The costs of supporting omnichannel retail are so high only 16% of companies are able to make a profit from it. This stark finding comes from research carried out by PwC on behalf of JDA Software, which spoke to more than 400 CEOs from global retail and consumer goods businesses.
Margins are under attack from one source, namely the high cost of fulfilling orders. This was cited by 67% of respondents in the Omni-Channel Fulfillment Imperative report, who said these costs are growing as they increase their focus on selling across channels.
The fulfillment capability most cited as needing attention was transportation and logistics, named by 88% of CEOs as a priority for the future. The second capability CEOs will focus on is improving inventory availability to fill orders, cited by 85%.
The other areas of highest cost identified by the research were:
- Handling returns from online and store orders (71%)
- Shipping directly to the customer (67%)
- Shipping to the store for customer pick-up (59%)
Another of the report’s findings was that reducing the logistics costs associated with omnichannel retail is not a primary focus.
Instead, 57% said investing in new customer experiences was their key focus. Similarly, 53% said reducing/reformatting their physical store footprints in order to grow their ecommerce business was the top choice.
“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 centralized warehouse or ship it directly from the supplier. JDA’s new study demonstrates that most retailers lack the insight to make these 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.”
Finding the most profitable way to deliver goods to shoppers is crucial, according to Iaquinto. “The CEOs in the JDA survey clearly understand the challenges they have ahead of them with regard to fulfillment, and they know they will have to innovate if they are to be profitable while meeting customer expectations across channels. The good news is that advanced technology can help retailers and consumer goods manufacturers master omni-channel fulfillment. However, until companies fully leverage these solutions, they will fail to realise positive financial returns on their omnichannel investments.”