The days when online merchants could treat inventory and fulfillment as "nice-to-haves" have long passed. Today, having inventory visibility, efficient order management, and a fast fulfillment process is an absolute must to keep up with the competition and provide a great ecommerce customer experience. Despite this, most organizations are still in the early stages of omnichannel maturity—how about you?

Over the past five years, we have undergone three stages of commerce. Pre-COVID was the era of the "Old Normal," 2020 and 2021 were the "Era of Growth at All Costs," and now we find ourselves in the "Era of Profitability." And with over 20% of all retail occurring over digital channels, forward-looking B2B and B2C merchants are shifting their ecommerce goals from a side project to a driver of profitability. Customers have come to expect fast and reliable shipping options, and failing to meet those expectations can result in lost sales and dissatisfied customers. At the same time, businesses need to trim the costs associated with logistics as much as possible in order to maximize the potential revenue generated by those sales and, by extension, achieve ideal profitability levels.

Companies have suffered significant disruption in their supply chains due to the pandemic, which has led them to ramp up their stocks to meet demand and find ways to conceal stockouts and depleted inventory. Some of the old problems for brick-and-mortar stores seem to be creeping into electronic commerce.

One key factor that businesses must consider when analyzing their inventory and logistics is their own maturity level. That is: the technology and tools they have at their disposal, which could help cut hidden costs, expedite deliveries, and provide better delivery and return journeys. Another way of seeing this maturity level is thinking about what capabilities merchants have—from warehousing and in-store pickup to omnichannel sales, in-store returns, dropshipping, amongst many others. The list of capabilities can and will vary depending on the company's size, industry, and, naturally, their buyer's needs.

Understanding your business's maturity is essential to making informed decisions for improving profitability. For this reason, VTEX has come up with The Omnichannel Maturity Model, an exclusive tool to evaluate areas of strength and weakness and help develop strategies that align with your overall business goals. Our research shows that about 55% of US retailers are in the first two of the five maturity stages, so ecommerce businesses need to up their game to provide the best possible experience for their buyers.

In this guide, we will provide you with the tools necessary to identify where your business is right now and what steps you should take next. In addition, we will present examples of well-known enterprises that have used VTEX to walk this road before. Some of them managed to vastly expedite their shipping process through a well-established order management system, and others managed to grow the impact of omnichannel on their online sales. 

If you’re constantly trying to get an advantage over the competition and make inventory and fulfillment a business strength, this is definitely the ideal place to start.

Before diving into the Maturity Model, it is important to understand the current state of fulfillment in ecommerce operations. This overview will be fundamental to our analysis.

According to VTEX customer examples, around 23% of net sales is spent on shipping and fulfillment costs. This huge percentage, second only to the initial cost of sold goods (COGS), is clearly an opportunity for improving profitability, but the process is not easy.

Broadly speaking, shipping and fulfillment costs can be broken down into storing, handling, shipping, and returning. And there are opportunities in each one of them to unlock profitable growth.

Storing includes receiving the product at warehouses and other fulfillment centers, segregating products, and the cost of storage itself. For this category, in-store pickup is a great tool. Brick-and-mortar stores should be an active part of a company's logistics network, and higher volumes of product delivered to a few locations are usually cheaper than smaller volumes shipped to several locations.

Handling comprises picking and packing products before being shipped. This stage of the process is vital for profitability overall since a well-oiled machine can prevent the 23% of returns caused by wrong deliveries that we mentioned earlier. Handling happens across all fulfillment nodes — from warehouses to brick-and-mortar and dark stores. To solve this problem, orders must be routed to the right fulfillment nodes (usually through an Order Management System), and each node needs the proper tooling to pick and pack the order (like a Warehouse Management System or VTEX’s all-new Pick and Pack). 

Shipping is perhaps the most important part of the fulfillment process. It includes routing, tracking, and delivering and has several areas for improvement. Better routing means less fuel usage for deliveries and lower costs, which can also be achieved by leveraging multiple fulfillment centers, including brick-and-mortar stores — as well as having different logistics providers to handle specific regions, types of products, and scale last-mile operations. Shipping costs, as well as handling and storage costs, can also be cut by utilizing third-party inventory through drop-shipping. 

