Essay Sample on Retail Customer Service: Ensuring Organization Profitability and Market Survival

Introduction

Organizations are established to offer quality services to its customers, which will ensure its profitability and survival in the market environment. In the retail market, it involves operations that are carried out continually to ensure customer satisfaction. Therefore, customer service is a core factor in the operations of a retail store and it is responsible for holding together the organization's entire workflow. However, in retail operations, it is possible for an organization to face challenges in service provision process that might hinder its operations in the market. Costco Wholesale Corporation is a retail firm operating in the U.S. market. The firm operates an international chain that entails membership warehouses based on quality and offering merchandise to its customers at the lower process. However, Costco is experiencing challenges in its service process that are based on the changing consumer preferences in the underlying market attributed to the rise of the use of e-commerce. The following paper will explore Costco and the challenges it faces in its services process due to changes in customer preference as a result of the rise in the use of the internet.

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Company Background

Costco Wholesale Corporation is among the leading retailers across the United States. Its dominance in the U.S. retail market is attributed to its ability to follow its mission and vision statement based on specific strategic objectives (Lombardo, 2017). The corporate vision statement of Costco Wholesale emphasizes customer satisfaction and experience. The organization's vision and mission statement assert its need to create value for its customers. Hence, it aims to offer its customers a retail environment that follows buying and operating practices that are efficient in providing unmatched and quality services. Based on the vision statement, Costco strives to achieve efficiency in its operations that will ensure prices and costs are minimized significantly. Therefore, through its cost minimization, it follows the vision statement of offering customers unmatched savings. Also, the firm follows a business model of membership status to allow customers to make savings, which is based on the continued provision of discounts that attract clients.

The mission of the company is to offer its customers continually with quality goods and services at a lower price possible. Thus, customers are drawn to the discounts and lower-priced goods available at Costco that develop a supply chain capable of supporting cost minimization and maintaining high quality. However, the problem of customer preference and use of e-commerce impacts the vision and mission statement of Costco, which fails in satisfying the needs and preferences of consumers (Butler, 2019). The changes in customer preferences will have an impact on the service provision process, followed by Costco in its daily operations. In the underlying American market, major retail firms are making a huge investment in online shopping, but Costco is lagging (Taylor, 2016). The reason Costco is reluctant to building its online business is associated with the retailer's business model that is based on its mission and vision statement.

Costco follows a business model of membership-only warehouse club that allows selling in high volume at lower prices. Therefore, through adhering to the conceptual framework at Costco established by the vision and mission of the company, it allows low prices and high-quality products are offered. Subsequently, through well-defined and thought pay and benefits allows the establishment of a positive work environment at the firm that increases efficiency and ultimately, the profitability. The major Costco Wholesale products include retail services, insurance services and others that are offered at the highest possible quality and low costs through the firm's Kirkland Signature brand.

OSCM Principles

Supply chain management complexity has been rising together with the scope of operations management that has gone through varying changes. Thus, the changes have made organizations to consider supply chain management as the most appropriate approach to work effectively through the complexities in the market and gain a competitive advantage (Fayezi, & Zomorrodi, 2016). Hence, an organization will ensure that it has improved its supply chain management process by investing massively in different business models. Therefore, different OSCM principles have been identified to offer the appropriate approach that will be attained to gain better customer experience and to be successful in supply chain management. Subsequently, challenges in the supply chain will affect the services process that often leads to poor performance by the entire organization (Li, 2014). Organizations such as Costco require to withstand the changes mostly in the rise of technology used to allow the OSCM principle integration to prevent the rise in supply chain process failure and improve the business.

The OSCM principles that will be followed in the scenario of Costco's challenges are adapting supply chain to customer needs, customizing logistics networks for each segment and aligning demand across the supply chain. Based on these principles, the organization will be able to overcome the challenges in supply chain management and ensure that customer expectations are achieved. The first principle of adapting the supply chain to customer needs will allow the implementation of an effective approach. To gain an understanding of the principle requires the utilization of classical strategies based on the information of customer transactional data to form analysis from an operational perspective. Hence, to have a better understanding of the customer, they are divided into different groups called segments. Therefore, segments offer inventory management that groups the customers based on sales volume or profitability (Lambert, 2014). Hence, Costco can segment its customers based on the service needs in sales and merchandising to fulfill their preferences.

