Omnichannel: What you need to know for 2015
If you think embracing omnichannel is tough, you’re not alone. According to the third annual Retail Insight industry benchmark report, 94% of retailers, suppliers and logistics firms surveyed haven’t executed a longterm omnichannel strategy, and 37% don’t even have one.
The report, commissioned by SPS Commerce and conducted by Retail Systems Research, highlights the cross-functional challenges retailers and others face as they build omnichannel capabilities into their operations. The report also underscores the critical role fulfillment excellence plays in meeting consumer expectations for rapid fulfillment and flexible returns. But most importantly, the report affirms that omnichannel truly is the future of retail—and that the future is now.
For the last two years, omnichannel pressures were felt on the selling side of the business-to-consumer industry: the challenge of creating a consistent customer experience and providing a single view of products and services regardless of the medium (stores, online, mobile, etc.).
But now, the emphasis has shifted to the supply chain side of the business, what some call the “Amazon effect.” In the simplest terms, it’s the presumption that retailers will always have in stock the items consumers want to buy and be able to deliver those items quickly to wherever consumers want them.
That may sound easy, but the reality is that all players in the omnichannel ecosystem are finding execution tougher than the expected. For example:
• Few companies believe they are “advanced” when it comes to omnichannel capabilities, and between 35% and 40% believe they’re lagging.
• Only 11% of companies are ready for cross-channel fulfillment, but retailers are more likely (18%) to report mobile commerce readiness.
• Both retailers and suppliers feel significant pressure from rising consumer expectations, with 75% of retailers experiencing increased demand for more rapid fulfillment and 44% of suppliers reporting greater demand for more robust item information.
• Just over half of retailers and suppliers are too distracted to prioritize and focus on their omnichannel strategies and 43% of retailers say their legacy systems hold them back from omnichannel progress.
• Fully a quarter of retailers have made the transition to store-based fulfillment of online orders but expect this to decline over the next three years to balance shipping costs.
Only a few years ago, the concept of the perfect order was defined as a set of criteria retailers gave to their suppliers that largely focused on those suppliers making on-time, complete and damage-free deliveries to the retailers’ distribution centers, where the retailers would then take control. In today’s world, the concept of the perfect order still exists, but now the consumer is defining the criteria and dictating it to retailers, suppliers and the logistics firms that enable and support them. The criteria now include: social validation, accurate product information, real-time accurate inventory information, competitive pricing, convenient fulfillment and convenient returns.
Meeting these criteria requires an enormous amount of complexity, both from a technical perspective and a business process perspective. Today, retailers, suppliers and logistics partners must work together and they must also think and act differently from their competitors.
When it comes to getting onboard with omnichannel, it pays to adhere to five foundational principles, including:
No. 1: Focus on foundational capabilities: As a whole, our industry needs more clarity on supply chain visibility and collaboration before we can do omnichannel well. While we may hope projects such as drop shipment, expanded assortment and other more sophisticated capabilities will drag foundational elements along by default, such wishful thinking is risky.
No. 2: Share product information: Spreadsheets, catalogs and emails are the least efficient ways to share product information, yet they’re the predominant tools of most retailers and suppliers. But just because they’re being used, doesn’t mean they should be. Better tools are available. Invest in these tools now to stay ahead of the curve, streamline data exchange and allow for additional attributes, including customer reviews, which are important to consumers.
No. 3: Put legacy systems to rest: In almost every study Retail Research Systems conducts, one finding stands out more any other: Legacy systems—and the siloed organizations they support—hinder progress. Retailers must invest in new technology. While replacement systems may be appropriate, such systems require an enormous amount of time and energy, which is why some retailers are instead integrating new applications with their legacy systems. In either case, educating senior management and communicating a clear vision to all employees will go a long way toward developing a strong technology infrastructure.
No. 4: Less is more: No one company can be all things to all people and still be profitable, which is why retailers are beginning to rethink assortments. Here’s why: Many studies indicate that customers prefer a more curated approach, especially when shopping in stores. And while adding more products can be tempting, it may not result in any discernable improvements to profitability.
No. 5: Lead with logistics: While retailers have been disrupted by satisfying omnichannel selling needs and vendors have been distracted trying to balance becoming retailers against alienating their retail partners, many logistics firms are stepping up their role in enabling omnichannel. Rather than continuing to view themselves as truckers with warehouses, these firms are gaining competitive advantage—for themselves and the companies they support—by focusing on the services omnichannel requires and the technologies that enable them.
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