Finally, Returning comprises every cost related to returned items. Accepting in-store returns can help you cut the cost of shipping products back to warehouses, but the best way to reduce return costs overall is by having a great Order Management System that ensures fewer mistakes with order dispatchment.

We know this is a lot to take in, but now you are settled to understand The Omnichannel Maturity Level. In the next chapter, we’re giving you a guide that will help you understand how and why you should invest in growing your company’s capabilities in each of these four dimensions.

To make it easier for companies to identify their strengths and weaknesses, as well as potential next steps in their ecommerce journey, VTEX has classified the maturity of online sales operations into five stages.

Each stage includes a description of the current state of affairs, a proposal for the most useful next investments, and a short case study from a company that has successfully climbed the ladder onto the next stage. It is essential to highlight that not every company will need to reach the highest maturity stage, so read the following with an open mind and identify which capabilities better align with your own needs.

If you have further questions regarding these stages while reading through our Maturity Model, book a consultation with a VTEX commerce specialist, who will help you find the best way to push your ecommerce business forward.

Operating with only the bare necessities covered in the first stages of an ecommerce operation is common. This often translates into a lack of inventory visibility, especially when operating several distribution centers and fulfillment points. It is also common to forego automatic warehouse management systems (WMS), which usually translates into manual order separation. If you’ve ever seen a warehouse keep tabs on its dispatched orders using a spreadsheet, you’ll know what we’re talking about.

This bare-bones operation means buyers have fewer options when it comes to any changes to their purchase orders: any changes have to be made by contacting the company’s staff, and returns are processed manually. 

The lack of automation and data integration makes it difficult for companies to meet SLAs. Usually, this forces companies to add longer delivery times to avoid delivering after the promised date, as well as stick to flat freight costs since it is almost impossible to have reliable information about the carrier’s costs. This, in turn, causes freight costs to represent around 48% of cart abandonment in this type of operation. 

Around 15% of US retailers are in this stage. Does it sound like you’re one of them? If so, here are a couple of things that could help you. 

What you should be doing: WMS implementation and integration with the ecommerce platform

It all starts with ensuring your warehouse integrates properly with your ecommerce operation. If your warehouses don’t have a Warehouse Management System (WMS, you need to implement one in order to have a basic tool that will serve as a bridge to communicate these facilities with your ecommerce operation. 

Before a business has digital operations, its warehouses are usually optimized for a daily routine that only takes brick-and-mortar stores into account. When you bring ecommerce into the equation –especially as it grows beyond a 5% participation of total sales– the need to include digital sales in the WMS grows. This means making sure you have an ecommerce platform that automatically receives digital orders and sends them to your existing WMS through its native order workflow.

At this stage, there’s no need to have the WMS send any information back: as long as warehouses are getting the needed information, we’re good to go! This information includes the products to be shipped and the carrier that will fulfill the order. At the same time, the WMS can help you improve productivity in the warehouse by modifying layouts and processes according to the information it gathers.

Al’s Sporting Goods is a full-line sporting goods business based in Utah that’s been owned and run by the same family since 1921. Al’s operates two brick-and-mortar stores in northern Utah and a distribution center that supports its website and Amazon sales.

“We’re unique in that we have the size and selection of Dick’s Sporting Goods or a similar retailer, but all the brands and products that we carry are specialty brands,” said Riley Reeder, IT Director at the company. Al’s offers more than 90,000 products and 300,000 SKUs in 400 categories.

That inventory size presented logistical challenges that Al’s needed to overcome to compete effectively. Al’s started looking for a new ecommerce platform in January 2019, and in March of the same year, signed on with VTEX. One of Al’s main goals was to have faster inventory updates, which was helped by VTEX thanks to a unified view of inventory data.

“We were excited to show the team at Al’s how VTEX could accelerate its unified commerce strategy. Our platform offered Al’s a way to easily implement ship-from-store, BOPIS, pickup-only items, drop-shipping, and cross-docking, as well as Amazon order fulfillment. These capabilities give Al’s customers more options, improve efficiency and enhance the company’s competitiveness in omnichannel retail”, said Alex Soncini, Growth CEO at VTEX.

