As retailers across the market vow to implement omnichannel strategies, a just-released report reveals that companies are not ready to handle the transformation.
The authors of the survey and report, HRC Advisory, a unit of Hilco Global, said retailers “are working hard to transform their supply chains to a customer-centric, omnichannel model, but 80 percent are not prepared for the magnitude of change required.”
The retail industry analysis revealed that “expensive online returns, cannibalization of in-store sales and outdated systems are some of the challenges restraining retailers.”
Of those retailers polled, 95 percent said their biggest issue “in transforming the supply chain was how to mitigate online returns, which can run as high as 30 percent and are quite costly to a retailer.” Regarding cannibalization, three-fourths of the retailers polled said “some of their e-commerce sales” were eating away at in-store sales.
When it comes to turning a profit, more challenges are revealed. “Although e-commerce sales growth rates are often 10 to 15 percent greater than physical store growth rates, 70 percent of retailers are still struggling to develop a profitable economic business model for e-commerce while maintaining acceptable profitability for stores,” the report noted.
“Today’s consumer is driven by an ‘I want it now’ mentality, yet many retailers are still struggling to deliver,” explained Farla Efros, president of HRC Advisory. “Competing with pure-play e-commerce retailers, and accommodating the multitude of new fulfillment options, requires a significant increase in supply-chain flexibility and better integration between the physical store and e-commerce network. Without these changes, traditional retailers will not be able to execute a truly customer-centric model.”
The survey showed also showed that a complete integration of inventory and fulfillment functions between the store and the online channel “would achieve the most effective customer outcome and the lowest margin risk.” But over half of the retailers polled acknowledged that “they do not have the systems in place to provide the required visibility to inventory in each store.”
Still, companies are committed to the approach, and 60 percent said they have plans to “invest further in their e-commerce-related systems to provide an improved customer experience.”