Retailers and consumer goods manufacturers are spending an enormous amount to improve their omnichannel sales capabilities.
While this may not be surprising given the current business environment, a new JDA study reveals an unexpected and disturbing fact: despite these significant investments only 16% of companies say they can fulfill omnichannel demand profitably today.
This finding and others are highlighted in The Omnichannel Fulfillment Imperative a report prepared for JDA Software Group by PwC. This study is based on a global survey of more than 400 retail and consumer goods CEOs from around the world conducted in late 2014.
What is eroding retailer’s margins as they sell and deliver products across multiple channels? It’s simple: the high cost of fulfilling orders. A full 67% of respondents reported that these costs are growing as they increase their focus on selling across channels.
Survey respondents reported their highest costs associated with omnichannel selling as:
1. Handling returns from online and store orders
2. Shipping directly to the customer
3. Shipping to the store for customer pick-up
The CEOs in the study recognize that they need to continue investing in business improvements to enhance their omnichannel performance. However, reducing the associated logistics costs is not their primary focus. When asked to rank their top initiatives for improving business operations, CEOs’ number one choice (57%) was spending capital on creating new customer experiences.
Similarly, when asked to rank strategic growth enablers for the year, reducing/reformatting physical store footprints to focus on expanding the ecommerce business was top choice a 53%.
Every time retailers receive an online order, they have a number of options to fulfill that demand. They can pull the product from a local store, send it from a centralised warehouse or ship it directly form the supplier. JDA’s new study demonstrates that most retailers lack the insight to make decisions in a profitable manner – and are not sufficiently focused on this critical capability gap, said Kevin Iaquinto, Chief Marketing Officer at JDA.
“They need intelligent logistics and fulfillment solutions that can reveal the hidden costs, and the customer service trade-offs associated with every delivery option. In addition to truly win in the omnichannel marketplace retailers need the upfront demand forecasting tools to make sure products are already distributed across all locations in a manner that supports profitable delivery. “