Reeder said VTEX delivers inventory updates four times faster than their previous system. “Before VTEX, we were updating via flat file, which required us to essentially update every single item every single hour. Now, with the VTEX API, we can look at the items that have been modified and only update those items. Because we’re sending up much smaller chunks of data, we can do it much quicker. Right now, we’re updating every 15 minutes versus every hour with the old system.”

Once inventory from all warehouses is centralized and online orders are automatically received and sent to the warehouse system, a company is no longer in the first stage. Typically, this means there is a dedicated operation for online fulfillment, which doesn’t communicate well with the brick-and-mortar side of the business. If a company offers online commerce but doesn’t have visibility over physical stores’ inventory and doesn’t offer any type of store fulfillment, it is probably in this stage.

From a customer’s perspective, orders from these companies can usually be canceled, but they can’t otherwise be changed in any way, and returns are still processed manually. 

When it comes to shipping, costs are often monitored manually, and any contract changes need to be updated manually as well. Service Level Agreements (SLA) may have improved from stage one, but retailers in this stage still have a hard time accurately calculating and matching delivery time slots. After shipping, companies at this stage still need to manually change the status of the dispatch and input information such as tracking numbers and remaining inventory. 

What you should be doing: Implement BOPIS and DOM, integrate ERP, and prioritize B&M

The most important element for getting to stage 3 is inventory integration. The best way to do this is through the Enterprise Resource Planning (ERP, but –given the legacy nature of most ERPs– this is usually not an easy task and requires a lot of time and effort. A good way to avoid headaches is to look for an Integration-Platform-as-a-Service (iPaaS that is already integrated to your ERP. 

These tools can get information –such as inventory– from your ERP, consolidate it, and send it to your ecommerce platform. The platform needs to be prepared to receive this information, and one way to do it is through an Order Management System (OMS, which should be able to route the orders and separate inventory. With these tools, the ecommerce platform can get inventory from the ERP and send back orders, turning communication into a two-way street. This, in turn, allows you to update your inventory and order in near-real time.

Implementing an entire network of stores at once might not be feasible, so, when integrating inventory, it’s important to prioritize a subset of stores. This can be chosen depending on the percentage of revenue or customer demands. With inventory separated by store and the right OMS –one that offers BOPIS natively as VTEX does– this is also the moment to take the first omnichannel step by implementing buy-online pick-up in-store (BOPIS, even if part of its fulfillment is done manually.

This is also the right time to expand your shipping providers to more than five in order to serve as many customers as possible. 

Victoria’s Secret, operated by Grupo Axo in Chile, migrated to VTEX in October 2020. Thania Contreras, Ecommerce Manager at Axo, pointed out that channel integration (of stores and ecommerce) was one of the most important trends for the group’s future and was a heavy factor when deciding which platform to migrate to.

“We ship products directly from stores, which has many client-facing benefits. It’s very satisfying for us, and we do better than other stores because we create synergies”.

Thania Contreras, Ecommerce Manager at Axo

In the interest of this integration, Axo implemented, together with VTEX and Ecomsur, a click-and-collect solution for their brick-and-mortar stores in Chile. The option was launched in February 2022 and was quickly adopted by a high volume of customers.

What started as a project focused on a better customer experience quickly became one of the most popular delivery methods, which drove foot traffic to the stores and raised sales for the company. 

“Click and collect has been growing from the very beginning, and we’ve been looking for better ways to measure upselling. Today, in-store pick up represents around a quarter of online orders, and a significant percentage of those customers end up buying other products.”

Thania Contreras, Ecommerce Manager at Axo

Contreras revealed that the group hasn’t done much yet to promote upselling amongst its store employees, which means that the current upsell rate has happened organically. Special sales have brought peaks of up to 38% to the upsell percentage. This is encouraging and represents significant growth from the period immediately after launch when upselling percentage was barely in the double digits.

Axo has very short delivery times. The company promises your order is ready to collect in a day –at most–and the processing period is as short as three hours. Sometimes, if a store isn’t too busy, it might even allow customers to collect orders right after they place their online order. 

