Retailers are struggling with the transformation to omni-channel operations, with a clear division opening up between those that have made the jump and those who perhaps never will.
This is one of the findings of research published today from supply chain consultancy LCP. Now in its third year, the Omni-Channel Journey report found significantly fewer retailers claiming to have successfully made the transformation to omni-channel operations this year compared with 2014; many retailers have only focused on their front-end operations and now realise this is not sufficient.
In 2014, 54% said they had moved to omni-channel successfully, with 19% saying they were in transition. This picture has changed as an acceptance of the difficulties of omni-channel transition; only 31% now claim to have become omni-channel retailers, with 38% in transit.
Stuart Higgins, retail partner at LCP, said: “Omni-channel retail requires a complete transformation of a retail business. There can be no more silos, no more separate stock pools for store and online. Everything has to be unified. But for many retailers who optimistically embraced the move toward omni-channel, transforming back-end operations was over-looked.”
LCP has divided retailers into four broad categories:
- Omni-channel Pioneers – who are fully committed to transforming front-end and back-end operations to deliver a seamless experience to customers,
- Omni-channel Followers – these are recent converts to omni-channel retailing that lack a fully integrated business model. Followers tend to focus on front-end solutions
- Optimised multi-channel/pureplay – these are retailers who have made a strategic decision to adopt either a multi-channel or pureplay approach, often very successfully,
- Challenged multi-channel – retailers that are still trying to adapt to a multi-channel world by bending existing bricks and mortar infrastructure.
These gaps in readiness and capability point to the opening up of a significant gap between different groups of retailers, as some break away from the pack, while others get left behind. Those who lack the investment, or strategic will, to become successful omni-channel operators face a future of competing on price for an ever-declining market share. Similar conclusions are drawn by the Top500 report published by eDelivery’s sister title, InternetRetailing, which ranks the top 500 retailers in the UK and Europe and highlights those that are clear winners in multi-channel and omni-channel.
Those retailers already in the omni-channel camp are reporting increases in sales and higher customer satisfaction. Twice as many of those in LCP’s pioneer group saw sales growth in excess of 10% than those in the challenged multi-channel category.
The role of supply chain operations in bringing the omni-channel promise to fruition is now widely acknowledged – perhaps leading to some of the acceptance that the transformation will take longer than anticipated.
LCP’ report finds that 70% of respondents rank customer satisfaction as the most important consideration in supply chain design. However, returns handling comes in last in this regard, something which is out of step with customer expectations.
“Returns simply aren’t customer-friendly,” Higgins said. “There are too many hurdles when it comes to returning and processing stock.”
