all the varying requirements from individual retailers, it makes sense to hire an expert in all of these trading partner rules to handle EDI on your behalf. It’s impractical for a company to build and maintain this expertise in-house, particularly as the retailer rulebooks are constantly changing.

There are two types of cloud-based EDI solutions: managed services and full-service. On the surface, these EDI solutions sound similar, but in reality, there are vast differences between providers. 

A managed EDI service is a cloud-based solution in which the provider is responsible for developing and maintaining the core technology, while the customer’s internal staff is responsible for the day-to-day customisation, optimisation, and maintenance of the technology. Managed services are essentially updated versions of traditional licensed software in which each company has its own instance of EDI software running in the cloud. These systems require extensive in-house resources to manage them on an ongoing basis.

In contrast, a full-service solution provides a cloud-based solution and associated staffing resources responsible for customising, optimising, and operating the technology. In this model, the provider carries out a complete business function on behalf of the customer. A full-service provider does the work to understand all of the external business rules on your behalf across your entire customer base.

So, which EDI solution should you choose? This decision comes down to a central question: is EDI a core competency of your business? If EDI is a core competency of your business, then managed services is a good option. 

If, however, you don’t believe acquiring and retaining specialized EDI skills is a strategic priority, then a full-service option is the best route. In the end, companies that want to focus their resources on running their business rather than an EDI department should consider a full-service solution.

Trading partners who use full-service EDI benefit from increased visibility into the ordering process, including the efficiencies gained from automation and reduced manual labour. Full-service EDI specialists like SPS Commerce have existing networks of retailer rulebooks, as well as the expertise, process and technology to support you as your business grows. 

“We utilise ShipBob’s EDI solution that is connected to our 3rd party EDI platform SPS Commerce for our Chewy orders, and when we don’t ship directly to Amazon, we rely on ShipBob’s direct integration with Amazon for FBA orders. We’re even exploring additional channels that ShipBob supports, such as Walmart.com. Being an omnichannel brand is critical for us, so we can reach more pet lovers from more places. We’re glad that ShipBob helps us keep up with demand from all the places we reach our customers.”

Stephanie Lee, COO at PetLab

Preparing a retail channel strategy for growth

Once your EDI is up and running, you’ll be primed for growth. That growth might be gained by fostering your existing buyer relationships, or by adding new retailers or channels. 

Let’s begin with your existing relationships. The goal is to increase sales over time, so a good place to start is by meeting the requirements of the retailer rulebook, as discussed above. Doing so shows the retailer that you respect them and allows for a relationship of mutual trust.

Provide your retailers with excellent service. If doing business with you is easy and pleasant, they’ll be more open to expanding your product offerings in the future. Ask for feedback, listen, and respond by making adjustments when necessary. Your retailer relationships will strengthen when you show them you care what they have to say. 

Consistency and timeliness in fulfilling orders also goes a long way to building and maintaining good relations with trading partners. Changing consumer behaviour has been reshaping the supply chain over the past few years, and will continue to do so moving forward. Consumers expect instant responses across channels. As retailers have had to adapt to these consumer demands, their merchant community is expected to keep up. Being aware, responsive and honest with your retailers will drive mutual success.

Adding new retailers or expanding into different channels are additional paths to achieving growth. The good news is that successfully managing and fulfilling your first retailer’s orders puts you on the right path to adding the next buying organisation. When other retailers recognise that you understand the consumer and what it takes to do business in the modern retail supply chain, they’ll be much more likely to respond positively.

Before you jump into new distribution channels or marketplaces, it’s important to have a good handle on your capacity for growth. There is such a thing as scaling too quickly, and you should have a good retail channel strategy in place before moving forward. 

You should also take the time to consider which channels might be most productive for your product. Is it best sold in-store? Then expanding to additional brick-and-mortar locations would be a good move. Does your product lend itself to inspiring branding or user-generated content? Then social media could help you generate a cult following around your brand. Start by thinking of the end user and how they interact with your product, and build your retail channel strategy from there.

Building sustainable fulfilment that fits your retail channel strategy

As your order volume increases, so does your need for efficient and accurate order fulfilment and inventory management. Moving into new channels or retailers provides the perfect opportunity to examine your order fulfilment process, especially if you’ve been handling shipping in-house. 

The same rule applies here as it did in EDI – if shipping your product is not a core competency of your business, you’ll want to consider partnering with a third-party logistics provider (3PL).

Just like a full-service EDI partner provides the technology, the know-how and the staff to handle your EDI, a 3PL partner handles receiving, inventory storage, picking, packing and shipping for your growing order volume. 

Working with a 3PL offers enormous benefits. First and foremost are the time and money you save by having a team of experts handling fulfilment and inventory storage on your behalf. Their industry expertise means that they have standing arrangements and relationships with couriers, so they’re able to get you the best prices on shipping. 

A 3PL usually has multiple warehouses to cover more ground, allowing you to expand the reach of your brand and decrease shipping times.

Getting the right 3PL partner is crucial to supporting your business goals. You’ll want to find a company that offers great service, transparent pricing and strong technology. With an order accuracy of 99.5% and 99.6% of orders shipping on-time, ShipBob has a proven track record of excellence. Their expertise offers you peace of mind when it comes to your fulfilment process, allowing you to spend your valuable time elsewhere.

“Since moving to ShipBob, I’ve been able to focus on creating content and thinking of ways to push sales. I’ve found myself to be way more inspired, now that I can focus on different aspects of the business.” 

Nichole Jacklyne, Founder of Slime by Nichole Jacklyne

Scaling your retail channel strategy for success

As you look ahead and create your retail channel strategy, think about putting processes into place that will allow you to scale. As mentioned above, you’ll want to avoid scaling too quickly. If you move ahead too fast, you might find it tempting to come up with a quick fix for a new retail channel, which may actually work well at the outset. 

But as more new channels are added, these quick fixes – which typically involve lots of manual steps or managed (but not full) services – will eventually multiply, compound and ultimately limit your growth. They may even prevent you from taking on more volume or adding new channels in the long run.

Instead of taking a quick-fix approach, set yourself up for success in the long-term by implementing a strategy with processes that can adapt and grow with you. Bringing on full-service partners for EDI and fulfilment is an important step in that strategy.

As you employ those services, consider integrating EDI data with your 3PL. Automating the crucial process of getting order data to your fulfilment partner and giving your 3PL the right data at the right time will help ensure the accuracy and scalability of your business.

Find partners like SPS Commerce and ShipBob who can help you automate some of the more tedious and complex processes, freeing up your time to explore ways to grow your business. The right partnerships will enable you to say yes to new opportunities that come your way, evolving with you and your business needs.

“In terms of growth, FlutterHabit is hitting the gas, so we need a system that can help us do it — and ShipBob has totally handled everything we’ve thrown at them.”

Bethany Peterson, COO of FlutterHabit 

Learn more

Learn more about how ShipBob can power your business with best-in-class logistics, and see how full-service EDI and automation from SPS Commerce can position you for success. Build your retail channel strategy with the right partners at your side. Contact Wes Arentson at [email protected] for more information.

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Written By:

Wes leads the Logistics Sales team at SPS Commerce, which focuses on building relationships with third-party logistics (3PL) providers that support our network of 40,000+ merchant and retailer customers. Wes has a background in technology, including in the warehouse management technology space, and has experience helping companies optimize their warehouse processes.

Read all posts written by Wesley Arentson