This is extremely attractive for customers who are used to waiting between three and five days for home delivery from online shopping orders, depending on how busy the store is. Victoria’s Secret also has physical stores in central and very recognizable locations, which helps with the perception of convenience. 

With these elements, the percentage of clients that choose to pick their orders in-store has stayed healthy, even when the company offers free shipping. During seasonal sales, this percentage also grows.

Axo has feedback from the brand in the US that its current performance is good compared to other markets. Now, salespeople from Victoria’s Secret Chile have clear goals for upselling, and Axo has even set up short contests between representatives to promote best practices. 

When a company can orchestrate orders across multiple channels, the next logical step is having a dedicated team in their distribution centers that is used to prioritize where products are stored so, in peak sales, they can separate them more efficiently. If their inventory is already integrated, the next step is inventory visibility for a limited group of stores, even if that’s not the case for the entire network. If the integration in the previous step was limited to certain stores, now is the time to extend it to the whole network. With this, buyers are now able to make changes to their orders after being placed, and billing is updated automatically.

On the fulfillment side, a buyer can pick options such as BOPIS, curbside pickup, and ship from store, but all orders need to be fulfilled from the same distribution point. In other words, as buyers navigate through your store, they can only pick products from the same location, and if they want products from different places, they need to place separate orders. Besides that, as you route orders for in-store fulfillment, all points are treated equally, given inventory availability, despite the store's team size and capacity to handle simultaneous orders in a given period. This is partially caused by the lack of advanced order management capabilities and dedicated in-store software for picking and packing online orders — which are still managed manually by opening the ecommerce platform on a desktop computer. 

Companies at this stage have usually expanded their network of carriers to support the store fulfillment operations, but costs related to shipping are still managed manually — usually through spreadsheets and updated by your logistics team. SLAs are usually down to 2 to 5 days, and the more mature companies are already measuring a carrier's performance based on SLA accuracy. Yet, you can't commit to express and same-day delivery, as SLAs may vary and your picking and packing operation is not yet reliable.

Also, companies still rely on their own first-party product assortment — without using any third-party seller or supplier to add new categories and increase assortment. This represents a huge opportunity for sales growth and cost cutting, as well as faster delivery times and a better customer experience. Additionally, there’s an opportunity to add endless aisle capabilities, which allow a physical store to offer the inventory from other stores and fulfillment nodes, immediately growing stock. So, how do we take advantage of these opportunities?

What you should be doing: Implement a dedicated picking and packing solution. Define store capacity based. Integrate third-party sellers to expand assortment.

As you evolve, the same architecture should be enough to integrate your entire network of stores, but other mature scenarios might present challenges. The first one is prioritizing the stores that have the capacity to fulfill orders during peak times. This is not a native functionality of all OMSs, so you need to find one that will allow you to set up store capacity according to time slots and days of the week. 

This is also the right time to expand your last-mile shipping providers in order to make the final stage of the delivery process as efficient as possible.

Another challenge is to get your salesforce to buy into the project of fulfilling orders. This requires a dedicated in-store system that can make their lives easier –such as Pick and Pack–as well as give you performance indicators for each associate’s performance and hand out bonuses and financial incentives accordingly. 

Finally, this is the time to implement endless aisle, which allows you to bring to the brick-and-mortar stores products previously available only online. This allows you to carry expensive products to the store and, at the same time, helps associates capture sales that would otherwise be lost due to individual store stockouts, which also impacts goals and bonuses. 

Grupo SOMA is a Brazilian conglomerate of nine unique fashion brands: Animale, Farm, Off-Premium, Fábula, A.BRAND, Foxton, Cris Barros, Maria Filó, and Animale Oro. Back in 2018, Grupo SOMA was excited to set up a marketplace environment for one of its brands, so they went looking for a technological solution. Simultaneously, they were ready to venture into the world of omnichannel to offer a seamless experience to their customers, so they sought another partner to deliver such a robust OMS.

A larger, unified inventory would enable orders to increase significantly and stock-out disappointments all but disappear. Moreover, with Grupo SOMA’s 200 brick-and-mortar stores operating as mini-distribution centers, more diverse fulfillment options are enabled, such as ship from store, pickup in-store, or ship to home, which provides faster order delivery. Devoting care to details such as these increases brand loyalty in the long run. 