According to Lambert (2014), segmenting customers based on their specific needs equips the organization with the ability to develop a portfolio of services that are tailored. Hence, the organization will be able to establish services that are highly valued by all customers in a certain segment. Thus, the principle allows in attaining a degree of segmentation and variation required to maximize the organization's profitability. Therefore, through a cross-functional process by the organization develops a supply chain approach that will create specific service that appeals to the customers.

The second principle of customizing the logistics network for each segment offers the organization an approach to creating a logistics network design to organize the inventory, warehouse, and transportation to meet the standards that will satisfy the customers. The logistic network design is a form of an initiative driven mostly by the customer to meet their preferences. Therefore, the principle is designed to meeting the average service requirements for all customers to ensure the segment is satisfied. A segment that is well served will attain profitable growth and improved return on assets and revenue based on the newly deployed inventory strategy. However, the logistics network will be complex and might require the involvement of third-party logistics providers that are more flexible compared to the organization. Based on the principle, the organization will be required to have a logistics plan that is robust to enable real-time decisions making that supports and can hand flow in the supply chain management. Another principle is aligning demand across the supply chain through observing the market signal across the supply chain to ensure optimal allocation of resources within the organization. The organization will have multiple departments working independently to create a forecast that will provide details on customer preferences (Fawcett, Magnan, & McCarter, 2008). The functional orientation of the principle allows the organization to forecast sales to envision the growth in demand for particular services. Subsequently, the utilization of digital technologies in the supply chain management of an organization will allow enjoying low inventory and warehouse cost, which offers the ability to maintaining price levels and offering discounts.

The principle recognizes the objectives and needs of every functional group that bases the final operational decisions on the potential overall profit. Hence, it will offer an excellent supply chain management that links all departments within the organization to develop a collaborative forecast that maintains the necessary capacity across the operations. Therefore, through developing a wide channel supply chain, it will assist in detecting the ordering patterns by the customers and restocking algorithms by taking into account their capabilities, constraints and capacity (Sebastian, 2014). Therefore, the coordination of processes involved in the supply chain will improve the organization by assisting in determining a customer's preferences.

Current Service Method

The current business model utilized by Costco is appealing as it provides the firm with rapid inventory turnover, efficiencies in operations, and profits a lower gross margin. However, the organization can achieve maximum success through enhancing its sales through the internet, which will offer an opportunity to cut costs, to only stock bargains and treasure hunting merchandise. An appropriate service process is composed of a cost strategy that is designed with an aim to penetrating pricing to offer a diversion buying strategy that will enhance the shopping experience of the customer (Zou, 2016). Therefore, through its supply chain approaches composed of low prices and a limited product line selection. However, due to its membership-only business model, the organization can maintain a loyal and strong customer base.

Costco through its ancillary services, offers its customers expanded products and services. However, through its business model of membership-only warehouse retail method, it encourages customers to buy at the store but still restricts the total number of clients. Hence, the non-member's customers of the firm may have a feeling of being unwelcome at the store that forces them to shop at other retail stores. Subsequently, the service process of Costco is hindered by the firm's limited selection of services and goods that forces potential clients to go to other retailers that have a wider range of goods and services.

Findings

Based on the analysis of OSCM principles, the service process at Costco is experiencing challenges due to changes in customer preferences that are attributed to the slow implementation of e-commerce. According to Kline (2017), Costco has been struggling with gaining a market share in online shopping, which is due to its services process. The majority of customers certainly prefer Costco due to its prices and other contributing factors that have enabled the chain to grow despite its limited online business. However, customer preferences on the way services are offered by change especially in the current market that is highly influenced by the use of digital technologies. Thus, online sales have not made gains at Costco and consumers are migrating to retailers that have increased ease in services to purchase products online. Therefore, there is a need for the firm to identify customer preferences to determine how they require to be served to attain customer satisfaction (Kline, 2017). The e-commerce services have been on the rise that offers the customers ease of doing shopping.

The business model of membership only is ef...