“The main point of the brand is to be desired, and omnichannel plays a key role in making that happen.” – Alisson Calgaroto, director of Technology and Innovation at Grupo SOMA

Once the project was in place, VTEX promised to migrate Grupo SOMA’s (then) seven ecommerce stores and have an operational omnichannel in less than a year – and delivered on its promise thanks to its cloud-based architecture. The kickoff of the migration was in January 2018. By the end of February, the first ecommerce website was up and running, and, starting with April of the same year, brick-and-mortar stores were already being connected to the operation. All physical and digital stores were integrated by November, ready for Black Friday, ensuring a fast time-to-revenue for Grupo SOMA. 

“Omnichannel is when you understand how your brick-and-mortar retail works and you understand how your digital retail works and you are empathic with both of them, which allows you to merge the operations.” – Alisson Calgaroto, director of Technology and Innovation at Grupo SOMA

During Black Friday 2018, Grupo SOMA sold so much that an unexpected challenge arose: keeping up with the demand without negatively impacting the in-store customer experience. Generally, sales increased by 15, mainly due to the handling of the last-mile delivery, which offered faster-than-ever shipping virtually anywhere in the country. Suddenly, quiet retail days like Christmas Eve were booming in sales, aided by the prospect of speedy fulfillment. In fact, Grupo SOMA started delivering to 30% more locations, substantially increasing their brand availability, which is a crucial customer retention driver. 

Grupo SOMA also made an effort to align the sales commission across all sales channels, not maintained separately and in conflict. This way, brick-and-mortar sales associates were incentivized to let go of ecommerce prejudices and help fulfill digital commerce orders.

In addition to capturing more sales, this strategy had another positive side-effect: increasing the efficiency of a physical store. In times when foot traffic is low, attendants can dedicate themselves to fulfilling online orders and implicitly earn commissions. 

Grupo SOMA took this synergy further by encouraging social selling amongst their employees. Every store employee can earn commissions for online orders if customers use their personalized code, which applies a promotion effect on the VTEX Commerce Platform. Employees usually promote these codes on social media platforms to their own follower base of clients and acquaintances. Consequently, conversion rates are improved as these followers opt-in to receive this content and are thus more likely to convert. Considering at least 80% of Grupo SOMA attendants choose to engage in social selling, the overall efficiency of targeting is maximized. 

When companies reach this stage, they have integrated the inventory in their entire network of stores, but it is isolated inside their own operation (ecommerce or brick-and-mortar stores) — which means having it offered in external channels would require a lot of manual work. 

These businesses can also define specific time slots where store fulfillment is available, and there is an in-store system that helps store associates prioritize their pick and pack duties. Despite this, the system is disconnected from the last mile partner, so there is no automatic way to notify them if an order is ready to be picked up — causing delays in SLA.

From the buyer's side, it is possible to see only products available for shipping to a specific location, but it isn’t possible to filter products according to shipping options during the search and navigation. The overall customer experience is much better since same-day and scheduled delivery are both attainable, and orders can be split into separate packages that can be dispatched from different fulfillment points.

Shipping is also much improved: an automated way to update carriers’ and freights’ costs and shipments can be allocated to the best carrier based on product categories, packaged dimensions, and delivery capacity. Customers have real-time visibility of their deliveries, but they can’t enjoy express deliveries – under two hours – because there is no reliable last-mile operation. 

These companies have also extended assortment through partnerships with sellers and suppliers and can sell in different countries with the support of third-party dropship partners.

Now that you have your entire store network integrated, your entire salesforce is committed to the digital operation, and you’re using third-party sellers to expand your inventory, it’s time to take it to the next level by bringing your entire assortment to third-party channels. 

VTEX’s platform, for example, allows you to make your entire brick-and-mortar store inventory available for marketplaces such as Amazon. This can generate a great efficiency cycle as you optimize your inventory to the maximum extent possible.

As you expand your BOPIS and ship-from-store capabilities, it is time to make your SLA as reliable as possible, which requires an even greater number of shipping providers to adapt to the different types of products you ship and environmental concerns. 

Since the sales team is also digitized now, this is the time to implement tools that allow them to connect with customers in the online world. This includes social selling with chat tools, as well as personal shoppers through video calls –something that even Apple has been championing recently–.

Besides the aforementioned areas of opportunity, companies at this stage can also focus on establishing Multi-level Omnichannel Inventory, expanding their shipping network, and leveraging assisted sales such as Live Shopping and Conversational Commerce. All these tools can help cut costs and improve the profitability of an ecommerce operation and, coupled with a highly flexible and low-maintenance solution, are becoming the smartest way to think of an ecommerce operation going forward.

C&A is a Belgian-German-Dutch chain of fast-fashion retail clothing stores, running over 280 stores across Brazil since 1976. Propelled by the change in the consumer profile, the fast-fashion giant decided in 2014 that an ecommerce operation was highly needed for the business to grow. After only one year of operating on the VTEX Commerce Platform, C&A Brazil sold BRL 50 million through the platform, proving that the physical-to-digital changeover was the right way to go.

When C&A first created its ecommerce presence, managing the inventory of 10 subsidiary brands was somewhat challenging. VTEX Commerce Platform's structure makes it possible to turn each sub-brand into a seller and have a different inventory for every single seller under the umbrella. With the marketplace, C&A’s catalog management got simpler,  easier to use, and won new capabilities. For example, defining rules for categories, brands, and products to automatically correlate SKUs with existing products keeps an instant track of all available items. 

With the VTEX Commerce Platform, it's also possible to customize the catalog, divide it into clusters, expand by integrating new sellers, and distribute products in any channel at no extra cost. C&A began its operation with 150,000 SKUs. Now that there are different accounts with independent configurations, each store is more manageable. This innovative architecture enabled C&A to pioneer the concept of having other logistics and payment options within the same store.

C&A was also able to open its marketplace to external sellers. With this, C&A’s looked to go beyond its own catalog to sell more than fashion and expand its offering with new sellers and new categories. Growing from 100 to 300 sellers in just four months resulted in a tremendous increase in product assortment. VTEX’s native marketplace capabilities mean less time and money spent on adding new sellers and SKUs with onboarding, management, and product matching tools. Incorporating more brands means offering a more diverse product mix, supporting customer needs better, and growing market share. 

Also known as Galeria C&A, the online marketplace is responsible for a considerable share of C&A's sales, especially in the electronics department, or fashion tronics, as they call it. The company wanted to invest in a cost-efficient operation and enable faster growth, and we see the marketplace as the future of C&A’s ecommerce.

At this point, every single brick-and-mortar store is equipped with a pick-up point and a ship-from-store option, and the checkout is equipped with a geolocation feature that checks product availability in the nearest depot to the customer placing the order. Those two categories combined to form the core of their omnichannel operation and account for 55% of C&A’s sales. After investing a lot of effort into digital transformation, it's safe to say that one of C&A’s strengths is omnichannel.

As far as the warehouse management system is concerned, there are two models in place: fulfillment operations at the distribution center and the physical store. The latter happens when the customer chooses the pickup in-store option on the website and therefore does not pay any shipping fee. The reason behind this is that keeping inventory is easy when you know exactly where your products are, and the information is available both on your desktop and mobile phone.

Most checkout methods on the market are complete in themselves but often lack connection with the store, the warehouse, or where those are located. There's a methodology called heuristics, that takes into account a set of parameters that are important for a given interface. Using it to develop the SmartCheckout, some of those parameters are the moment of purchase, the products in the customer’s cart, the geographical position of the customer, and the inventory. By combining all these parameters, SmartCheckout can identify the closest store with the inventory to fulfill each order.

The road to a fully mature ecommerce operation is long, winding, and very different from one merchant to the next. This might make it seem like becoming a more mature digital company is an impossible task, but the truth is that you just have to understand your needs and find the right partner who can help you design a tailor-made solution.

To achieve this, it’s important to go with a flexible and scalable solution that can not only adapt to your present but also grow at the same pace as your future. With more than 20 years of experience in the ecommerce industry, VTEX is ready to help you take that next step. If you would like to talk to a VTEX ecommerce specialist, click here.